Haier

The Cheese Has Moved Again

The Cheese Has Moved Again

The TV industry sees yet another churn. The top three brands have over the years moved from Crown-Weston-Dyanora to Videocon-Onida-BPL to LG-Samsung-Sony and now to Samsung-LG-Xiaomi. How the market shapes up in 2020 is anybody’s guess!

The usage of television is no longer an urban phenomenon with penetration of television now in more than 99 million homes in rural India. With a decreasing trend in prices of televisions, consumers tend to replace their set every 5 years. Increasing innovation coupled with lower price points has augmented the penetration of television across all income groups in the country.

The rapid growth of internet connectivity across the country, especially in Tier-II and Tier-III cities, is giving greater access to online-entertainment portals to the tech-savvy generation. Digital influence on broader consumer spending is significant, and is growing rapidly. The implementation of the cable digitization mandate further aided by OTT services has contributed vastly to the expanding popularity of new-age televisions. The method of viewing content has gradually shifted from television to smartphone among the Indian consumers.

In 2019, the televisions market remained flat at 14 million units, estimated at Rs 20,000 crore, by value. Within the industry, while the Japanese brands struggled, it is the Korean and Chinese brands which caught the attention of the consumer, with innovations and new offerings in price segments where there is massive consumption. As prices dropped, a firm shift was discerned toward large-screen premium sets.

Online sales gained popularity, and the brands ventured into the smart televisions category, increasing the e-commerce contribution in this segment from 25 percent in 2018 to 30 percent in 2019. With the Reliance group committing USD 24 billion to its digital-services holding company, the e-commerce market in the country is forecast to touch USD 84 billion in 2021 from USD 24 billion in 2017.

Samsung, LG, and Xiaomi had a combined share of 64 percent, with Samsung slightly ahead, and Xiaomi almost neck-to-neck with LG in 2019. This is a decline from the 67-percent combined share the three brands had in 2018, i.e., Samsung, LG, and Sony, the latter having slipped hugely in 2019. Panasonic, TCL, and Haier are the other dominant brands.

The other brands, including the unorganized segment and the regional brands have been gaining share over the last 3 years, from a combined 10 percent in 2017 to 16.5 percent in 2019. These include Onida, Daiwa, Akai, Vu, T-series, Truvison, Wybor, Daenyx, Intex, Micromax, Mitashi, Lloyd, Sharp, Sansui, Sanyo, JVC, Aisen, Philips, Veira, BPL, Aisen, Thomson, and iFfalcon, among others. Brands such as Blaupunkt, Telefunken, RCA, OnePlus, Motorola, Nokia, and Hero Electronix have made a recent foray into the Indian market.

The government decision to slash 15 percent tax for new manufacturing companies is expected to give a major fillip to India’s aspiration to build an export-led electronic-manufacturing ecosystem in the country. This is expected to attract investment. Foreign companies, in joint ventures with Indian companies, having an office in India, are also expected to get tax benefits.

For facilitating companies to relocate to India from China, in preference to locations as Vietnam and Thailand, and for the government to realize its ambitious target of USD 400 billion by 2025 in domestic electronics manufacturing from USD 70 billion currently, MeitY has proposed that fresh incentives, including a 4–6 percent interest rate subsidy on loans for new investments, credit guarantees for plant and machinery, and renewal of the EMC scheme, be extended.

Before the industry goes into a negative spiral, the makers have appealed to the government that apart from revisiting the FTAs, the 28-percent tax bracket on large-screen television sets be reduced to 18 percent. However, given that the GST and SGST collection targets have been scaled down, this looks unlikely.

The central government, in September 2019, for a year removed the 5 percent import duty on open-cell LCD TV panels, which now attracts nil duty. This is a huge relief for brands as the panels make up for 70 percent of the assembly cost. The government also waived customs duty on import of chip-on-film, printed circuit-board assembly (PCBA), and cell (glass board/substrate), which are used to manufacture open-cell TV panels.

Samsung had shut its production in 2018 in India, after the government imposed 5 percent import duty on open-cell panels, and instead started FTA imports from Vietnam. After the duty reduction, it recommenced production. The government is considering extension of zero-duty import of ready-to-use open-cell television panels beyond September 2020 as the industry has argued that no open-cell manufacturer is ready to sell raw open-cell panels, and there is minimal value-addition and employment generation to make it ready-to-use. To promote domestic manufacturing of TVs, a basic customs duty of 20 percent has been imposed on import of TVs in the country.

