Why Samsung Is Quitting the LCD TV Business

 

Why Samsung Is Quitting the LCD TV Business



Why Samsung Is Quitting the LCD TV Business


LCD televisions have been slowly disappearing from the market as people opt for more modern and innovative displays, such as OLED or 4K TVs. Samsung has announced that it will no longer be manufacturing LCD televisions after this month, instead focusing on their next-generation display technology OLED panels in addition to 4K UHD TV’s. Here’s why Samsung decided to stop making LCD TVs, and what it means for the future of the market.


The company has been bleeding red with its TVs

Despite being recognized as a pioneer of both OLED and Ultra HD televisions, Samsung is falling further behind its competitors in display technology. Sales have plummeted from 26 million units in 2011 to just 4.5 million last year—even though Samsung’s overall TV market share hasn’t changed much. But despite seeing fewer consumers purchase its TVs, Samsung has continued manufacturing them at higher volumes. The company was losing money on each one and most analysts consider it to be a major reason why Samsung lost $7 billion last year. As a result, they are saying goodbye to their low-end line (although they will continue making UHD sets).


TVs are shrinking in popularity anyway

The days of large, boxy televisions are over. The latest generation of TVs are thin and sleek, designed to be placed against a wall and display video from a variety of sources including your phone. While Samsung is one of many manufacturers that has embraced this new trend, it’s also taken its business a step further by becoming an early adopter in what is known as wallpaper-style TVs. In other words, Samsung isn’t concerned with selling millions of TVs; it simply wants to ensure its technology finds its way into as many homes as possible. As such, investing in an expensive tool like LCD panel production—which only profits when you sell lots of units—doesn’t make sense anymore.


LG was the only vendor that reported profit in the sector last year

Samsung posted a $2.6 billion loss from its flat-panel business and Sony dumped that division. Samsung has been losing money in its TV operation for years, struggling to compete with low-cost Chinese makers that are now flooding markets worldwide. Samsung has lost around $14 billion since starting its big push into consumer electronics after it bought ailing Japanese electronics maker Sony's semiconductor division in 1987. The company has turned to technology such as curved TVs and smart TVs - connected sets that incorporate some internet services - to differentiate itself, but those efforts have so far failed to make a significant impact on profits or sales volume..


From P6.5 billion, revenue fell to P3.1 billion in 2017

It was a drastic decrease in just one year, and it’s clear that things aren’t going so well for Samsung in their television business. With Chinese companies able to churn out better quality sets at a lower price, Samsung seems to have found itself between a rock and a hard place. They continue making HDTVs with OLED screens, but sales of those TVs haven’t been exactly stellar either. As it stands now, Samsung is planning on getting out of LCD television production by February 2018—essentially right after CES 2018 has ended. But what will they do after they quit? It’s likely that they will shift their focus towards premium QLED TVs to offer consumers something new while also trying to bring down prices as much as possible.


The entire global industry had revenues of $286.4 billion in 2016 but only $26.7 billion in 2017

While Samsung isn’t a trendsetter, it is a big enough fish in the industry to move markets, and when it pulls out of an industry segment, people will notice. What’s also notable about all of that is that revenues for global flat-panel production only declined from $38.4 billion in 2011 to $26.7 billion in 2017. The entire market has shrunk by 20 percent over six years and yet production output has barely budged; what happened? It’s worth pointing out that while overall revenue declined, shipments grew at an annualized rate of 4 percent during that time frame according to IHS Markit. So why did profitability collapse? Why has everyone been piling into OLED panels while they abandoned traditional LCD panels?



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