The television business appears to be in trouble.
In the latest sign that demand is slackening, Vijay Rakesh, an analyst with ThinkPanmure, noted this morning that Samsung has cut the retail price for 32-inch LCD televisions by 15% to $599. He thinks Sony (SNE) and Sharp will follow suit. “Since retail TV inventory is picking up, we expect TV panel pricing to fall sharply in July to keep demand stable,” he wrote in a research note.
Rakesh says checks with electronics retailers find June unit sales were down almost 10% from May. He also notes that inventories of Tier 1 TV makers are starting to pick up. “Rapid price cuts at retail appear to be affecting the inventory price protection from TV OEMs and in-transit value depreciation,” he writes. “Most of the Tier 1 TV OEMs have three to four months of inventory in transit, with current inventory being higher with the slowdown.”
Rakesh thinks TV makers have a dilemma heading into Q3. “If TV OEMs have to cut retail TV prices to maintain demand, we believe that TV LCD panel pricing could see significant price cuts in July,” he writes. “Also, rapid price declines and competition in the LCD TV space is negatively impacting glass demand and sales in the Plasma TV space as sales slow down. The slowdown in demand and inventory picking up at retail could impact the [second half] outlook for panel suppliers and glass suppliers such as Corning (GLW).”
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