At iSuppli Corp.’s Flat Information Displays 2006 (FID) conference in San Jose, Calif. last week, one of the major topics of concern was the potential commoditization of the LCD TV. With LCD TVs predicted to surpass cathode ray tube televisions in revenue and shipments by the end of 2006 and 2009 respectively, the threat of LCD sets becoming just as much of a commodity as their CRT ancestors grows. iSuppli already characterizes 32-inch and smaller LCD televisions as commodities and expects 40/42-inch sets to follow in 2007.
Though differentiation between products presents a possible hedge against commoditization, the strategy could just as easily increase the cost of production. Riddhi Patel, principal analyst for television systems at iSuppli, explains, “On one hand, you want to remain price competitive with the product next to your own on the retail floor, but on the other hand, the cost of manufacturing the product - because you have added a semiconductor or some type of color improvement to differentiate it - is not allowing you to do so.”
Another tactic manufacturers are employing is to locate their production facilities in the same place as their target market. If the manufacturing center and sales outlet are close to one another, shipping costs (and possible price drops that might happen during shipping) are minimized. iSuppli notes that while this strategy may work in the short term, commoditization may still prevail.
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