Forecasting the market for technologies and for product categories early in their commercial lifetimes is a very tricky business.
First there are no straight lines — or even curved ones — representing historical sales data that can be projected forward. Of course, reputable market intelligence companies, and there are some, don’t make their predictions based only on the projection of historical data. They also interview individual manufacturers and supply-chain participants to obtain their predictions of their own output, and add up the results for a grand total. In addition, they interview major purchasers, such as Fry’s and Best Buy, for estimates on how many units they expect to buy in the future. There is, of course, no guarantee that the number of units manufacturers expect to sell equals the number retailers expect to buy, which provides the opportunity for some creative number-crunching.
All of this assumes that everybody is giving honest answers to the market intelligence firm’s questions, which may or may not be the case. One can easily think of situations in which one company or another would think it is in its interest to high-ball or low-ball the numbers. But even if everybody is providing their speculative numbers as honestly as they can, there is still plenty of room for a market intelligence company to get its projections spectacularly wrong. One of our leading display-industry prognosticators — which is still very much in business — was wildly optimistic in predicting the ramp-up of small OLED displays, which were, and still are, produced almost entirely by Samsung. It then revised its estimates of the timing and volume of the market ramp-up, and was once again spectacularly wrong. These cycle repeated several times before sales actually began to take off.
The problem was that virtually everybody, including the people in Samsung, did not anticipate how difficult it would be to manufacture small OLED displays at high yield and low cost. Fortunately, it was Samsung, with its deep pockets and impressive corporate patience, that was carrying the ball. Ultimately, the problems were solved and the products and manufacturing processes continually refined. Now, small OLEDs for smart phones please handset makers and end consumers, and constitute a successful and profitable business for Samsung.
Which brings us to Ultra High Definition Television (UHD-TV), otherwise know as 4K-TV. There are still a few analysts around who say that UHD-TV is being over-hyped and will, like 3D-TV before it, fail to be an important product. These analysts are wrong.
Now, Displaybank IHS has published an interesting market projection for UHD-TV display panels in its “LCD Market Tracker — Q3 2013.” Please remember what I said about the reliability of market projects early in a product category’s lifecycle, but this one is (mostly) okay because it supports my position. IHS reports that 0.4 million UHD-TV panels were sold in Q2’13, with 0.8 million forecast for Q3’14. Market penetration by units is projected to be 1% is 2013, rising to 8% in 2017. IHS goes on to predict that penetration by revenue will rise much faster, and reach 20% by 2017. Panel makers would love that to be true, because it would mean they have a product to sell with more than a paper-thin margin. Maybe. The history of the display industry cautions us that high-performing panels generally command a higher margin for a relatively short time before becoming commoditized. But the unit penetration projections strike me as realistic.
We will soon see how UHD-TV prices will shake down for the holiday season. It will also be interesting to see if the very-low-price UHD-TV sets from China and (in one case) Japan will offer acceptable 4K image quality.
Posted by Ken Werner, October 31, 2013 1:35 PM
About Ken WernerKenneth I. Werner is the founder and Principal of Nutmeg Consultants, which specializes in the display industry, display technology, display manufacturing, and display applications. He serves as Marketing Consultant for Tannas Electronic Displays (Orange, California) and Senior Analyst for Insight Media. He is a founding co-editor of and regular contributor to Display Daily, and is a regular contributor to HDTVexpert.com and HDTV Magazine. He was the Editor of Information Display Magazine from 1987 to 2005.