How Samsung Fell behind Sony and LG in The Premium TV market

How Samsung Fell behind Sony and LG in The Premium TV market

106
Samsung QLED televisions are displayed during the 2017 CES in Las Vegas
Samsung QLED televisions are displayed during the 2017 CES in Las Vegas, Nevada January 5, 2017. REUTERS/Steve Marcus

By Joyce Lee and Ju-min Park
SEOUL (Reuters)

At the 2013 annual Consumer Electronics Show in Las Vegas, flashy organic light-emitting diode (OLED) televisions sporting credit card-thin screens were at the front and center of Samsung Electronics‘ new gadgets display

Later that year, the South Korean company splurged on marketing the televisions – which then retailed at around $10,000 for the 55-inch model – to the ultra wealthy. Among the promotions was a penthouse party for the residents of One Hyde Park in London, labeled the world’s most expensive residential block.

But by 2015, it had stopped making OLED TVs, saying the market was not ready to embrace the high costs of the technology – based on thin films of carbon-based modules that light up in response to electric current. Instead it decided to focus on developing liquid crystal display screens that are backlit and enhanced with so-called quantum dots, semiconductor nanocrystals that produce colors and can improve picture quality. These are known as QLED TVs.

 

"Quantum Dot" SUHD televisions are displayed at the Samsung Electronics booth during the 2016 CES trade show in Las Vegas
“Quantum Dot” SUHD televisions are displayed at the Samsung Electronics booth during the 2016 CES trade show in Las Vegas, Nevada January 7, 2016. REUTERS/Steve Marcus

 

It appears to have been a costly misstep. OLED TVs have become a dominant technology in the premium market – that is for a TV of at least 55 inches in size costing more than $2,500 – as the cost of producing them has dropped dramatically.

Samsung is now the only major TV manufacturer not to produce OLED screens. And while the TV business generates less than 3 percent of Samsung’s profit, which largely comes from its semiconductor and mobile phones businesses, the loss of the leadership of the premium, higher-margin market is a hard blow.

“It was based on an objective appraisal of technological and cost competitiveness,” Jongsuk Chu, head of sales and marketing for Samsung’s TV business, told Reuters in a statement, referring to its decision to discontinue making OLED TVs.

A look at online reviews of both OLED and QLED TVs in the past couple of years indicate that OLED TVs made by South Korea’s LG Electronics and Japan’s Sony gained fans because of the quality of the picture. In particular, reviewers cited more realistic colors and high resolution, as well as attractive designs and increasingly reasonable prices.

 

 

That doesn’t mean the Samsung QLED TVs don’t have their supporters. Picture quality has also improved and prices have dropped but they don’t tend to be reviewers’ top picks.

“OLED TV’s jump in premium TV market share is a direct result of its outstanding picture quality,” said Ross Young, CEO of research provider Display Supply Chain Consultants. “Samsung may have missteped in their 2017 product by emphasizing design over picture performance.”

Samsung last year only got an 18.5 percent share of global sales for premium TVs, based on dollar revenue, down from 54.7 percent in 2015, according to research firm IHS Markit. Meanwhile, Sony and LG have leapfrogged Samsung to grab 36.9 percent and 33 percent of the market respectively.

To be sure, Samsung remains the biggest maker of TVs in the world – a title it has now held for 12 years. It also claims to be No.1 in premium TVs, with more than a 40 percent market share, based on data from GfK. These figures include 55-inch TVs that are cheaper than the $2,500.

 

MORE EFFICIENT MANUFACTURING

Samsung Electronics’ decision to base its TV business on LCD technology was made after it took the advice of Samsung Group’s now-defunct Corporate Strategy Office, a source with knowledge of the matter said.

 

 

“The office made a suggestion that it would be more profitable to focus on LCDs than switching to less-proven OLED,” said the source, who declined to be named due to the sensitivity of the matter.

The reasons: the TV business was battling falling profits and the company felt LCD technology could be more profitable than high cost OLED, the source said.

The only problem was that around the time this decision was being taken, LG was developing a much more efficient manufacturing process to make OLED screens.

 

Keep reading …