Viewing habits, customer preferences, the industry, the distribution network, and government policies have all gone through a major change over the last couple of years. How the market shapes up in 2020 is anybody’s guess – brand loyalty and brand dominance, both being strangers to this industry.

The honeymoon may be over for LCD TVs

For most of the 2010-decade, LCD TV has been one of the stable fixtures in the consumer electronics market. Having completely replaced the old CRT-based TVs, LCD TVs have benefitted from technology advances that have improved resolution and made possible large screen sizes – over 50-inch – a much more common sight in many households. But LCD TVs are hitting a roadblock. For the first time since 2011, global LCD TV panel shipments are expected to decline in 2020, falling by 7 percent to total 265 million, according to IHS Markit. The 7-percent decrease represents the largest annual decline in the history of the LCD-TV industry.

The signs are not good. The 2020 decline will come after two consecutive years of market stagnation with shipments at 289 million units in 2018 and 284 million in 2019. Market growth stopped during those years despite fab capacity expansions at Gen 10.5 and Gen 8.6 TFT-LCD facilities in China. The cessation of growth also defied the growing demand for larger LCD TV panels sized 55-inch and above. The slower demand and increasing oversupply of LCD TVs have put downward pressure on panel prices and prompted suppliers to cut production. Many suppliers have taken a more conservative approach by reducing fab utilization starting in mid-2019 onward and initiating more aggressive fab restructuring plans.

Since the Chinese panel makers started their Gen 10.5 fabs in 2018, Korean and Taiwanese panel makers running Gen 7 and Gen 8 fabs have been facing tough competition in the larger-size LCD TV market. Due to the fast-declining prices of 65-inch and 75-inch LCD TV panels produced by Gen 10.5 fabs, they are now in a critical situation. As a result, Korean LCD TV panel makers have resorted to restructuring their LCD TV fabs, while their Taiwanese competitors have reduced LCD TV panel production, and diverted resources to producing monitors and notebook PC panels instead. This scenario is expected to lead to the big drop in 2020 LCD TV panel shipment.

Large LCD TV panels are managing to hold their own share. Even though the volume of the LCD-TV panel shipments has eroded, demand for larger-size panels will continue to grow. 65-inch and larger sized LCD TV panel shipments will reach 37 million units in 2020, up from 30.6 million in 2019. However, there is a possibility of supply tightness of some panel sizes due to the shuttering of Gen 8.5 fabs that produce 49-inch and 55-inch LCD TV panels.

Noteworthy growth for smart TVs

Unit shipment for the global smart TV market is expected to increase from 209.3 million in 2019 to 266.4 million in 2025, growing at a CAGR of 4.1 percent. APAC remains the largest market for smart TVs, with China expected to dominate shipments with a market share of over 25 percent in 2019. The Chinese middle class maintains persistent demand for the latest TV sets, especially as prices continue to fall year-on-year for HD and 4K TVs.

The segment of flat-screen smart TV witnessed growth at a noteworthy rate over the past few years owing to increasing adoption of smart TV on the back of escalating global sport events like FIFA World Cup and PyeongChang Winter Olympics, rising consumer spending on smart home appliances, and burgeoning adoption of bezel-less flexible OLED display in flat-panel TV.

Falling prices and the demand for next-generation features, such as 4K and HDR, continue to be the strongest drivers for smart TV sales. Even as the price of the highest-end models continues to rise as screen sizes and device sophistication at the high end continue to grow, there is falling disparity between traditional and smart TV price points at the lower spectrum of product lines. For new units, particularly as heavy price competition remains a factor, manufacturers are seeking to drive up interest among content creators and consumers alike for the next major technological breakthroughs after 4K, such as HDR and quantum dots.

For all vendors, the goal is to create a best-in-class app ecosystem and to differentiate their TV models to command a premium over other competing UHD and 1080p models. From a consumer perspective, the TV is fast becoming the central device that integrates the multiple screens (big and small) used in their homes. Vendors in the market are making significant investments in R&D to develop new products with innovative technologies. For instance, some vendors are offering smart TV sticks that allow users to operate using voice commands. The incorporation of such technologies will enable vendors to gain a competitive edge in the market. Increasing penetration of smart TVs and the emergence of numerous OTT content providers will further boost market growth.

