How Samsung Fell Behind Sony and LG in the Premium TV Market

On the 2013 annual Consumer Electronics Show in Las Vegas, flashy natural light-emitting diode (OLED) televisions sporting credit score card-thin screens have been on the entrance and centre of Samsung Electronics' new devices show.

Later that yr, the South Korean firm splurged on advertising the televisions - which then retailed at round $10,000 (roughly Rs. 6.67 lakhs) for the 55-inch mannequin - to the ultra-wealthy. Among the many promotions was a penthouse celebration for the residents of One Hyde Park in London, labelled the world's costliest residential block. However by 2015, it had stopped making OLED TVs, saying the market was not able to embrace the excessive prices of the know-how - primarily based on skinny movies of carbon-based modules that gentle up in response to electrical present. As an alternative it determined to give attention to creating liquid crystal show screens which are backlit and enhanced with so-called quantum dots, semiconductor nanocrystals that produce colors and may enhance image high quality. These are often called QLED TVs. It seems to have been a expensive misstep. OLED TVs have grow to be a dominant know-how within the premium market - that's for a TV of at the very least 55 inches in measurement costing greater than $2,500 (roughly Rs. 1.67 lakhss) - as the price of producing them has dropped dramatically.

Samsung is now the one main TV producer to not produce OLED screens. And whereas the TV enterprise generates lower than three % of Samsung's revenue, which largely comes from its semiconductor and cell phones companies, the lack of the management of the premium, higher-margin market is a tough blow.

Samsung declined to touch upon whether or not ending OLED TV manufacturing was a expensive mistake or who made it.

A take a look at on-line critiques of each OLED and QLED TVs up to now couple of years point out that OLED TVs made by South Korea's LG Electronics and Japan's Sony gained followers due to the standard of the image. Specifically, reviewers cited extra sensible colors and excessive decision, in addition to enticing designs and more and more cheap costs.

That does not imply the Samsung QLED TVs do not have their supporters. Image high quality has additionally improved and costs have dropped however they do not are usually reviewers' high picks.

"OLED TV's soar in premium TV market share is a direct results of its excellent image high quality," mentioned Ross Younger, CEO of analysis supplier Show Provide Chain Consultants. "Samsung could have missteped of their 2017 product by emphasising design over image efficiency."

Samsung final yr solely acquired an 18.5 % share of worldwide gross sales for premium TVs, primarily based on greenback income, down from 54.7 % in 2015, in keeping with analysis agency IHS Markit. In the meantime, Sony and LG have leapfrogged Samsung to seize 36.9 % and 33 % of the market respectively. To make sure, Samsung stays the most important maker of TVs on the earth - a title it has now held for 12 years. It additionally claims to be No.1 in premium TVs, with greater than a 40 % market share, primarily based on knowledge from GfK. These figures embody 55-inch TVs which are cheaper than the $2,500 IHS makes use of to outline the phase.

Extra environment friendly manufactring
Samsung Electronics' determination to base its TV enterprise on LCD know-how was made after it took the recommendation of Samsung Group's now-defunct Company Technique Workplace, a supply with information of the matter mentioned. "The workplace made a suggestion that it might be extra worthwhile to give attention to LCDs than switching to less-proven OLED," mentioned the supply, who declined to be named because of the sensitivity of the matter. The explanations: the TV enterprise was battling falling earnings and the corporate felt LCD know-how might be extra worthwhile than excessive value OLED, the supply mentioned. The one drawback was that across the time this determination was being taken, LG was creating a way more environment friendly manufacturing course of to make OLED screens.

The retail value of a mainstream LG 55-inch OLED TV has dropped to only KRW three million ($2,811) this yr from KRW 15 million ($14,056) in 2013, LG mentioned.

It's not the primary time selections involving Samsung's Company Technique Workplace have been questioned. The workplace, which was led by then Samsung Electronics vice chairman Choi Gee-sung, was closed after it confronted criticism throughout the political scandal that led to the arrest of the group's inheritor Jay Y. Lee final yr on prices of bribery and embezzlement. Lee, who denies any wrongdoing, walked out a free man in February after an appeals courtroom suspended his sentence.

Samsung advised Reuters the most important cause it isn't making OLED TVs is the problem of display screen burn-in, referring to a type of picture retention when a picture has been on the display screen for a very long time. LG, although, says on its US web site that whereas burn-in is feasible on nearly any show, it has addressed the problem by way of know-how that protects in opposition to harm to the display screen and rectifies short-term issues.

Revenue figures inform the story
The wrestle's influence on company outcomes grew to become clearer final month. LG mentioned on Thursday its TV division recorded a 77 % soar in quarterly revenue and a document revenue margin of 14 % within the quarter resulted in March.

Samsung reported a 32 % quarterly revenue decline final Thursday for its shopper electronics division that sells TVs and residential home equipment, saying that earnings fell from a yr in the past, partly as a result of it had modified its lineup and stopped promoting some decrease and mid-priced TVs.

Sony, whose tv enterprise incurred losses totalling KRW 800 billion ($7.four billion) over ten years, swung again to a revenue within the yr resulted in March 2017.

To return to revenue, the Japanese firm diminished the variety of markets all over the world wherein it sells, diversified suppliers and provided each OLED and LCD screens. It additionally ditched an LCD three way partnership with Samsung. The technique paid off. Whereas Sony had simply 10.2 % share within the world TV market final yr in greenback phrases, it was No. 1 within the premium market. Its working revenue margin reached 10.7 % within the September-December quarter, in keeping with John Soh, analyst at Shinhan Funding. The outlook for Samsung in premium TVs may worsen as 71 % of gross sales this yr are anticipated to be OLED TVs, up from 51 % final yr, in keeping with IHS.

And that is all occurring with the 2018 FIFA World Cup beginning in June. The month-long soccer competitors, which is being held in Russia this yr, is persistently essentially the most watched TV occasion on the earth and offers TV makers with an awesome alternative to spice up gross sales.

Choong Hoon Yi, head of UBI Analysis and a former Samsung show engineer, mentioned that it now "appears to be like like Samsung made a mistake" although it didn't appear a blunder on the time, as Samsung thought of the OLED know-how too immature. When requested about whether or not it plans to restart OLED TV manufacturing and gross sales, Samsung reiterated its earlier stance that it's going to give attention to different extra aggressive know-how. "There isn't any change (in our technique)," Jonghee Han, President of Samsung's TV enterprise advised reporters final month. Some show analysts say all won't be misplaced as Samsung can battle again on value. Initially the US value for Samsung's mid-range Q7F 55-inch QLED TV in 2018 was $1,900, down from $2,500 final yr, in keeping with on-line channels. In the meantime the preliminary value for LG's 55-inch C7 OLED TV was $three,500 (roughly Rs. 2.33 lakhs) in 2017 however the corresponding C8 began at $2,500 this yr. "Our objective is to not be No. 1 for x-number of consecutive years, however No. 1 endlessly," Samsung's Han mentioned.

© Thomson Reuters 2018