Originally Posted by tgm1024
That's certainly true. Indulge me in some guesswork here, but I wonder about the whole chessboard. Ultimately the retail price is up to the primary (Panasonic, Sony, et. al.) not a Contract manufacturer. The CEM probably has no choice but to follow a standard cost structure, so their panels will be prohibitive in the beginning, but isn't it entirely possible that OLED (and/or Sony's Crystal LED) TV's themselves will be priced at what they perceive to be the longer term sustained revenue, not the immediate?
No, it really isn't. Even when the Japanese used to do this explicitly, they didn't price at some long-run price, they priced slightly
down the learning curve. The problem with pricing too far down the learning curve is that you run into two issues:
1) You lose a lot
of money. Say you price down $1,000 below where you ought to be. Over even 1 million units, that's $1 billion. It's simply unrealistic.
2) You stimulate demand you can't even supply.
In less cerebral words, gee wiz, wouldn't it be nifty if they sold these things at an initial loss to get that leg up on the market that will make it all up on volume later?
It all depends on the technology/cost curve they're betting on.
What I've been trying to explain for the better part of a year now is that you can't repeal the laws of production economics just because you have a "better mousetrap". You have to price high and sell few initially. But in selling few, you need to move enough
such that you move down the learning curve to lower costs. Then you can price lower and sell more for less. Then you can move down the learning curve and do it again.
There is no deus ex machina
here that allows you to magically just start producing in quantity and selling as if you're good at making it. We've seen this to be true with not only every variant of flat-panel TV technology, but also with every consumer electronics technology period
There are absolutely finite rates to both the speed with which you can increase production and the speed with which you can lower costs. Because of this, you cannot reasonably price below cost, except marginally. You can understand this by using my example above and plugging in any other set of numbers you wish. Say your production is ramping up even more quickly than expected such that you will sell 4 million, not 1 million. In that scenario, you couldn't even lower the price $500 below cost because that would cost you $2 billion!
We need to keep in mind that neither Samsung nor LG needs these products to exist. Samsung's TV division is (a) pretty decently profitable and (b) taking share constantly. LG's is slightly profitable and may also be gaining share, but is not losing share at least. Competing OLED production developments from Sony, Panasonic, AUO, etc. are years
behind. There is no urgency here and therefore the idea of taking losses is especially odd. Also, there is no secondary purchase to be made and no guarantee of long-term market share. If you are Amazon giving away tablets below cost (and if you include all costs, including support, warranty, shipping, logistics, R&D, they are clearly losing money selling Kindle Fires), you can justify it on the long stream of Amazon-related purchases you are fostering. With an LG OLED, not only will the person not be buying another for 5-10 years, but there is no follow on purchase of apps, videos, etc. to even slightly offset your loss. And even if LG had 80% share in 2014 and had its production curve mastered 3 years ahead of everyone else, by 2017 others will have caught them. The nature of the beast is that the upstream machine makers (the parts that go into the fab) end up supplying the other display fabs so that it doesn't take as long or cost as much for the next guy to come in.
Plus, the next guy might be able to use a technique you can't. For example, Sony and Panasonic might master "printable" OLEDs (I doubt they will, but we've been hearing about them for more than 10 years, so maybe they're finally coming). This means they might match LG on cost despite being 3 years behind. So why should LG go lose $1-5 billion to be first? It simply doesn't make sense.