Flat-Screen Prices Take a Dive

Is a price war brewing now that the $500 barrier has been broken? In this Q&A, an NEC-Mitsubishi exec sheds some light on the outlook

When prices on flat-panel monitors plunged last fall, industry insiders blamed inventory pileups and wider availability of liquid crystal display (LCD) panels. A temporary dip, they claimed. But oversupplies have persisted and the urge to move product seems about to turn into a full-blown price war. In mid-April, NEC-Mitsubishi Electronics Display of America, the largest supplier, cut prices for its 15-inch flat-panel monitor by $200, to $549. Competitors are expected to follow. That's down from the $1,000 pricetag for most flat panels eight months ago.

Analysts believe $500 is the magic price point that could drive wide adoption. Chris Connery, the company's product-line manager for LCD monitor marketing group, recently met with BusinessWeek Online reporter Olga Kharif to discuss the future of the flat panel. Here are edited excerpts from the conversation:

Q: Why are you cutting the price?


We want to remove price as the barrier to entry. Our 15-in. flat-panel monitors will be available at $549, and available through retailers and online for below $500. When our business customers last upgraded their monitors, maybe three years ago, they moved from a 14-in. CRT to a 17-in. CRT, and, at that time, they spent around $520 on the 17-in. monitor. So breaking this $500 price point for an LCD monitor is extremely significant -- as much as reducing the prices on 17-in. and 18-in. monitors. We will grow our market.

Q: Are you afraid to trigger a price war?


No. It's all based on whether our competition can realize the production advantages we have realized. And that's not something they can do yet. We believe we will be ahead by several months, especially on the larger-size monitors.

Q: How are you able to reduce prices so much?


Back in 1996, we had manufacturing lines that were 300 millimeters by 350 millimeters in size, able to accommodate this big sheet of glass used in making a monitor. And from this sheet of glass, we would actually get two 10.4-in. displays for notebook computers. Then, in 1999, we were able to get four 15-in. size displays out of a sheet of glass -- and you started to see 15-in. flat-panel monitors. And now, as we move up to the next generation of glass products, we can actually get four 18-in. displays.

Q: Do you see the prices on LCDs coming down farther?


We expect to see new, even more efficient glass sizes, but probably not for another two or three years. To do that will require billion-dollar investments in production, and they take several years.

Q: Why would businesses choose flat-panel displays over CRT?


The financial marketplace appreciates the space savings. They can actually get additional traders in the small, confined area, so they get more trades per day -- and more money per day for them.

They also appreciate the cost savings associated with the reduced power consumption. An LCD monitor consumes much less power than a CRT monitor. And then, additionally, there are some cost savings associated with cooling since it's not generating so much heat. With the energy crisis going on right now in California, the total cost of ownership of flat-panel monitors is becoming very important.

Q: You expect the flat-panel monitor market to grow at double-digit rates. Why would you expect such rapid growth when PC sales are down?


A lot of analysts have said that the performance of the PCs, especially those bought over the last 12 to 18 months, is sufficient for the applications. There's no compelling reason to upgrade your process or speed. So what people are doing is spending their dollars to enhance the computing experience. In the home market that means digital cameras. And in an office it means flat-panel models.

Q: Could LCD monitors cannibalize NEC-Mitsubishi's CRT business?


We are shifting business from one category to another. But there are still areas, especially in the really high-end graphics animation, for example, where consumers would use CRT for color-matching reasons. And then, on the other side, you can still buy a regular monitor today for $150 -- at the very, very low end. In the mainstream business, though, I think you will see some cannibalization from LCD into CRT.

Q: Where do you expect to see your U.S. sales growth this year?


We have a high penetration right here in Manhattan because of Wall Street. But we do see our sales shifting a little bit to the West Coast because of the energy shortages. And actually we have already heard of not only very large private companies, but also public utilities in California making public statements about the fact that they will either prohibit the purchase of CRTs or create incentives for companies to move to flat-panel monitors.

Edited by Douglas Harbrecht

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