Superior Technology Does Not Guarantee Success: The Demise of Plasma Televisions

Panasonic Corp announced on 31 October 2013 that it will cease production of plasma panels by the end of the year and halt sales of its plasma televisions by March 2014. The decision to exit the plasma television business is not a major surprise, with an earlier opinion piece written by Mykola Golovko (Senior Analyst – Consumer Electronics) in December 2012 predicting that manufacturers of plasma panels would throw in the towel by 2014.

Cost is a Key Factor

Plasma panels offer greater contrast, a faster refresh rate and sharper images than LCD displays. However, the key advantage of an LCD panel over a plasma panel is its lower production cost. Plasma manufacturers like Panasonic have struggled to drive costs down, especially for panels smaller than 40”. In emerging markets like Brazil and Indonesia where consumers are very price-sensitive, sales of digital televisions sized 40” and below are completely squeezing plasma televisions out of the market. Without critical mass, manufacturers are unable to drive down the production cost of plasma panels so as to be comparable with that of LCDs.

Sales of Digital Televisions 2013

Source: Euromonitor International

Betting on the Wrong Horse

Panasonic was pushing 3D technology as the higher refresh rates required to drive 3D content played to the advantage of plasma displays. That said, the absence of readily available content and significantly higher prices limited the popularity of 3D televisions. Consequently, 3D functionality became just another feature for all mid and high-end televisions, and not a unique differentiator.

Television Losing its Importance

A consumer survey conducted by Euromonitor International shows that younger consumers still enjoy watching television programmes and films – just not on a television set. Consumers under the age of 30 are twice as likely as those over 60 to watch DVDs or view television programmes over the internet for free or by paying for content via Netflix, Amazon Prime or another website that streams video content online.

While plasma televisions offer superior video quality, consumers (especially the younger generation) do not see the benefit of paying more for a large-screened (>40”) plasma television. Instead, they would rather pay less for smaller-screened (<40”) digital televisions, which are usually LCD televisions.

Another One Bites the Dust

The history of electronics is littered with inferior products triumphing over technologically superior competitors, such as VHS over Betamax, MP3 over FLAC, soundbars and home cinema systems over audio separates. Time and time again, consumers have chosen to support a technology that offers lower prices, and, unfortunately in this case, plasma televisions are also destined to fall victim to this trend.

Another War

Panasonic Corp led plasma televisions in 2012 with a 36% share of volume sales. With the impending withdrawal of Panasonic, Samsung will be the main beneficiary in 2014. Samsung leads LCD televisions and smartphones and will be keen to claim leadership of another market (albeit a hollow victory). With Samsung’s vast development resources and financial muscle, the Suwon-based manufacturer can easily continue to keep its plasma production factory running. LG Corp, on the other hand, is struggling to compete in both LCD televisions and smartphones and may exit the plasma business. LG can then focus its limited resources on next generation display technology like OLED and the higher-margin smartphone business.