LG, Samsung and Sony Enter OLED TV Market

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LG Electronics entered the New Year announcing the sale of its next-generation TV display — LG 55EM9700 — a 55-inch organic light-emitting diode (OLED) TV. The company's announcement concludes the race with its rival, Samsung Electronics, to determine which company will first bring OLED technology to the marketplace. 

LG retail outlets in South Korea have started accepting pre-orders from only domestic customers for KRW 11-million (US $10,000) with shipments scheduled to begin next month. LG plans to expand sales into North America, Europe, and the rest of Asia during March 2013, the Seoul-based company said in a press release

At LG's 2013 Consumer Electronics Show (CES) press event in Las Vegas, James Fishler, LG's U.S marketing chief, announced the 55-inch OLED TV will sell for about $12,000 in the United States.

Samsung has scheduled to release its own OLED TVs this year. The tech-giant first revealed its 55-inch ES9500 OLED displays at CES 2012. The South Korean company exhibited its curved OLED TVs, smart cameras and bendable OLED smartphones prototypes at Samsung's 2013 CES press events.

OLED technology offers richer colors, deeper blacks, higher contrast and sharper images than liquid crystal displays (LCDs), light-emitting diodes (LEDs) and plasmas. OLED technology is energy efficient and does not require LED back lighting used in LCD displays. This explains OLED TVs thinness. LG's model measures 4 millimeters thick at 22 pounds.

According to market research firm NPD Display Search, sales of all TV types declined more than 4 percent in 2012. It forecasts global TV demand to remain flat in the New Year with economic uncertainty plaguing consumer spending and confidence. The firm projects OLED TV sales to total approximately 50,000 units in 2013, 1.7-million units in 2014 and 7.2-million units by 2016.

Display Search's TV shipment forecast by technology. Source: Quarterly Advanced Global TV Shipment and Forecast Report

“Worldwide demand for TVs continues to face pressure from external factors, such as slowing economic growth, high unemployment rates, and the rising household penetration of flat panel TVs,” said Paul Gagnon, Director of North America TV Research at Display Search. “At the same time, internal factors, such as slower cost reductions and a greater focus on profits at the expense of volume, are leading to a lower level of retail price erosion, which is also impacting demand.”

Drawbacks

LG and Samsung promised to deliver OLED TVs to the marketplace during the fourth quarter of 2012, but delayed mass production. High production costs from poor manufacturing processes hampered efforts to launch the technology. LG Display (NYSE: LPL), LG's manufacturing subsidiary, has improved production yields to meet OLEDs limited demand.

Universal Display Corp. (NASDAQ: OLED), a developer of OLED technologies and materials for flat panel display, supplies OLED materials to LG and Samsung, its two largest customers. The company embraces high supplier power and influences the prices of its OLED materials to make higher profits, but these actions hold the risk of losing LG as a customer. Losing LG or Samsung would deteriorate the company's revenue stream.

Universal Display's revenue has grown 442 percent from 2007 to 2011, but it failed to impress investors with its poor Q3 2012 earnings in November. OLED TV delays from LG and Samsung last year weakened the company's OLED material sales. Universal Display forecasts full-year 2012 revenue of $80-million to $82-million, as opposed to prior estimates of $90-million to $110-million.

Consumers reacting poorly to OLED TVs will dampen LG's sales — an issue for Universal Display. Universal Display's weak third quarter revenues were a result of customers slashing orders of OLED materials. If OLED TVs perform poorly in the marketplace, LG may continue to cut orders from Universal Display.

Sony Bounces Back

In December 2007, Sony Corp. (NYSE: SNE) introduced its own OLED TV modeled XEL-1. The 11-inch XEL-1 was not necessarily a commercial product but a technology prototype. Sony manufactured the OLED TV in small volumes and sold it for $2,500. The Japanese company discontinued production of the XEL-1 in February 2010. Sony was unable to manufacture the technology cost efficiently and reduce the commercial price to an affordable level.

Sony's failure did not stop the company from moving forward. The company developed strong partnerships to propel it back into the OLED TV business.

In June 2012, Sony and Panasonic announced a partnership to develop OLED technology "suitable for low-cost mass production of large, high resolution OLED panels and modules." Sony may have solved the issues it faced in 2007. The company claims the partnership will reduce total costs of production and improve manufacturing yields to help accelerate its OLED TV sales.

Sony worked with AU Optronics Corp, a Taiwanese LCD and OLED panel manufacturer, to develop the first OLED TV with 4K resolution. Sony unveiled its 4K OLED TV at the company's press event at CES 2013 — a threat to LG and Samsung's OLED TV market share.


kingmali has no position in any stocks mentioned. The Motley Fool recommends Universal Display . The Motley Fool owns shares of Universal Display . The Motley Fool is short Sony (ADR). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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