Monitoring the 2003 market

Monitoring the 2003 market

Sales of PC monitors fell more than 7 per cent in the third quarter of last year as both the PC market continued to flounder and corporate customers delayed their triennial equipment replacement. To make matters worse, the expected fourth-quarter spike in both corporate and consumer sales failed to eventuate.

However, it wasn’t all bad news and leading vendors of flat panel TFT (thin film transistor) monitors are going into 2003 optimistic that the next 24 months will provide them with strong sales growth, particularly in the open box market.

IDC’s Australian PC monitor market results for the third quarter (July-September) of 2002 showed a 7.4 per cent drop on Q2 with the decline being felt most significantly in the original equipment manufacturer market (monitors pre-bundled with first-tier global PC vendors) which decreased 15.7 per cent.

Unit shipments in the branded market (that accounts for all local sales by monitor vendors) fared better, increasing fractionally (0.8 per cent).

IDC associate analyst for computing hardware, Imraan Ali, said the poor performance of the PC desktop market accounted for the drop off in original equipment manufacturer (OEM) monitor sales.

Desktop shipments dropped almost 9 per cent from Q2. However, results in the branded market were encouraging compared to the previous quarter.

While Q3 is generally the slowest quarter of the year, there was actually slight growth in the market, predominantly attributed to an increase in the liquid crystal display (LCD) market, which jumped 48.6 per cent from Q2 2002 spurred on by an 11.4 per cent price drop.

Ali said this was due to significant decreases in the cost of LCD panels. This allowed many vendors to play with their pricing during the quarter.

Yet vendors, particularly those at the lower end of the market, claim that while LCD monitor sales are beginning to take off, margins are low, often just single digit.

Nevertheless there is general acceptance in the marketplace that CRT (cathode ray tube) monitors have done their dash and could disappear from shelves as early as next year, particularly in the corporate market. That is a big call. According to figures from research company Inform, CRT sales still made up more than 71 per cent of the total market in November 2002. This isn’t necessarily surprising when you look at IDC’s Q3 figures which show a 12 per cent decline in CRT sales.

There is one factor that promises to make 2003 a boom year for flat panel displays — it is three years since the biggest ever corporate and government re-equip of IT infrastructure. It’s now time for many of them to begin a new replacement cycle. While few expect another pre-Y2K market, many of the organisations that upgraded then are due to do so again. Early indications are that most, if not all, will choose TFT over CRT monitors.

Despite their initially higher cost, TFT flat panel displays have a major advantage when it comes to total cost of ownership over three years. Lower power consumption has the added benefit of reduced heat generation, which in a large workplace with more than 100 monitors can also lead to noticeable savings on air conditioning. The dramatically reduced space requirements and low flicker rate resulting in less eyestrain and resultant health problems also translate to the bottom line.

State government legislators in California have hinted at banning CRT monitors because of the amount of electro-magnetic radiation they emit there is no such concern in Australia, although government and corporate buyers are aware of health issues such as eye damage.

While there’s no health and safety legislation planned relating to monitors, the Federal Government is considering setting energy consumption standards that will favour the use of flat panel displays.

Consumer products manager for Philips Consumer Electronics, Lisa Coggan, said vendors were beginning to see a lot of tender activity for LCD as opposed to CRT monitors.

“Our corporate business has been traditionally skewed towards CRT but we can already see a shift occurring,” she said. “There are volume opportunities in the 15-inch market beginning to emerge, but we are also seeing activity at the higher end, particularly in the 18-inch area. There is even pick-up in the 20-inch area, particularly in the hospital/health sector. As prices come down they see it as a low-cost option.

“We expect the 17-inch market to start growing soon, but it remains to be seen whether that will be driven by corporate or retail. Prices are coming down to the extent that TFT is now a reasonable alternative to CRT and that is what is driving the market more than anything. It’s good news for the customer but not necessarily for the supplier in terms of margins and profitability.”

Coggan said flat panel offered huge cost-saving advantages over the life of the monitor in terms of space, cooler operation and resultant lower energy consumption. As far as design went, corporates were looking for slim lines.

There is a definite trend toward slim bevels so there is not a wide space around the viewing area.

Some corporates are also looking for monitors with multimedia bases. In the future wireless connectivity between laptops and monitors could become a factor.

She said there were growing opportunities for vendors and channels partners in the government and education sectors. A recent government decision to pull back a lot of services that had previously been outsourced meant even more opportunities in the government sector.

Head of Samsung IT, Norm Krieke, said the last quarter of 2002 and the first quarter of this year would be accurate indicators of what the rest of the year held for the flat panel market.

“While the corporate and consumer sectors were both quieter than expected, feelers were put out for a lot of tenders for corporate refreshers for 2003,” Krieke said. “As each week goes by there are more tenders being offered, some of them for thousands of units at a time and all of them are for TFTs. No-one wants CRTs.”

He said corporates were looking at their operations and for ways to save money. They were seeing what TFTs could offer in the way of space saving, lower energy costs and occupational health and work safety issues.

While the 15-inch market was where things were happening, large corporates were avoiding the bottom end of the market.

“There are a lot of low-end monitors out there that at first glance look like good value but because they don’t offer height and tilt adjustment they are being totally discounted by corporate buyers,” Krieke said.

The plug-in factor that allowed users to easily connect their laptops to a larger TFT monitor was becoming attractive to some big corporates.

Krieke said wireless connectivity would start to play a role in the market in the second half of the year.

“You also will start to see new technology later in the year that allows users to highlight sections of the screen and magnify the highlighted area,” he said.

Sydney-based Camcom International has already notched up one major government tender success this year, landing a supply contract with New South Wales Rail worth about $300,000. Camcom, which markets AG Neovo smart flat panel displays, won the tender to provide TFT monitors for the department’s new convergent communications control room.

One of the contributing factors to NSW Rail’s decision to go to TFT was best practice occupational health and safety considerations, a Camcom spokesperson said. Being able to have a zero emission environment, where having CRT would have created a very high emission environment, had weighed heavily in favour of TFT.

Camcom business development manager, Matthew Mann, said it was a good example of where demand was coming from, particularly for intelligent FPDs (flat panel displays) that could switch between platforms and high-end applications in video, data, and so on.

“By the end of the year we are going to see a fair few tenders going through,” Mann said. “Companies are definitely looking for larger numbers of flat panel displays and they will be ordering hundreds of units at a time.”

The medical market held a lot of potential, he said, particularly as the quality of TFT displays continued to improve while prices came down.

NEC may, by its own admission, be a minnow in the market compared to Samsung, LG Electronics and Philips, but it is benefitting from being a higher end supplier. Product manager, Geoff Cottee, said there were good margins to be had in the 18-inch and higher project market.

This did not apply to the lower end 15-inch to 17-inch area where price competition had slashed margins to “very small single digits”. However, the higher end the market was also beginning to pick up and there was reason to be optimistic about 2003. “The project market is very strong,” he said.

This would be the year that the CRT lost favour, Cottee said. By 2004 TFT would have totally taken over the market.

He said that while prices may rise slightly during the year as manufacturers retooled to introduce new technology they would settle back down again. While the corporate market is seen as driving TFT over the next 12 months, the move from bulky CRT displays to slim line flat panels in offices around the country is expected to have a flow-on effect on the retail market.

As consumers are introduced to the convenience of TFT in the workplace, retailers are hoping they will be convinced to take them into the home. Although this is expected to lag behind the corporate market, possibly by several months, there is still good reason to be optimistic.

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