The LCD market is poised to grow significantly in 2003, as government and corporates start issuing tenders for the replacement of pre-Y2K PC hardware. While most of the expected government tenders have been stalled by logistical and bureaucratic hurdles commonly associated with large-scale government rollouts, the private sector has already started to make the move, replacing their old CRT monitors with LCD monitors and stimulating massive growth in the LCD market.
The retail sector, not surprisingly, has been the first to abandon CRT technology in favour of LCD monitors. Retail consumers are traditionally the first to adopt peripherals primarily designed to enable superior graphics technologies.
“Resellers have been challenged in selling LCDs, as CRT monitors are so well established in the market, particularly as CRT monitors are sold as part of PC packages,” LG Australia marketing manager, Paul Reeves, said. “This has created a need for resellers to re-educate the market on PC options available. Resellers have addressed these challenges by increasingly bundling LCD monitors with PCs, resulting in the benefit to resellers of higher margins.”
LCD monitor sales increased exponentially from Q4 2002 to Q1 2003. According to market analyst IDC, LCD shipments increased sequentially by 43.3 per cent from Q4 to Q1 and jumped a staggering 206.6 per cent year-on-year. CRT shipments increased 7.7 per cent from Q4 to Q1, up 3.1 per cent on the same period last year. LCDs now represent 52.5 per cent of the total value of the monitor market, while CRTs now represent 47.5 per cent.
“LCD sales have grown 20-30 per cent month on month since November,” managing director of distributor Synnex, Frank Sheu, said. “March/April LCD shipments made up about 25 per cent of our total shipments.”
According to Sheu, LCD monitor sales now exceed CRT sales in the retail sector and this trend will extend to government and corporates. Tech Pacific’s systems and peripherals category manager, Joshua Velling, said Tech Pac had also experienced a definite increase in LCD sales over the past five months.
“We’ve seen roughly a 20 per cent growth in LCD sales over that period,” Velling said. “It’s definitely growing significantly.”
The sharp uptick in LCD retail sales has been driven largely by the drop in price of 15-inch LCDs, the average cost of which is about $500.
“Consumers can now buy a Pentium 4 with a 15-inch LCD for under $2500,” Sheu said. “The price of LCDs really dropped in November, making it very attractive to the consumer. We were selling Hyundai 15-inch LCDs for under $599 before Christmas. The sweetspot used to be around $600 or $700, now it’s around $499.”
Although the wholesale price of 15-inch LCDs has increased incrementally due to unit shortages, these costs have been for the most part absorbed by local vendors thanks to the strengthening value of the Australian dollar.
IDC analyst, Imraan Ali, said that 15-inch LCD prices had stabilised and in some cases increased after a significant drop last year.
Ali said that heightened demand occasioned by price drops caused a supply shortage. In addition, vendors have been encouraging manufacturing factories to produce more 17-inch LCDs despite high demand for 15-inch displays. Fifth-generation LCD factories can now produce larger sized glasses that are more economic for cutting out 17-inch LCDs.
This factor is also pushing more and more manufacturers towards 17-inch LCD production.
Heightened competition amongst these manufacturers should result in the cost of 17-inch LCDs dropping and the price gap between 15-inch and 17-inch LCDs narrowing. As the gap narrows, market demand will shift from 15-inch to 17-inch LCDs.
“Fifteen-inch LCDs have already hit their minimum pricepoint,” Sheu said, “but the price of 17-inch LCDs can still drop further and will continue to do so — 17-inch LCDS prices have already dropped 30 per cent over the last couple of months. At the moment the price gap at the retail level between 15-inch and 17-inch LCDs is about $350, I think that will close another $100.”
“Presently some branded 17-inch LCDs are double the price of the respective vendor’s 15-inch offering,” Ali said. “Clearly the pricepoint on 17-inch monitors has a long way to go before they start attracting SOHO and home users, and at this pricepoint market demand [for 17-inch LCDs] will mainly come from the corporate and government sectors.”
While local distributors report that the price of CRTs and 15-inch LCDs has stabilised, they are highly aware of international pricing fluctuations and remain watchful of price changes and associated supply and demand trends.
“We are watching pricing very carefully at the moment and monitoring demand,” Velling said. “We are expecting some CRT price increases if the international trends continue.”
While the strengthening Australian dollar translates to greater value for money for consumers, it is causing local distributors more than a few headaches as they are forced to reassess their revenue targets and inventory management strategies.