Will 2020 be the year of affordable OLED TVs?

OLED technology is becoming an increasingly important technology to the future of the televisions industry but the recent growth pace of revenue and unit shipments slowed in the 4Q2020, according to DSCC. OLED TV sales across the globe are still estimated to reach 3 million units in 2019 and then add 2 million units per year to reach 11.5 million units by 2023. Against total global TV sales of 220 million, OLED makes up a mere 1 percent by selling 2.5 to 3 million units. But in the premium market with a price tag of over USD 2500, OLED models take up more than 30 percent.

OLED TV panel shipments increased 11 percent year-over-year in 2019 to 3.2 million units, with the fourth quarter of 2019 registering a meager 3 percent year-over-year growth to 842,000 units. Thus far, OLED TV panel shipments (WRGB type) remain the exclusive domain of LG Display, although additional large format OLED panel markers are expected to enter the market in 2020 and beyond.

OLED TV has come a long way in becoming a viable option for the living room. Once (six or so years ago), they cost several thousands of dollars. Today, OLED TVs are just about breaking the sub-USD 1000 mark. The panel technology is not exactly mass market yet, with the majority of 4K TV buyers settling for affordable LCD sets, but it soon could be – and perhaps as early as 2020.

The reason is two-fold. Firstly, it is likely that consumers will see 48-inch OLED TVs on shelves for the first time – and smaller screens naturally brandish more affordable prices. And secondly, and most crucially, the mass production capacity of inkjet-printed (IJP) OLED display technology is set to rise as much as 12-fold from 2020 through 2024, according to IHS Markit.

The IJP OLED market is set to prosper as Japan-based JOLED Inc., reportedly becomes the first OLED panel supplier to move from trial to mass production. The manufacturer can cut the cost of producing a 65-inch OLED TV by up to 25 percent compared to traditional WOLED (white OLED) production.

Despite years of competition with LCDs in the market for high-end displays of all sizes, OLED market penetration remains limited because of its expensive production costs. However, IJP has the potential to dramatically reduce manufacturing expenses, making OLEDs more cost-competitive with LCDs in products including televisions and displays for computers and tablets.

So, will there be an influx of three-figure OLED TVs in 2020? One can pray, although it is unlikely consumers will see brand-new models enter the market at such prices for some time, with the most attractive prices saved for year-old or 2-year-old models. By the sound of it that could well be the case by the 2024 Olympics!

Quantum dot – Entering expansion phase

Quantum-dot display will be entering an expansion phase in 2020 with lower prices, availability of TV in many sizes, and more expansions into other applications, such as monitors and notebooks. Samsung Display has announced its plan to invest 13.1 trillion won (about USD 10.5 billion) up to the year 2025 in QD-OLED TV R&D and production line. It will convert LCD production line to QD-OLED. The new QD-OLED TV line (Gen 8.5) is expected to start production in 2021. Besides Samsung, Vizio, TCL, Hisense, and Xiaomi have joined in for QD TV. Lower retail prices for QD TV will drive demand.

Will 8K TV follow 4K’s quick adoption pattern?

In 2019, upscale TV technologies continued to trickle down into the lower price tiers, making for instance smart 4K TVs more affordable for mass market consumers and increasing competitive pressure. While in 2016 around 30 brands were selling TVs with 4K resolution, more than 70 brands have these devices on offer today. As a result, 4K is becoming the standard for today’s TVs. 8K went on sale in autumn 2018. At the moment, the high price and the back-log of available content make it a true niche product.

While flat-panel TV makers have announced 8K TV sets, it is the 4K TV market that will continue to grow to cement its place as the mainstream TV format over the next few years. ABI Research forecasts that 4K flat panel TV shipments will grow at 13 percent CAGR to reach 233 million in 2024.

Manufacturers have announced the introduction of 8K flat-panel TV models, which are priced between USD 5000 and USD 70,000 depending on the display size. The cost of 8K TV sets is far from affordable for most consumers. This will limit the sales volume for the foreseeable future; however, the price points are likely to decline to a more reasonable level over the next several years just as 4K sets have.

The lack of content and distribution models are more significant barriers than cost for 8K TV adoption at the moment. Aside from 8K channels provided by Japanese broadcaster NHK, there are no other 8K broadcast channels currently available, although Korean Broadcasting Corporation (KBS) is working toward an 8K broadcast. While streaming service provider Rakuten announced its interest to provide 8K content in late 2019, service providers overall are not ready for 8K content, nor is there much incentive for content providers due to limited 8K TV set adoption at present.

