As Samsung Australia and LG go head to head in the TV market, both retailers and vendors are looking to increase their returns from TVs after 18 months of declining margins.The move will see the price of premium TVs increase by between 10 and 15 percent say analysts.
During the past month, LG and Samsung have tipped hundreds of thousands of dollars into new instore TV display units, complete with proprietary broadband so that each Company cannot benefit from each others Wi Fi services.
Last week, Samsung and LG, who between them account for more than a third of global TV shipments and revenues, announced their Q1’12 earnings.
After barely breaking even in 2010, profit margins at the two companies TV businesses were just over 2% in 2011.
During the weekend LGE, reported a 4.1% operating profit margin from selling TVs and home entertainment gear while Samsung reported a 5.0% return.
Sony, Panasonic, Sharp and Toshiba are all losing money with all four Japanese Companies heavily discounting their TVs running into the peak Xmas buying period.
Steve Rust the CEO of Panasonic Australia, who recently launched a new range of Smart TVs, claims that “moving forward” Panasonic would prefer to sell less TVs and make a profit from the TVs we are selling, rather than “blindly” sell discounted TVs.
With the Japanese brands suffering profit losses, Samsung and LG Australia are not compelled to reduce their prices to be competitive. As a result, both have been able to avoid selling money-losing products.
Samsung Australia’s director of Audio Visual, Philip Newton, said recently that his Company is now delivering leading edge TVs:
“We now have a new generation of TVs that deliver content gesture control and voice activation. They have new dual core processors built in which deliver superior online access. These TVs are worth the extra investment as they deliver a superior TV experience. We are are delivering a new capability that allows the TV to be upgraded when new processors are introduced”.
In Australia both Samsung and LG benefitted from tight inventory management prior to launching their new models.
Over at Sony the Company was forced into heavy discounting claim retailers due to a lack of demand for their Bravia TVs over offerings from LG and Samsung.
In Australia ,as the Japanese Companies moved to discount TV models, Samsung and LG immediately responded to market changes with low-cost models.
Premium models, with 3D capability, LED backlights and Smart functionality are now driving profits with strong unit market share claims research company Display Search.
The research Company claims that as both Samsung and LG increase their profits they can be expected to become more aggressive in capturing share from other brands and increase pressure on Japanese TV brands, especially if the TV market in Australia does not grow, as expected.
This is one of the reasons that brands like Sony is exploring closer collaboration with low cost Taiwanese panel makers Display Search said.
They claimed that over the past few years, it was seen as an impossible mission to make more than 3% margin in the TV set business, as Japanese set makers experienced increasingly worsening losses.
In such an atmosphere, few expected Apple to enter this low margin category with a branded TV product. However, the opinion is starting to change and some in the TV industry now believe that if Apple enters the TV category, it may improve the margin structure as a game-changer, driving innovation and higher margins.