LCD monitors are cool. Everyone wants one. In fact, despite the recent drop-off in prices and all of the assorted ergonomic benefits, desire remains one of the key reasons behind the continued success of LCD monitors.
That's not just the opinion of some stat-addled analyst in a Californian think-tank either. Just ask those in the channel whether it is price or the additional benefits of owning an LCD monitor versus a CRT monitor and the answer you will get is a heady mix of desire mixed with peer pressure.
"Most users prefer an LCD display simply because it looks better, and once someone in the office has one, they all want one," claims Nick Heather, peripherals business manager at Acer UK.
Mike Farrah, senior business manager for audiovisual and displays at Ingram Micro, agrees. "There's a number of reasons why customers buy LCDs, from price to ergonomics, but the fact remains that they look good," he says.
The LCD monitor market has been riding high for more than 18 months now and only came somewhat unstuck at the start of the summer, thanks to a combination of weak demand, high prices and over-production.
DisplaySearch found that for the first quarter of 2004 LCD monitor shipments had risen by six per cent quarter-on-quarter, and a massive 49 per cent compared with Q1 2003, topping out at 15.8 million units. LCD shipments for Q1 were up 300,000 units on previous expectations.
In contrast, CRT monitors fell by 12 per cent against 2003, with unit shipments down to 15.6 million. LCD growth has been astounding considering that in Q4 2003 and Q1 this year the market was plagued by LCD panel shortages and prices were spiralling upwards.
The happy days ended at the tail-end of Q2, with weak demand resulting in warehouses full of pricey LCD monitors. This started a frenzy of price-cutting that saw 20 to 30 per cent disappear from price tags in just two months. Today, there are more LCD monitors than buyers.
"During Q4 last year and Q1 this year we had an under-supply situation, which allowed us to maximise profits from the restricted supplies," says Keith Talbott, Viewsonic's sales director for UK and Ireland.
"We didn't kill the LCD monitor market, but we certainly slowed it down by raising the prices earlier in the year. But now we are in an over-supply situation and market pricing has fallen by about 30 per cent."
Andrew Murray, senior analyst at iSuppli, says: "From a panel manufacturer's point of view, the supply of the panels has exceeded the demand by more than 10 per cent. That caused a price reduction in panels over recent months, with prices falling off very quickly. It should balance out in the run up to Christmas though.
"The other problem was on the demand side. In the LCD monitor arena people were looking to buy 15in panels, but the manufacturer wanted to sell them 17in and 19in models because there are better margins to be made. People didn't bite and either went back to CRTs or didn't buy anything at all.
"The trouble with the manufacturers in 2003 is that they were in such a hurry to convert CRT users to LCDs that they dropped the prices too far. Then came under-supply at the end of 2003 and the start of 2004 which pushed prices back up. Now we are back in an over-supply situation with rapidly falling prices."
John Turner, business manager at Midwich Thame, says: "Sales have been buoyant, but margins have been tougher because of the massive supply of products. It went from famine to feast very quickly, and there have been fairly dramatic price declines in a short period of time.
"From a distributor's standpoint, a typical 17in TFT LCD display has come down to between £30 to £40 in a few months. That has affected 15in LCD monitors, which are essentially in decline now."
Heather says: "I've been in the display business for nearly 10 years and I've seen a lot of price drops, but this one was severe and happened in just two months. This level of decrease usually takes four or five months.
"We saw prices fall by 20 per cent and more in just eight weeks; on certain lines prices dropped up to 25 per cent. We will probably see more decreases in October, but the rate of decline is slowing now and we expect volume sales to increase."
In fact, until the recent drop-off LCDs' winning streak stretched back to the beginning of 2003. DisplaySearch found that in July this year TFT LCD prices dropped for the first time in 18 months, ending a remarkable run of price increases.
While it is doubtful that LCD displays will ever see the kind of high-priced market growth of the past 18 months, there is no shortage of growth in the market. One reason that under-supply will become a rare occurrence is down to the increased number of fifth-generation and newer sixth-generation fabrication plants coming online.
From Taiwan and Korea to Japan and China, ultra-modern and efficient fabrication plants are starting work, and will continue to do so into 2005. As a result, many market watchers predict over-supply is far more likely than under-supply throughout 2005.
"We certainly see more of a balance between supply and demand coming in Q4," Murray says.
"But over-supply will continue in 2005 because of the new plants that are coming online. The basic problem in the LCD market is the supply-versus-demand ratio. Demand can change on a week-to-week basis, but supply is different because you can't just turn a plant on and off that quickly."