8K content also needs larger data files, which creates challenges in content distribution and data management. Versatile video coding (VVC), which achieved 34 percent higher efficiency over HEVC, is currently in the process of standardization. VVC will play a vital role in driving the 8K TV market when the final standardization completes in 2020. 8K is likely to gain momentum only when challenges are addressed, and the ecosystem evolves.

Without even the promise of widely available 8K content, it is no surprise that consumers ask: “Why do I need 8K?”

To move the 8K needle, on the business side 8K stakeholders have to encourage native 8K production. It helps that the 8K Association is developing industry standards. The mission is to encourage native 8K production. One help is the increasing development and availability of professional 8K production equipment. One argument the 8K community can use to convince producers to capture content in native 8K is oversampling. Capturing content in 8K to deliver in 4K or 2K makes a better presentation. Capturing in higher resolution for legacy value makes a lot of sense, even if the deliverable is 4K or 2K.

Paralleling 8K professional gear availability is the development of more efficient codecs such as HEVC, AV1, VVC, and essential video coding (EVC), aka MPEG-5, although many of these are still years away. But with Wi-Fi 6 and even 5G, wireless pipes are getting roomy enough to handle the thicker 8K data stream.

Simultaneously on the consumer front, TV makers advise retailers to de-emphasize resolution as 8K’s prima facie case to buy. There is a lot more to pursue than just resolution. It is a matter of packaging the message. Instead of simply resolution, 8K’s three primary selling points to package are HDR, color gamut, and, especially, upscaling.

Algorithms for upscaling have improved dramatically in the last couple of years. New scaling technologies that use machine learning to analyze millions of images have created databases, so one can have intelligent upscaling that resides in the cloud, which means 4K and increasingly 2K content will look very good on an 8K TV.

One hurdle 8K makers know they need to overcome is resistance on the sales floor, which means getting retailers on board. Manufacturers are just now starting to reach out to retailers – their first task is to engage with retailers. They have to conduct market research with retailers to discover pain points, then develop programs to address those pain points.

The major roadblock at retail, beyond consumers not recognizing a need for 8K, is price, especially the value ratio. It is helpful that new large screen 65-inch and 75-inch Gen 10.5 panel capacity will be coming online in the next few years, which will allow prices on 8K sets to drop – hopefully not through the floor as they have for 4K, or at least not as quickly.

A third of the current 4K market is 55-inch and above. 8K 65-inch sets and above will also start to sell when prices become affordable and there is content. Finally, 8K Association minimum specifications and certifications on the verge of finalization, along with test specifications and tools that hopefully lead to self-certification, will result in 8K-certified sets appearing in 2020 that could help allay consumer worries about what they may be buying.

All the pieces of the 8K ecosystem are moving in the right direction.

But for now, 4K will be the dominant format of the flat-panel TV market and of the content ecosystem as a result. 4K TV household penetration will reach slightly more than half of the TV households in mature markets, and with penetration still relatively low in emerging markets, there is significant room for 4K market growth in the years to come.

HDR gets better and brighter

High dynamic range (HDR) was a hot TV topic in 2019, and it will be again in 2020. While many manufacturers tout HDR capability in their 4K TVs, there is no way to tell how well a set will handle HDR just by looking at it in the store. Many sets do not have the brightness, black levels, or video-processing ability to really show off HDR programs to their full effect. In 2019, it was found that it was mainly pricier TVs that were able to deliver an effective HDR experience, though there were a few exceptions. In 2020, more 4K TVs are expected to be able to reproduce the enhanced brightness range and nuanced shadow detail that the best HDR content requires. Several manufacturers are likely to promote TVs with peak brightness levels, significantly higher than the 1000 nits, typically required for top HDR performance. 2020 will be about if TV manufacturers are able to deliver on the promise of HDR.

AMOLED TVs pave the way for widespread adoption

Driven by falling prices and rising consumer demand for thinner, lighter, and more colorful TV sets, sales of AMOLED displays used in TVs are projected to reach USD 7.5 billion by 2025, up from USD 2.9 billion in 2019. AMOLED technology has developed rapidly in the last few years, and IHS Markit expects active-matrix OLED TV sets are expected to account for 20.6 percent of the USD 36 billion TV display market in 2025, up from just 8.6 percent in 2019.

