How Samsung fell behind Sony and LG in the premium TV market

    SEOUL (Reuters) – On the 2013 annual Shopper Electronics Present in Las Vegas, flashy natural light-emitting diode (OLED) televisions sporting credit score card-thin screens have been on the entrance and middle of Samsung Electronics’ new devices show.

    FILE PHOTO: Samsung QLED televisions are displayed through the 2017 CES in Las Vegas, Nevada January 5, 2017. REUTERS/Steve Marcus/File Picture

    Later that yr, the South Korean firm splurged on advertising and marketing the televisions – which then retailed at round $10,000 for the 55-inch mannequin – to the extremely rich. Among the many promotions was a penthouse celebration for the residents of One Hyde Park in London, labeled the world’s costliest residential block.

    However by 2015, it had stopped making OLED TVs, saying the market was not able to embrace the excessive prices of the know-how – based mostly on skinny movies of carbon-based modules that mild up in response to electrical present. As an alternative it determined to give attention to growing liquid crystal show screens which might be backlit and enhanced with so-called quantum dots, semiconductor nanocrystals that produce colours and might enhance image high quality. These are generally known as QLED TVs.

    It seems to have been a pricey misstep. OLED TVs have turn out to be a dominant know-how within the premium market – that’s for a TV of at the least 55 inches in measurement costing greater than $2,500 – as the price of producing them has dropped dramatically.

    Samsung is now the one main TV producer to not produce OLED screens. And whereas the TV enterprise generates lower than three % of Samsung’s revenue, which largely comes from its semiconductor and cellphones companies, the lack of the management of the premium, higher-margin market is a tough blow.

    Samsung declined to touch upon whether or not ending OLED TV manufacturing was a pricey mistake or who made it.

    A take a look at on-line opinions of each OLED and QLED TVs previously couple of years point out that OLED TVs made by South Korea’s LG Electronics and Japan’s Sony gained followers due to the standard of the image. Particularly, reviewers cited extra life like colours and excessive decision, in addition to enticing designs and more and more cheap costs.

    That doesn’t imply the Samsung QLED TVs don’t have their supporters. Image high quality has additionally improved and costs have dropped however they don’t are typically reviewers’ prime picks.

    “OLED TV’s soar in premium TV market share is a direct results of its excellent image high quality,” stated Ross Younger, CEO of analysis supplier Show Provide Chain Consultants. “Samsung could have missteped of their 2017 product by emphasizing design over image efficiency.”

    Samsung final yr solely received an 18.5 % share of world gross sales for premium TVs, based mostly on greenback income, down from 54.7 % in 2015, in response to analysis agency IHS Markit. In the meantime, Sony and LG have leapfrogged Samsung to seize 36.9 % and 33 % of the market respectively.

    To make sure, Samsung stays the most important maker of TVs on the planet – a title it has now held for 12 years. It additionally claims to be No.1 in premium TVs, with greater than a 40 % market share, based mostly on information from GfK. These figures embrace 55-inch TVs which might be cheaper than the $2,500 IHS makes use of to outline the phase.


    Samsung Electronics’ determination to base its TV enterprise on LCD know-how was made after it took the recommendation of Samsung Group’s now-defunct Company Technique Workplace, a supply with data of the matter stated.

    “The workplace made a suggestion that it could be extra worthwhile to give attention to LCDs than switching to less-proven OLED,” stated the supply, who declined to be named as a result of sensitivity of the matter.

    The explanations: the TV enterprise was battling falling earnings and the corporate felt LCD know-how could possibly be extra worthwhile than excessive price OLED, the supply stated.

    The one drawback was that across the time this determination was being taken, LG was growing a way more environment friendly manufacturing course of to make OLED screens.

    FILE PHOTO: “Quantum Dot” SUHD televisions are displayed on the Samsung Electronics sales space through the 2016 CES commerce present in Las Vegas, Nevada January 7, 2016. REUTERS/Steve Marcus/File Picture

    The retail value of a mainstream LG 55-inch OLED TV has dropped to simply three million gained ($2,811) this yr from 15 million gained ($14,056) in 2013, LG stated.

    It’s not the primary time choices involving Samsung’s Company Technique Workplace have been questioned. The workplace, which was led by then Samsung Electronics vice chairman Choi Gee-sung, was closed after it confronted criticism through the political scandal that led to the arrest of the group’s inheritor Jay Y. Lee final yr on prices of bribery and embezzlement. Lee, who denies any wrongdoing, walked out a free man in February after an appeals court docket suspended his sentence.

    Samsung advised Reuters the most important motive it’s not making OLED TVs is the difficulty of display screen burn-in, referring to a type of picture retention when a picture has been on the display screen for a very long time.

    LG, although, says on its U.S. web site that whereas burn-in is feasible on virtually any show, it has addressed the difficulty via know-how that protects towards harm to the display screen and rectifies short-term issues.


    The wrestle’s influence on company outcomes turned clearer final month. LG stated on Thursday its TV division recorded a 77 % soar in quarterly revenue and a report revenue margin of 14 % within the quarter led to March.

    Samsung reported a 32 % quarterly revenue decline final Thursday for its client electronics division that sells TVs and residential home equipment, saying that earnings fell from a yr in the past, partly as a result of it had modified its lineup and stopped promoting some decrease and mid-priced TVs.

    Sony, whose tv enterprise incurred losses totaling 800 billion yen ($7.four billion) over ten years, swung again to a revenue within the yr led to March 2017.

    To return to revenue, the Japanese firm lowered the variety of markets all over the world through which it sells, diversified suppliers and provided each OLED and LCD screens. It additionally ditched an LCD three way partnership with Samsung.

    The technique paid off. Whereas Sony had simply 10.2 % share within the world TV market final yr in greenback phrases, it was No. 1 within the premium market. Its working revenue margin reached 10.7 % within the September-December quarter, in response to John Soh, analyst at Shinhan Funding. The outlook for Samsung in premium TVs might worsen as 71 % of gross sales this yr are anticipated to be OLED TVs, up from 51 % final yr, in response to IHS.

    And that is all taking place with the 2018 FIFA World Cup beginning in June. The month-long soccer competitors, which is being held in Russia this yr, is persistently essentially the most watched TV occasion on the planet and gives TV makers with an ideal alternative to spice up gross sales.

    Choong Hoon Yi, head of UBI Analysis and a former Samsung show engineer, stated that it now “appears to be like like Samsung made a mistake” although it didn’t appear a blunder on the time, as Samsung thought-about the OLED know-how too immature. When requested about whether or not it plans to restart OLED TV manufacturing and gross sales, Samsung reiterated its earlier stance that it’s going to give attention to different extra aggressive know-how.

    “There’s no change (in our technique),” Jonghee Han, President of Samsung’s TV enterprise advised reporters final month.

    Some show analysts say all won’t be misplaced as Samsung can struggle again on value.

    Initially the U.S. value for Samsung’s mid-range Q7F 55-inch QLED TV in 2018 was $1,900, down from $2,500 final yr, in response to on-line channels. In the meantime the preliminary value for LG’s 55-inch C7 OLED TV was $three,500 in 2017 however the corresponding C8 began at $2,500 this yr.

    “Our objective is to not be No. 1 for x-number of consecutive years, however No. 1 perpetually,” Samsung’s Han stated.

    Reporting by Joyce Lee and Ju-min Park; Further reporting by Makiko Yamazaki; Enhancing by Miyoung Kim and Martin Howell

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