A shortage of flat panel TV’s has seriously hurt the consumer electronics retailers with Australian TV vendors being blamed for “short sighted” thinking mid 2008 when decisions were being made over stock levels for the Australian market.
“Basically they panicked and took a precautionary view without the knowledge that the Federal Government was set to tip billions of dollars into the market. And while a lot of this money went straight into savings the ones that spent did so on flat panel TV’s and other consumer electronic items” said a leading industry analyst.
“They added “This really hurt their partners in particular partners who were already experiencing trading problems. At a global manufacturing level there was no shortage of supply. The vendors also failed to take into consideration the exit from the market of several vendors which was very short sighted. However going forward we believe that LG, Panasonic and Samsung are going to get stronger at the expense of Sony whose products are going to be expensive compared to the Korean Company sold products” he said.
This view is also support by JBWere analyst George Batsakis who in a recent confidential report to investors wrote “Clive Peeters suggested that there was a shortage of flat panel televisions in Australia in December – January. (ChannelNews January 2008) The company estimated the shortage resulted in $5m in lost sales in December. While JB Hi Fi performed very strongly in 1H09, we believe this shortage may negatively impact JBH TV/Visual sales (20% of group sales) if the shortage persisted for a long period of time. In the short term, we expect JBH sales to be relatively resilient given good sales in other categories and an improved supply/demand balance for the flat panel market in the June quarter”.
He went on to say that the Australian flat panel TV shortage is part of a global shortage. However, signs are emerging of an improved balance between global supply and demand. Corning , a global producer of the glass for LCD displays, suggested that there was a global contraction in supply of LCD TVs in the December 2008 and March 2009 quarters.
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This was driven by the selling price dropping below the marginal cost of producing an LCD TV. We believe the drop in the selling price was due to a build up in inventory 1H CY08 (as per Corning) and discounting by distributors/retailers due to the state of the world economy. Corning expects upply and demand to realign during the June quarter as the margin returns to positive territory.
We believe this drop in global supply, coupled with strong sales of flat panel televisions in Australia in December, may result in the industry being unable to meet consumer demand in 1Q CY09 (despite a recession). GFK indicates that Australian industry flat panel TV sales grew by 19% in CY08. However, we expect supply to catch up with demand in the June quarter in time for the next fiscal stimulus package to hit consumers’ bank accounts.
