Originally Posted by peka j.
Why is it that the TV manufacturing business wound up with such slim margins that virtually every Japanese maker can't compete? I get that lots of competition leads to lower margins until they are razor thin, but not every industry, even with robust competition, cannibalizes itself.
What I mean is, why is it different than the car business, or other businesses? The car business is obviously mature and has been around forever. There are an absolutely huge number of manufacturers that span from ultra luxury all the way down to inexpensive utilitarian, and yet they all seem to make money and keep making cars. I know GM had issues in the 2008 recession, but has recovered. Normally, there are dozens of manufacturers making money. Why is it that even with all the competition, Honda (for example, or Chevy, or Hyundai or Mercedes) can make cars and get people to pay enough over the cost to manufacture them (total margin) that Honda the manufacturer makes a profit, Honda of America the distributor makes a profit, and the local dealer makes enough profit (and shares some with the salesperson) to keep in business, and a rather handsome business?
I don't get why the TV business so cannibalizes itself that almost no one can make a substantial margin anymore. Even those making money like Vizio (and I assume Samsung and LG and even the Chinese manufacturers) have a tiny profit/revenue percentage.
So this is a great question and if I ever get more time, I'll write a longer response.
In the short term, though, understand this: TV is a consumer business building a mostly commodity, discretionary product. Autos -- which are far more boom/bust than perhaps you realize as Kia, Chrysler, Mazda and many others have struggled mightily in recent years -- are a consumer and business product. There is a ton of differentiation. They represent status in ways TVs rarely do (except here at AVS!). They have all sorts of weird utilitarian function components (e.g. you have a baby, you buy a minivan; you start a home-improvement business, you buy a pickup).
That said, autos don't have great margins. They have good margins. They are super expensive to build so it's very, very hard to become a new entrant. Vizio, by contrast, was started by a handful of guys with industry expertise and a bit of capital. And because TVs are commodity and warehouse clubs have great return policies, Vizio could get by early on selling a limited aesthetic at a good price even while the quality failed to stack up.
As the posts about American TV makers note, mfg. of televisions was once a U.S. thing. They the Japanese came along when the yen was >200 to the dollar and offered an attractive product for less money. American TV died off very quickly thereafter.
When the HD / flat-panel transition came, it misled the TV industry into believing there would be a "new cycle" where instead of 6-8 years between purchases -- not terribly far from how often folks buy cars, by the cars -- they'd start buying a new TV every 2-4 years. This led to massive over-investment in LCD fabrication which rapidly commoditized the core piece of flat-panel TVs. That allowed for years of rapidly declining prices, which helped speed the HD / flat-panel transition globally. What it did not do was motivate people to purchase again more often. The idea this would happen was predicated on nonsensical comparisons to cellular phones. A better way of looking at this is say a really cool innovation comes to cars (e.g. long range electrics that cost the equivalent of $1 per gallon to operate but are priced like gasoline cars, self-driving cars that come with much lower insurance and hands-free commuting). People might collectively upgrade to that much faster than normal -- this is the "HDTV of cars" -- but they wouldn't upgrade yet again soon after.
TV learned this lesson the hard way and as such Sony has lost money nearly every quarter for more than a decade selling TVs (few exceptions don't disprove this). Sony is a huge TV seller and yet records losses! They are also not vertically integrated, which has proved to be a way of ensuring losses and took out Toshiba, Mitsubishi (flat panel side, their insistence on sticking with RPTV was another titanic error), Sanyo... and counting. Vertical integration, though, was no panacea as Sharp proved by failing to heed the lessons of what came before and never recovering from over-investing in capacity nor from a period of endaka
-- the yen being highly valued -- which devastated Sharp in solar and television at the same time.
In sum, these are different industries with different characteristics. Innovation is no guarantee of success (look to hard drives, where the innovation curve exceeds any industry ever and yet few firms have survived, let alone sustained interesting profits). And huge strategic errors almost certainly produce failure.
Originally Posted by markrubin
agreed: my Elite 70 Pro is still going strong:
hope it stays that way because I don't see another 70 inch display on the market that comes close except for the Sony 950...but for those speakers
but as Rogo says, Sharp's demise was inevitable
That the Sony is close is bullish. That Sony might be the brand name on a Chinese company seeking to establish credibility in N. Amer. and Europe soon is less so.
Originally Posted by steve1971
Correct me if I'm wrong but wasnt 4K supposed to be this new tech that was supposed to help tv sales? With Sharps exit from the tv buisness I guess thats not the case.
So, here's the thing. The industry mistakenly believes everything is a catalyst for a great new wave of success. They believed this about 3-D too. They insanely though "smart TVs" would ignite sales. They believed this about "thinness". They believed this to an extent about size.
The only two things that have changed the trajectory of TV sales in any interesting way are
(1) The above-mentioned HD/flat-panel transition
(2) An improving global economy
Unfortunately for the TV industry (1) will never be repeated and while (2) has happened certainly since the nadir of 2008, there is an upper limit to TV sales. You can't really use one in a place where there isn't reliable electricity and space to enjoy it. Most of the developed world that wants a TV has one. Little of the world moves from "developing" to developed in a given year. And worse still for TV, there is a new mitigator. People love video more than they love TV. In much of Asia, the preferred video viewing device is a phone/phablet/tablet. That's become more true in N. Amer. and Europe over time, too.
There cannot realistically be a long-term upswing in TV sales. Electronics are better placed in a small box (e.g. AppleTV, Roku) that can be improved via apps or replaced cheaply. The TV is moving towards an appliance again -- a screen that receives input. It is mostly good enough for 99% of viewers. It will be replaced when it wears out or if there is another discontinuous technology (e.g. transparent, super-light screens that can offer pictures of many sizes depending on content and desire but almost literally disappear when not in use).
Until then, the industry will continue to fight over a similarly sized market year after year. New entrants from Chinese will squeeze incumbents with pricing that is lower based on newer factories with lower costs (Chinese labor isn't especially cheap anymore, but it also won't hurt).
There is no reason to believe a renaissance is coming here anymore than in personal computers. Neither is going away, but neither will again be the industry it once was either.