Trick or Treat-LCD is on PDP’s Doorstep

The long-awaited nightmare of PDP managers has arrived - and it was announced on Halloween. DisplaySearch said today that for the first time, LCD-TV panel shipments exceeded PDP shipments in the 37-inch-and-above segment in Q3′06.

Steve Sechrist
Senior Analyst and Editor
Projection Monthly

Not that PDP had a bad Q3, mind you. 2.8M units shipped and revenue was at a record high, up 10% sequentially and almost 30% year-on-year, passing the $2B mark for the first time ever, according to DisplaySearch. But all this wasn’t enough to stop the LCD juggernaut fueled by super capacity Gen 7, Gen 7.5 and Gen 8 fabs pumping out large displays in unprecedented quantities that kept the price pressure in high-gear over the quarter and pumped up flat panel demand across the industry.

In fact, the double-digit (17%) sequential growth numbers in PDP sales look anemic by comparison to large LCD panels, which topped the mid-triple digits at a whopping 560% sequential growth in the 40- to 47-inch panel size.

Scratch the surface a bit and you’ll find the devil in the details. While revenue is up, PDP’s unit growth is actually slowing, partly because of the shift toward production of larger (+50-inch) panels. This defensive move is in answer to rival LCD’s 1080p, full-HD push and helps explain LCDs success in the +37-inch category, where PDPs cannot compete on pixel (cell) density.

For PDP makers, the trade-off to building larger panels is reduced unit output as fewer larger panels can be produced per plasma substrate. This is reflected in the Q3 numbers. Third-quarter PDP unit growth was actually the lowest in the past 12 quarters, which saw sequential growth range between 70 to 170%.

It makes sense. Larger PDP panels are selling for more, but in lower quantities. In fact, +50 inch PDP panel output doubled in the past year from 12% to 24%. But unlike LCDs, which are being made in record numbers, PDP’s shift to larger panel sizes has resulted in reduced PDP output, which, in turn, lowered supply pressure on prices. What was a PDP price gap with LCD is narrowing. As prices for large LCD panels dropped to relative parity with PDP in the same size range, consumers opted for the higher-resolution LCD models, in part stimulated by the mantra of “full-HD.”

Here’s our take: Matsushita, LGE and Samsung SDI have invested heavily in ramping production to compete with LCD in the large-display space. Plasma “owned” the large flat-panel market for many years, but it did this without effective competition. Remember, plasma had no flat-panel competition until the recent development of Gen 6 LCD fabs.

So, adding insult to injury, the display gods picked Halloween as the last day plasma could claim king of the big-display hill in the 40-to-49-inch segment. Is this as frightening to PDP planners as a cackling witch on Halloween? Actually, no. People in the industry have seen this coming for months, and PDP demand is projected to grow for years to come. But if anyone is just a little nervous, they, like tonight’s Halloween pranksters, will be able to take off their costumes and masks by tomorrow, and the event will fade with few real consequences on their - or our - daily lives.