Plasma Flow Slows Demand and Supply Slowdown Expected in 2009

The long-dreaded slowdown in growth in the plasma panel market now is at hand, according to iSuppli Corp.

Global plasma panel shipments will increase by a mere 6 percent in 2009. This compares to 28 percent growth in 2008 and a 20 percent rise in 2007.

On the supply side, two of the three Japanese plasma panel makers-Pioneer and Hitachi-have announced plans to withdraw from the business. This leaves only Panasonic as the sole plasma panel maker in Japan, and even this company just delayed its new Amagasaki production line. This comes after the reorganizations at Korean plasma makers Samsung SDI and LG Electronics, which already had caused panel shipments to slow down.

On the demand side, sales growth for televisions and other plasma-display products is not what it used to be, iSuppli believes. Weak consumer spending and business purchases are discouraging plasma panel makers from ramping up production. The economic downturn is affecting both retail and business purchases.

Demand is bound to recover at some point near the end of this year or in 2010. However, 2009 is going to be slow across the board for plasma panel makers.
Quarterly plasma panel shipments will continue to follow the seasonal pattern, with sales rising during the second half of the year. However, second-half sales will grow at a far slower rate than in previous years.

Shifting Focus
To remain competitive amid current market conditions, plasma panel makers must alter their product strategies.

While continuing to improve the picture quality and performance of their products, plasma panel makers need to place greater emphasis on reducing costs. They can achieve both goals by using better phosphors, single-scan technology or changing or enhancing the cell structures of their panels.

One market trend is moving in favor of plasma makers: consumers are demanding larger-sized televisions. This plays to the strength of plasma, with holds a price advantage over LCD-TVs at larger dimensions.

However, the television market also is moving toward the full High-Definition (HD) resolution, slimmer form factors and wireless connectivity. To compete with LCD, plasma makers and television brands must make strides on these fronts.

Key success factors for plasma panel makers and television brands include:

1. Increased focus on 50-inch and larger sizes.
2. More stress on new business areas beyond consumer televisions, such as digital signage, retail signage and more.
3. Cutting costs.
4. Making full HD resolution standard on all products.

32 and 42-Inch Losing Ground

After moving out of the area to focus on larger sizes, plasma televisions OEMs reentered the 32-inch market in the second half of 2007 because they detected a gap in the LCD-TV makers' offerings that they could capitalize on.

However, with 32-inch HD LCD panels having come into ample supply, demand for PDP panels at this size has dropped dramatically. Even in emerging regions, there has been a slowdown in 32-inch plasma sales as consumers began seeking larger sets.

The outlook isn't much better on the 42-inch front. While this size initially represented the sweet spot for plasma televisions, declining prices for LCDs along with limited availability for full-HD plasma panels-is impacting plasma's place in the market. As the LCD makers continue to move to newer-generation fabs and their growing capability to produce even cheaper panels at the 40-inch and larger size range, this will squeeze the plasma market even further.

For now, the sweet spot for plasma has moved to the 50-inch and larger market, where the cost benefits of choosing plasma give it an advantage over LCDs. However, just as in the 42-inch size, this advantage eventually will evaporate.