Decline in domestic TV sales to hit Japanese firms in 2011

Flatscreen TV manufacturer firms in Japan look set for a tough year with a programme of subsidies due to finish at the end of March.

While last year saw impressive figures with sales of Japanese TVs jumping 75 percent to 24 million units, it is expected that the good times are not meant to last as sales lower to 13 million this year, while just eight million are forecast the following year according to DisplaySearch figures.

It is believed that this is largely due to the cutting of a subsidy program that began in May 2009, offering ‘eco-points’ when consumers buy green products such as energy-efficient TVs, fridges and air-conditioning in exchange for goods.

The WSJ gives an example of how one Tokyo resident was encouraged by the subsidy to replace his old CRT TV with a 37-inch flatscreen Toshiba. “I’m not sure if I would have bought a new TV, had it not been for the discount,” says Takashi Koizumi.

By buying the new TV at a price of around $1,200, Koizumi earned approximately $200 back in eco points.

With Japanese firms such as Toshiba, Sharp, Panasonic and Sony making up 90 percent of TV sales in Japan, with the world’s two largest manufacturers Samsung and LG having little presence, it means that they are likely to be hit hard by any decline.

This problem is particularly pertinent for Sharp who held the largest share of the market last year at 37.8 percent of the market from January to September. This has lead to the firm doubling its dealership in China to around 10,000, with the aim to double China sales to 2.4 million units, equal to about 7 percent of the market.

Furthermore, with little growth expected in US and European markets, Japanese firms may have to look to emerging markets in order to boost profits.

Towards the end of last year Toshiba indicated it would be doing just that when it announced the release of a flatscreen set that catered specifically for the conditions of certain emerging markets with the release of it battery powered TV that gave a much stronger signal, important in areas such asINdonesia where it is aimed at.

Panasonic is also said to be targeting emerging markets with less expensive products, such as LCD sets with reduced backlighting designed for the Indian market.

However some analysts are expecting that it may be some time before revenues from emerging markets really begin to make up for the substantial downturn in domestic profits.

“For most Japanese TV brands, sales in emerging markets are still relatively small, so even if the numbers double or triple, it wouldn’t make a huge difference any time soon,” said Nobuo Kurahashi, an analyst at Mizuho Investors Securities.

According to Paul Gray, Director TV Electronics & Europe TV Research at DisplaySearch, while saturation of the market is a contributing factor to the difficulties being faced by Japanese firms it is the cutting of the subsidies that is the main cause of companies woes.

“The Japanese market was 8-9 million units shipped per year for a long time – and remember that the flat screen transition happened in Japan in 2004-2006,” Gray told Techeye. “Undoubtedly the market is saturated, like Western Europe and North America, and essentially driven by replacement – but that is the same as any other developed market, so it is the subsidy programme that is the main cause of these problems.”

Gray believes that focusing on emerging markets could possibly offer a way for flatscreen TV manufacturers to lighten the blow of the domestic forecasts, though a quick fix is an unlikely scenario.

 “While historically emerging markets have been unstable, with the Brazilian TV market halving in the early part of the last decade, the recent economic crisis largely left consumer spending intact.   Russia had four very weak quarters in 2008-2009, but it has bounced back fast,” he said.

 “I think the more worrying aspect is that the typical levels of hyper-competition in the market will play out and the returns in emerging markets will be low.  I think it’s hard to see any quick fix to the impending hole in Japanese TV sales.  They also of course will be fighting Samsung and LGE, who have strong leadership positions in emerging markets.”