Vendor cuts blamed for shrinking margins

Vendor cuts blamed for shrinking margins

LCD screen distributors claim plummeting margins from aggressive vendor pricing will cause tough market conditions for the rest of the year. Both suppliers and resellers said they had struggled under downward price pressure for some time.

"We're lucky if we get a 12.5 per cent and some resellers are looking at only five or six per cent," Impact Systems marketing manager, George Karantonis, said.

A 17-inch LCD screen now sold for $549 whereas six months ago it sold for $849, he said.

Pioneer product manager, Jeff Li, said the difference in the wholesales price for 15-inch and 17-inch screens had narrowed to $15.

While panel shortages in the latter half of last year had helped maintain prices, the situation had been reversed and there was a marked increase in production, he said.

In a news report last week, flat screen manufacturer, Samsung, said it did not expect LCD screen prices to recover until the end of 2005 as the recent surge in production fuelled a sharp fall in prices.

But Plus Corporation managing director, Nigel Fernandes, attributed the contracting margins to aggressive pricing by some screen vendors to win market share.

"It's mainly BenQ that has pushed the price drops and their prices have fallen significantly," he said.

IT analyst, IDC, said the branded screen sector was also suffering in the consumer sector because of the popularity of bundled PC systems. Associate analyst for PC hardware, Mercie Clement, said OEMs such as Dell and HP had won out in Q3 and Q4 last year through bundled sales. This left standalone screen vendors as the losers.

According to IDC figures, OEM vendors experienced 11 per cent quarter-on-quarter growth. Both sides now represented 50 per cent of the total monitors market.

To combating margin erosion, both vendors and distributors said they had endeavoured to revise sales strategies. Screen vendor, Viewsonic, had protected its margins amid falling prices by using its large corporate buying power, its marketing manager, Edwin Tien, said.

"We get the best prices from panel makers because of our company size," he said.

The vendor recently announced a diversification strategy to peripherals as well as an increase in its fledgling LCD TV range to lessen its reliance on monitor sales.

"Higher margins in peripherals can compensate and there are still really good margins in LCD TV's," Tien said.

BCN Technology's LG product manager, Bob Harris, said the hardware distributor had moved to promoting higher specification and larger screens to recover profits.

"We are pushing higher spec models with faster refresh rates of 12ms to 8ms now," he said. "Screens can now come with an analogue TV tuner inside, widescreens, USB hubs, DVI and super high resolution."

IDC's Clement advised the channel to remain flexible by not entering into fixed contracts and long term agreements with vendors to hold stock.

"It is such a price driven market," she said. "It doesn't seem to matter what vendors bundle their monitors with, such as peripherals, as that's not really a working formula anymore."

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