Turner says: "Into Q4 supply will tighten, which is usual - well, we hope it does, because prices will go up. That said, with all the new manufacturing plants coming online we will not see the supply problems of the past any more."
In model terms, the 15in display is being superseded at the entry level by 17in displays. Price erosion in the 17in space has been the most fierce. The gap between 15in and 17in has shrunk to the point that businesses do not mind forking out a little more cash for a lot more screen.
"The 17in display is now the most popular size," says Talbott. "With the dramatic drops on 15in pricing this may change a little, and while there will still be a very big market globally for 15in displays, western Europe is standardising on 17in."
Turner adds: "Most people are willing to pay a little more for the 17in display. The vast majority of our sales are 17in and I think they will remain the mainstream display for most of next year."
Heather adds: "Most 15in panels are being used in notebooks now where they command a better margin return for manufacturers. The 17in LCD display is the main entry level model now."
So what is different in terms of the technology these days? While nothing revolutionary has happened to display technology in the past 12 months, existing features and performance have improved noticeably.
From response times and higher resolutions to improved colour reproduction and connectivity options, today's LCD buyers are getting more product for their cash.
One of the noticeable hang-ups of last year's LCDs was the problems they had reproducing fast action games, football on the TV or action movies without 'ghosting', where the image would show blurring or lag. This was down to inadequate response times.
In fact, most knowledgeable buyers avoided them for these reasons, preferring to stick with regular CRTs or TVs for entertainment. This year, much of that has changed.
"The image quality is better than it was," says Talbott. "The biggest change has been in panel response time. Around 25ms was the average response last year, but it was not acceptable for games or movies. For fast-moving images or graphics, 15ms is the minimum that is acceptable.
"Most good panels offer that now. We have a 12ms model out now and will be the first to launch a panel offering 8ms in November."
Farrah agrees. "Response time is a lot better - from 25ms last year to 15ms now, and falling. It is helping to open new markets, especially with gamers, as they tended to stick to CRTs because of the ghosting issues," he says.
Murray adds: "At 25ms you would see a lot of blurring watching a football match or movie on an LCD TV or monitor. Now, 15ms is the minimum you can get away with. Most of the response time improvements are being driven by both the LCD TV camp and the gaming audience in the LCD monitor market."
Heather says: "Response times have certainly improved, falling as low as 15ms and 12ms, with newer panels going even lower. CRT monitors have a response time of 6ms, so it's getting close. Once you are at 12ms or 15ms that blurring problem goes."
In addition to response times, there are a wider array of connectivity options on many panels, with some offering USB, S-Video, composite video and Digital Video Interface. The latter is now no longer as expensive an upgrade as it was. Viewing angles are also improving while higher resolutions are making panels very popular in certain corporate sectors.
"The 19in is rapidly becoming the corporate standard, taking over from 18in panels, which are being discontinued," Talbott says. "Once you hit 20in and 21in you will be able to run things in a UXGA [Ultra Extended Graphics Array] resolution of 1,600 x 1,200.
"Most 19in panels can only run up to 1,280 x 1,024. With UXGA you can see a lot more information, such as spreadsheets or multiple applications."
So the technology is improving and prices are still falling, but the channel can hardly sit on its laurels. Retail giants such as PC World, a growing number of e-tailers and even PC vendors are gunning for the cash-rich SME sector with a growing amount of success.
Although this is making life a bit harder for dealers, they are still the preferred route to market for many LCD manufacturers.
Heather says: "We are 100 per cent channel and take no direct business. We made this choice in the late 1990s and it works. Most customers like to buy from a reseller that will help them throughout the whole buying and support process."
"The channel is vital to us," says Talbott. "We work with a number of distributors but, for instance, if you look at Ingram Micro's database it has about 20,000 resellers on its books. We could never build that kind of customer base by ourselves.
"There is a threat to the channel from bigger e-tailers, as LCD manufacturers now treat them like large retail customers because they can buy in large volume and sell cheaply over the internet. These e-tailers are now like online versions of PC World."
Despite the competition in the market, Turner says there are still a lot of opportunities for resellers to make a buck.
"We sell a lot more panels to resellers than we sell systems with bundled LCD panels," he says. "It is not difficult to sell these panels because the whole market knows about them. There are lots of health and safety benefits, they are good looking and now they are very affordable.
"Resellers should be looking to sell add-ons too, such as height-adjustable clamps for the desk. These can add another £40 to £70 to a sale. Resellers will probably make more margins from the panel accessories than off the panel sale itself."
Acer (01753) 699 200
Ingram Micro (0190) 826 0422
iSuppli (01189) 036 001
Midwich Thame (01379) 649 200
Viewsonic (01293) 643 900
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