Sheu said the increased value of the Australian dollar has made revenue targets harder to meet.
“You have to sell more volume to compensate for the unit price decline,” he said. “Our revenue targets are still the same, but because the price of units decline, it makes it a lot harder to meet those targets.
“The market is still juggling between supply and demand. At the moment it is pretty balanced, but with the way the dollar is fluctuating at the moment no-one is keeping a lot of stock.”
While the channel juggles inventory and supply/demand issues, consumers are increasingly being drawn to LCD monitors, and not just because of price. LCDs now offer a far greater value proposition than CRTs, and have finally won over their toughest critic — the gamer.
LCD monitors had been branded cool by discerning gaming cliques since vendors such as BenQ, Hitachi, LG.Philips LCD, Sony and ViewSonic began releasing LCDs with faster pixel response times — the length of time it takes to turn their pixels on and off — that are critical to displaying moving graphics. Until recently, gaming enthusiasts had limited choices when it came to selecting a monitor, and were forced to use CRTs as they were the only monitors that had pixel response times fast enough to adequately display action-intensive games.
Many of the LCDs currently on the market have a pixel response time of 25 milliseconds, or 40 frames per second (fps). Newer LCDs boast a 16-millisecond response, which translates into slightly more than 60fps — the magic number for producing fluid movement in video games.
Response time on CRT monitors, however, is several orders of magnitude faster than on even the fastest LCDs. Now that LCD vendors have licked the pixel response time problem, dedicated gamers are opting for the more expensive LCDs over CRTs because they offer superior colour reproduction and their form factors are far more appealing.
While demand for 15-inch LCDs from the retail sector has fuelled significant market growth for the first half of 2003, both government and corporate sectors are expected to drive spur LCD sales over the second half of the year.
Reeves said: “The key drivers in the market will be corporate and government tenders, along with the increasing interest from the expanding SOHO market.
There are numerous government departments and corporate businesses that have not yet refreshed their pre-Y2K PC hardware and are poised to do so over the course of the year.
LCD resellers and distributors that supply PC hardware and services to these verticals should be ready to pounce on opportunities as they emerge over the next six months.
The Department of Defence is scheduled to replace 80,000 PCs this year and it recently announced it would be replacing its old monitors with 17-inch LCDs.
“Many of these government contracts are still pending,” IDC’s Ali said. “Government has not been as quick to refresh its existing PC hardware as corporates have been lately. There are still a lot of deals being [negotiated] in the government space.”
Velling said government work was already starting to roll in.
“We’re seeing a lot of quotes coming in from government as a lot of government departments are due to refresh their PCs/desktops,” he said. “From the feedback we’ve received, federal government has been really hotting up. We’re seeing government supply contracts for PCs with LCD monitors as well as just LCD monitors.”
Synnex has also been involved in PC and LCD supply deals at the local government level this year.
“We just closed a deal with a local [government] council to supply 120 PCs and LCDs”, Sheu said. “This year I see growth in every segment of the LCD market - education, SMBs and corporates because the price gap [between LCDs and CRTs] is so minimal now — about $200-250 gap. Corporates and government are happy to spend that extra money and we can now push 17-inch LCDs to them.”
Sheu said that while SMEs and corporates have already started refreshing, he expects many government departments to begin refreshing their pre-Y2K hardware in the second half of this year.
“The LCD monitor is a real consideration for government moving forward, mainly because of pricing as well as the ergonomic benefits of LCDs over CRTs,” Velling said.
When it comes to occupational health and safety, flicker-free, eye-friendly LCDs are the obvious choice for highly accountable government bodies and corporates. Large institutions are also favouring the devices because they consume far less power than CRTs and are therefore the most environmentally friendly option.
“Commonwealth, State and Territory government agencies have produced many documents concerning energy consumption standards, including the Green Office Guide, which is aimed at helping businesses to buy and use environmentally friendly office equipment,” Samsung market development manager of monitors, Joe Serra, said.
“The report clearly recommends purchasing a TFT monitor over a CRT to “save energy and give yourself more desktop space”.
The government report also recommends that government departments adopt “best practice products” in preference to products with Energy Star ratings (an international standard for energy-efficient electronic equipment). At this stage the Energy Star ratings have only been issued to a relatively small number of monitors and there are wide variations between the levels of energy saved.