Panasonic steps up plasma play

If the Consumer Electronics Show in Las Vegas was any indication, a flood of newly released models of high-definition TVs promises to push the market to the breaking point. In fact, Current Analysis data demonstrates that the number of HDTV models in the retail plasma market alone has grown by over 65 percent since 2003 (from 33 to 55 distinct product lines), while the total plasma market has nearly doubled (from 40 to 70 distinct lines). As a result, models such as Panasonic's TH42PX20U face intensifying competition in the HDTV market.

Lowering the cost of production and components in this environment of increased competition will play an increasingly vital role in maximizing manufacturer retail presence and market share.

Most of us are aware of the lower manufacturing costs that result when IT and consumer electronics products are outsourced, but how much should it cost manufacturers to stay competitive in today's plasma display market?

To examine the cost-saving efficiencies of utilizing manufacturing cost analysis, Current Analysis Labs chose to examine the Panasonic TH-42PX2OU Plasma TV.

On average, the Panasonic TH-42-PX20U will cost consumers approximately $3,495. (It retails for as much as $4,000.) This reflects at least a $1,220 price differential between production costs and end-user pricing, indicating a 35 percent profit.

There are other costs that are not included in our lab's analysis: shipping, tariffs and duties associated with getting the product to the point of channel entry. Nonetheless, the delta of the estimated production cost and the associated cost to consumers presents an interesting challenge for manufacturers. They must broker for the lower component and labor costs necessary to succeed in manufacturing similar plasma TVs.

Competitive analysis
While the number of plasma TVs in retail has doubled, other technologies such as liquid-crystal displays (LCDs) and microdisplays are increasingly competing with them at the smaller and larger sizes. As a result, the high-definition plasma market faces competition from all angles.

Of all the technologies, however, the most significant threat is that of LCDs. A key theme that emerged from this year's Consumer Electronics Show is that LCD TVs are overcoming many of their traditional weaknesses, making them more competitive with plasmas in specific areas. For example, many LCDs are now using new backlighting systems, better chips and enhanced panels to boost viewing angles, response times, color saturation and contrast-all of which are areas in which plasmas have typically had an edge.

One remaining advantage of plasmas over LCDs is price. A 42-inch HDTV plasma currently costs about $800 less than a comparably sized LCD. This price advantage, however, is expected to diminish as next-generation LCD plants begin to volume-produce panels sized above 40 inches. By the end of 2005, a flood of larger LCDs will enter the channel, and many of them will be priced in line with high-definition plasmas.

Given this rise in competition, it is imperative that plasma manufacturers bring strong value equations to the table. The average selling price of a 42-inch HDTV plasma in retail is $4,999, as much as $2,000 more than a competing high-definition microdisplay and $3,000 more than an entry-level enhanced-definition plasma. As a result, high-definition plasmas like Panasonic's TH42PX20U need to wow consumers with superior picture quality and enhanced features that justify their premium prices.

Within this cutthroat market, the TH42-PX20U benefits from the following: