Among consumer electronics manufacturers, winning or losing a brutally competitive standards war can mean the difference between a profitable balance sheet for shareholders or going out of business. The losing side often disappears from the market. Samsung and LG Electronics are currently engaged in the latest edition of an empire battle in the high-tech industry. This time, they are competing for dominance in the 3D flat-panel TV market, both hoping to reverse their lackluster sales performance in the TV market through high-margin 3D TVs. The company that wins this standards war will have the right to set technical standards that other manufacturers must follow until the next major technological shift.
Despite this, it remains uncertain whether Samsung, LG, or any other 3D TV manufacturer can produce a product compelling enough to convince consumers to pay a premium. Last year, various TV manufacturers launched 3D TVs claiming to deliver the stunning experience of watching "Avatar" in theaters, hoping to attract consumers. However, the results were extremely disappointing. Out of the 248 million TVs sold globally, only 3 million were 3D TVs. Surveys show that a 55-inch 3D TV is priced between $1,500 and $3,500. Such high prices, along with warnings from manufacturers about potential nausea, spasms, dizziness, and visual fatigue caused by prolonged use of expensive battery-powered 3D glasses, deterred many consumers. UBS Investment Research analyst Shinsuke Iwasa predicts that LCD TV sales, which account for the largest market share, will grow by only 10% in 2011, the lowest since the popularization of flat-screen technology began 10 years ago.
This means that if Samsung, LG, Sony, and other companies want to increase their market share, they will need to resort to a tried-and-true method in the consumer electronics industry: stealing customers without lowering prices. This is because profit margins in this market are very low, and TV manufacturers rely on new technologies like 3D to create buzz and enhance pricing power. IHS iSuppli analyst Riddhi Patel says, "Even personal consumer electronics like irons and electric razors now yield higher profits than TVs." Making matters worse, consumers realize that with any new tech product, price drops are inevitable, so they simply wait patiently.
Not all companies have the stamina to participate in this race. On April 18th, Royal Philips Electronics sold its 80-year-old TV business to TPV Technology, an Asian contract manufacturer based in Hong Kong. Philips CEO Frans van Houten stated that mere adjustments to the TV business couldn't change its consistently high losses. Philips had already exited the high-end plasma TV market in 2008. Although achieving high profits is difficult, other manufacturers like Samsung, LG, and Sony refuse to abandon their TV businesses because TVs serve as the gateway for brands to enter consumers' homes and occupy important positions. This makes their TV businesses the biggest loss-makers among high-end devices like tablets, smartphones, and Blu-ray players. Both Samsung and LG's overall TV sales profits are very slim.
LG launched its Cinema 3D series TVs in January, initiating this standards battle. These TVs utilize the company’s self-developed film-patterned retarder (FPR) 3D glasses technology, boasting that 3D images won’t suffer from blurring and flickering issues like the first generation of 3D TVs released in 2010. Older 3D TVs used costly active shutter 3D technology, where battery-powered glasses created 3D effects by opening and closing two small shutters on the lenses. LG's new 3D TVs feature a thin special 3D film filter on the screen and come with traditional polarized glasses used in cinemas. Vizio and other Chinese TV manufacturers have followed suit with LG's new technology. In March, LG managers expressed hopes to also bring Sony, a long-time customer of Samsung panels, into their camp.
Samsung, however, remained unfazed, continuing to produce active-shutter 3D TVs and battery-powered glasses while countering LG's claims by pointing out that their technology is 35 years old and therefore only capable of delivering half-resolution HD movie playback. Samsung even launched a print ad in Korea featuring actors and monkeys wearing 3D glasses, where the monkey asks, "Why isn't my 3D TV full HD?" A senior executive at Samsung went as far as calling LG's engineers stupid during a press conference in Seoul, accusing them of misleading comparisons between the two 3D technologies. He later apologized for his comments.
David Das, vice president of display marketing at Samsung's U.S. electronics division, said that LG's Cinema 3D TVs belong to the passive display category, with manufacturing costs almost identical to Samsung's models of the same size but with slightly inferior picture quality. Samsung is addressing consumer complaints by developing more comfortable 3D glasses and including two pairs with every 3D TV model purchased, with additional pairs available for just $50. Das noted that as 3D glasses prices drop significantly from $200 per pair, consumers will enjoy a 3D experience without compromising image quality. He said, "Unlike other 3D technologies, our picture quality is unparalleled." An LG spokesperson declined to comment.
However, compared to a larger challenge, these are minor issues. Randy Waynick, Vizio's sales director, said, "The biggest problem for companies isn't the technology—what works and what doesn't—it's whether consumers will accept it." To achieve this goal, Samsung, LG, and other 3D TV manufacturers are incorporating popular features into their TVs, such as the ability to download internet files directly from the TV. Market research firm DisplaySearch optimistically forecasts nearly 18 million 3D TV shipments in 2011, increasing to 91 million by 2014. "Avatar" director James Cameron believes that 3D technology will eventually gain widespread consumer acceptance. He recently founded a new company aimed at promoting 3D business applications in television, sports, and advertising. He said, "With more 3D content, 3D TV sales will naturally rise." Now, all TV manufacturers hope his words become reality.
Summary: Despite selling only 3 million 3D TVs out of 248 million units last year, LG and Samsung still hope their 3D TVs will become mainstream products.