Making Predictions on 4K UHD TV Pricing for the 2018 Holidays

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Making Predictions on 4K UHD TV Pricing for the 2018 Holidays


If you've been waiting for a great deal to buy that 65-inch 4K TV you've had your eye on, get ready to pounce, because chances are you won't find a better deal than what will be offered this Black Friday through Cyber Monday, according to consumer technology industry analysts.

TV Pricing So Far This Year
Average TV pricing this year is down from 2017, but pricing was "artificially high" last year, according to NPD analyst Stephen Baker. That's because an increasing number of mid-sized TVs in the 40- to 55-inch range were "transitioning to 4K" in 2017, so the average selling prices (ASPs) were rising as the mix was shifting away from HD models in favor of UHD TVs, he told me. At the same time, there was "some flatness" in the pricing of 65-inch and larger TVs as the mix continued to shift in favor of 4K models, he said.

During the first couple of quarters of 2018, there was some "pretty aggressive" TV pricing seen, although not from the top-tier brands, he said. Right now, "most of the pricing pressure looks like it's in the 65s and maybe even the 75-and-above class," with the biggest pricing pressure on 65-inch TVs because of strong demand, he told me.

Consumers are trading up for larger TVs because the price points for 65-inch models are "at a point where [the] cost level is a little bit more attractive [and] you also have a very wide range of pricing on 65s," he explained, noting consumers can now opt for a $3,000-$4,000 OLED 4K TV or a "really high-end" model from Sony. "At the same time, there's a lot of opportunity--a lot of products--available at well below $1,000, so, there's a lot of affordable stuff out there," he said, pointing out that, in Q3, "about two-thirds of 65-inch TVs sold for under $1,000"--and all TVs that size are now 4K.

Relatively speaking, overall TV pricing "didn't decline too much" in the first half of 2018, according to Paul Gagnon, executive director of research and analysis-technology, media, and telecom at IHS Markit. Although there wasn't much price erosion seen in the first two quarters, however, there was likely more of it in the third quarter, which he didn't have data for yet, he said.

Echoing Baker, Gagnon said "there were a few brands that were pretty aggressive" in the first half, including TCL and Hisense. He told me: "The Chinese brands just in particular [have been] a little bit more aggressive in trying to pick up market share. So, they were kind of early to do the discounting. We saw TCL with really aggressive pricing on 55- and 65-inch 4K sets."

However, "we didn't really see the kind of top-tier global brands react to that pricing until probably just very recently," he said, adding those TV makers have largely been "focused more on preserving profitability." Meanwhile, "upstream in the supply chain," LCD panel pricing started declining at the end of last year and continued into the early part of 2018, he pointed out, noting that provided "a good opportunity for them to kind of bolster their profit margins a bit."

The analysts didn't name those top-tier TV makers by name. But LG, Samsung, and Sony are typically included in that definition.

What we're basically seeing now is a repeat of what typically happens in the consumer electronics industry, Brian Markwalter, senior vice president-research & standards at the Consumer Technology Association (CTA), told me. When new display technologies are introduced, TV ASPs increase, "but then it all comes down quickly" and what happens is that, for any given dollar amount, you get better and better TVs as time goes on, he said.

For example, whereas TVs a couple of years ago may have been 4K only, with no high dynamic range (HDR) capability, he pointed out: "Now, you're pretty much --in any of the nicer TVs--you're going to get 4K resolution, HDR [and], of course, they're going to be smart."

What's Expected This Holiday Season
Despite the relatively low profile that the top-tier TV brands had when it came to aggressive pricing early on this year, Gagnon predicted: "Heading into the holiday season this year, we should expect more of a reaction from the top-tier global brands and I would expect to see a lot better discounting going into the holidays."

That's because all you have to do is "look at where the TV brands have the most upside potential--kind of the most bang for their buck--[and] it's the holiday season," he said. So, for TV makers that "haven't been really willing to compete on price yet so far this year ... now is the time that they would start to do that," he said.

Gagnon predicted we'll see "some pretty decent promotions--particularly for very large screen sizes this holiday season." He expects that larger-sized 4K TVs will be $100-$200 cheaper than last year in many cases, he told me.

And all those TVs will be 4K this time. After all, he pointed out: "At this point, everything that's 50 inches and larger is essentially 4K now. There's just a handful of SKUs out there that are still remaining--kind of leftover inventory--that are 1080p." He predicted that "almost all of the major promotions this year--with the exception of the usual super cheap 32-inch or 40-inch, 43-inch 1080p sets" will be for 4K models.

Consumers looking to hold out for even better pricing after Cyber Monday but before Christmas may definitely want to reconsider that wishful thinking. After all, Gagnon said: "It's been the trend, I'd say, over the last three or four years that TV brands tend to not try to be as aggressive throughout the holiday season on pricing for TVs, mainly because it's all a question of inventory. Nobody likes to exit the holiday season with a lot of inventory, especially retailers. So, they tend to kind of be somewhat conservative right up until maybe the week before Christmas, just so they can judge how well inventory is selling through."

Baker was more reluctant to predict just how low the Thanksgiving weekend promotions will go, calling it a "crapshoot" and stressing that pricing during that period are hard to gauge because it has "nothing to do with costs or business--it has to do with marketing [and the] prices don't bear any relevance or relationship to what's actually going on in the market." Those who do predict holiday pricing are really just "sticking their finger in the wind," he said.