Despite carrying a much higher average selling price (ASP) than LCD TVs, AMOLED TVs are extremely appealing to consumers because of their slim form factor, light weight, and wide color gamut. Starting in 2020, AMOLED TV ASPs are expected to begin to decline due to increases in manufacturing capacity spurred by the adoption of a more advanced production process. This will pave the way for much more widespread adoption of AMOLED TVs. According to IHS Markit, one development expected to result in major price declines is the use of multi-model glass (MMG) substrates in Gen 8 display manufacturing fabs. With its capability to support multiple display sizes on a single substrate, MMG substrates can improve the efficiency of manufacturing, reduce product costs, and help diversify product line-ups.

Beyond TV sets developments

Some other developments that are expected to surface in 2020 are higher frame rates, HDMI 2.1, and ATSC 3.0. These technologies are interesting, but they will not really become important for consumers until further down the road. Most TV shows are delivered at 60 frames per second (fps). A few brands are expected to talk about TVs that display video at 120 fps instead. Sports networks are especially interested in this technology – doubling the number of frames displayed each second can help reduce motion blur during fast-moving action.

Consumers will also start to see some TVs with new HDMI 2.1 connectors, which provide greater bandwidth. This latest version of HDMI can support 8K video resolution as well as faster frame rates with 4K content. While some premium TVs in 2020 will come with HDMI 2.1 inputs, many mainstream sets will still have HDMI 2.0 connectors. The newest standard in TV broadcast technology is ATSC 3.0, and it is poised to go big in 2020, delivering a 4K picture over the air for the same completely free price as current 720p and 1080p broadcasts. The new standard has been in the works for several years, but broadcasters’ recent adoption of the standard will make ATSC 3.0 broadcasts a reality across the country in the coming months.

Way forward

The Korean share of LCD TV panel shipments in 2020 is expected to decrease by about 9 percent compared to 2019, while the Chinese share is set to increase by 10 percent. Korean LCD TV panel makers may eventually exit the LCD TV panel business, relinquishing their market share to their Chinese rivals. Some TV industry experts say that a recently strained relationship between Korea and Japan will dampen Korean TV makers’ passion to penetrate the Japanese TV market. This is because the Japanese government began to put restrictions on the export of semiconductor and display materials to Korea in the beginning of July, and the economic conflict between the two countries is spiraling out of control. Sony, JTI, and Nissan, among others, are carefully monitoring market situations while canceling scheduled events for product launches in Korea. If the current situation continues for a long time, it will be a burden for Korean TV makers trying to expand their presence in the Japanese TV market.

Display sizes will increase – 70-inch+ screens are taking over from 60-inch, and 84-inch screens are being replaced with 86-inch versions. This shift is majorly driven by the incorporation of more efficient processes that lead to less wastage, while producing a greater number of panels. Also, bezels are becoming narrower, so the actual visible screen is bigger. Industry observers and executives alike remain stunned at how, in just five relatively short years, 4K UHD TVs transformed from a pricey curiosity to a race-to-the-bottom commodity. Based on this perhaps flawed phenomenon, the industry is optimistic that 8K will follow the same super-speedy adoption path, sans 4K’s rapid price erosions. In April 2019, IHS forecast only 6 million 8K sets would be sold in 2023.

Everyone agrees on the one major hole in the 4K-8K adoption analogy – content. Netflix and Amazon both launched 4K streaming early during the initial UHD hardware rollout, and UHD Blu-ray players, and a smattering of Hollywood titles appeared almost simultaneously with new 4K TVs. However, there is only a smattering of 8K content now leaking into the ecosystem, largely NHK gearing up its 8K engine for the 2020 Tokyo Olympics, and three European OTT providers – CHILI, The Explorers, and MEGOGO – announced 8K content availability in the last week.

As worldwide TV household penetration is quite saturated, the flat-panel television market has been driven by consumer adoption of televisions with higher resolution, larger screen size, and connected and integrated applications and services. However, the market is at a crossroads with stagnating unit volume sales, commoditization, and looming extended excess capacity. All this translates into shrinking profitability while the industry remains extremely CapEx-intensive. The industry, therefore, is striving to develop new features to trigger a replacement cycle and compel consumers to upgrade their televisions with newer and more expensive models. Individual players are all striving to differentiate.

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