TVs shrink in the big economic picture

[CptGreedle]

http://money.cnn.com/2008/06/18/tech...ion=2008061912

NEW YORK (Fortune) -- First the SUV, now the big-screen TV.

America's supersized consumer appetite is shrinking. With the increased costs of food and fuel, rising unemployment, falling home prices, tighter credit and general gloom it's hardly a surprise that people aren't bulking up on big ticket purchases like they used to.

But big screen TV sales have held up well. Until now. Analysts say the next consumer luxury to feel the pinch of the slowing economy will be the Humvee of TVs- the 46-inch-and-above, $3,000-plus flat-screen high-definition set.

The number of "shipments are tracking in line but people are spending less on TVs," says Tayyib Shah, an analyst with Longbow Research. "People are buying smaller sizes and concentrating their spending on lower-priced models."

Other industry analysts says they are also seeing a dip in demand and uptick in supply.

"The second quarter will be slow because of the economic conditions," says iSuppli TV analyst Riddhi Patel. "Inventory levels are at 8 weeks, which is very high."

The likely results of this cooling trend: Lower prices on big TVs to move a mountain of inventory, and cuts in production levels to adjust to lower demand.

Cheaper TVs certainly help aspiring home cinema fans, but slashed production is not good news for suppliers like liquid crystal display glassmaker Corning (GLW, Fortune 500).

One of Corning's largest customers, a Taiwanese LCD panel maker, recently tempered its "utilization rates," says Lehman Bros. analyst C. J. Muse, invoking a euphemism for production cuts. Panel makers use LCD glass to make the screens for TV and computer monitor manufacturers.

These component makers have three ways to adjust supply to demand, says Muse. First, they partially assemble screens and finish them later to fill orders. Second, they shift production from TV screens to computer monitors. And if those approaches aren't enough, they cut production.

"It's still early, as far as what's going on," says Muse, "but the initial news out of Asia is not inspiring."

A slowdown would seem to come as a big surprise to Corning. As recently as three weeks ago, CEO Wendell Weeks said there was "no evidence of an economic downturn impacting LCD TV sales in the U.S."

A Corning spokesman declined comment Wednesday.

But as the supplier at the far end of the chain, Corning has shown a blind spot when it comes to slowdowns. At the peak of the Internet building boom, for example, all Corning could see was sky high demand for fiber optic cable, even as the industry ran right off a cliff.

The signs that big TVs are going the way of the Ford Excursion aren't so indisputable yet. On Tuesday, electronics retail giant Best Buy (BBY, Fortune 500) posted solid quarterly results partially on the strength of TV sales. TVs got pushed out the door thanks to customers wielding Federal stimulus checks, and an increase in financed purchases through Best Buy credit cards.

And iSuppli's Patel notes that lower prices could stimulate demand, while higher travel costs encourage more home entertainment purchases.

But that buy could well be shrinking in size. That's bad news for glassmakers - and to the head of the household who has to settle for a foot less of crystal clear video screen just to keep gas tank filled.

We may have been lucky until now, there is still a chance the economy will bite the Home Theater industry hard. This could also have repercussions on Blu-ray if the lower prices don't help.

[DetroitSportsFan]

Originally Posted by CptGreedle

We may have been lucky until now, there is still a chance the economy will bite the Home Theater industry hard. This could also have repercussions on Blu-ray if the lower prices don't help.

I agree, these economic troubles for the country will slow the mass adoption of Blu and HD home theater.

[Sonny]

Originally Posted by DetroitSportsFan

I agree, these economic troubles for the country will slow the mass adoption of Blu and HD home theater.

I think so too. Its hurting anybody who drives & eats at the very least...

[CptGreedle]

All I can say is... spend your stimulus check (or at least some of it) on blu-ray and home theater if you can. I plan to buy a speaker or 2 with it among other things myself.
I personally don't think the stimulus package will do much good. People will use it to pay off debt, or save it for later. It is too little, too late. But if you are going to spend it on something, stick a blu-ray in there

[Xerious]

Originally Posted by Sonny

I think so too. Its hurting anybody who drives & eats at the very least...

don't need to drive... order movies from amazon... don't need to eat... eats the box the movies came in

[Beta Man]

Yet my projector went up $50 over the weekend....... I check the price daily... waiting to get into the new place before pulling the trigger, but if it drops down $100 one day.... I'll be all over it

[U4K61]

I seem to recall things like radio doing very will during the Great Depression - the high tech of the day. If fuel prices go up so much that we can't afford to drive around, then we will have to stay home, doing among other things, watching TV. If electric gets to the point where it is rationed, then a small battery powered 1080P OLED recharged by a few minutes of foot power (think Singer Sewing Machine) will save the day for HDTV. The small set will do the trick if we follow that Screen Size/Resolution/Distance formula. We have a hand crank LED lantern (not the inexpensive flash-light). It works well and gets a lot ot use. Makes me believe a super efficient TV is withen the relm of possibility.

But I hear energy prices are set to go down for a while (before going up again), with more oil comming on line (relative to ever rising demand), so the above is really just a worst case (for now). A fun idea though.