That said, Baker predicted "we will see moderately aggressive pricing" during the holiday period, probably including "some attractive price points again on 65s" and even more 65-inch 4K models promoted than a year ago.

"The intersection in Q4 is going to be that the tier-one brands need to be a little bit more price-competitive and tier two and beyond brands need to find some ways to move their price points up--not necessarily by charging more, but by capturing more share in higher value, higher screen size categories," he said.

Aggressive promotions could help the industry achieve a comeback after fairly weak results on TVs in the 2017 holiday season. Holiday TV sales were "terrible last year compared to 2016 [and] were down in double digits from where they were the year before," Baker said, adding that this time: "We expect a rebound in terms of growth to where total TVs will probably be someplace around 10 percent or more in terms of unit growth" compared to the 2017 holiday season. That, he noted, would put TV sales "about at the same level as they were in 2016."

Markwalter predicted we'll see especially "strong deals" this holiday season on 55- and 65-inch TVs, with even 55-inch OLED models expected to be in demand.

Click over to Page 2 for a discussion about the impact of tariffs, thoughts on 2019 TV pricing, and more...


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The Effect of Tariffs So Far
All three analysts said there didn't seem to be any noticeable impact on TV pricing so far this year from the Trump Administration's tariffs. That's because, so far, only TV components have been included on the list of tariffed items, rather than finished TVs.

South Carolina-based Element Electronics is the only U.S. manufacturer that's still been assembling TVs within the U.S., so it was the only TV maker in the country that stood to be impacted by the tariffs, which included Chinese-made components used in the company's TVs. Element said over the summer that it was going to be forced to close its factory in Winnsboro, South Carolina, this fall due to the tariffs. Since then, however, Element said in a September 18 Facebook post that its TV components were removed from the tariff list, so its factory "will remain open."�

The "vast majority" of TVs sold in the U.S. are assembled in either China or Mexico, "so, any tariff on components wouldn't have any impact," Gagnon said.

Although Element is a "pretty big unit volume brand" in the U.S., even if the components it used were subject to the tariffs and it had to close down its factory and find an alternate strategy for its TVs, that wouldn't have had a big impact on overall U.S. TV pricing, Baker said.

What's Expected for 2019 TV Pricing
The next major promotional period for big-screen TVs after this holiday season will again be the period just before the Super Bowl, the analysts noted. But all three of them stressed that pricing then isn't expected to be lower than what's seen during the Thanksgiving weekend. It never is.

There's typically "a final push just before Super Bowl to clear out old model-year stuff before the new models start shipping in the spring," Gagnon noted, adding that, "ideally, TV brands like to transition their models with retailers in the February through April timeframe." This year, "there was a higher level of inventory" on TVs after the 2017 holiday season, "so, it took longer to clear out that old inventory, which delayed some of the introduction timing for the new models," he said. Obviously, TV makers "prefer not to have that happen, so Super Bowl and the weeks running up to the Super Bowl are a really good time to try to clear through that inventory," he said. But Baker cautioned that Super Bowl is "not typically a pricing bonanza" for TVs in the same way that the Thanksgiving weekend is. "Super Bowl is more about product than about price," he said.

One expected positive for consumers still shopping for bigger screen sizes after this holiday season is that there are "a lot of new LCD factories being built in China" that are "optimized for very large sizes"--some that have already come on line this year and others expected to come on line next year and the year after that, Gagnon said. �These factories--dubbed Gen 10.5 fabs--are "very efficient at making screen sizes" including 65 and 75 inches, he said.

In fact, "there are so many of those that are coming on line that there should be, according to our projections, a pretty substantial oversupply of panels at those screen sizes, which should bring prices down for those large panels quite a bit in the next couple of years... so long as that oversupply bears out," Gagnon said.

One potential effect if 65- and 75-inch TVs drop sharply as a result of that is it may be difficult for the pricing of 55-inch models--which have seen significant sales growth over the last several years due largely to major price declines on that size--to drop at the same pace as those larger models, he said. At the same time, prices for TVs smaller than 55 inches might not fall "much or at all over the next few years," he noted. On the plus side, few consumers may care if it starts making even more economic sense to buy a 65-inch TV than a 55-inch set unless they can't fit a 65-inch set in the space they plan to use.

A Potential Monkey Wrench
Although the analysts agreed that big-screen TV pricing will likely continue to decline, they predicted that if the U.S. tariffs start to include finished TVs instead of merely components, all bets are off. If the Trump Administration implements an additional $267 billion in tariffs, as it's warned, that "would have a gigantic impact on consumer electronics" because TVs and other major CE devices, including PCs, would likely be included at that point, Gagnon predicted. Although a list of targeted products hasn't been announced yet, "by process of elimination," TVs and other CE devices "would be impacted [because] that's largely what's left," he said, noting that, so far, other than device components, it's mostly been commodities such as food and textiles that were subject to tariffs.�

On a positive note, however, even if TVs are added to the list of tariffed products, the review period is "about 60 to 90 days, so even if it was announced today it wouldn't take effect until early next year," he said. Regardless, if you really want that large-screen UHD TV, you might want to assume the worst and pick one up now.


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