Sony's Flat Faux Pas

So much for East Asian production efficiency and Japanese business cunning: According to a Reuters (Nasdaq: RTRSY  ) report on Friday, consumer electronics standard-setter Sony (NYSE: SNE  ) has found itself behind the curve in consumer demand for trendy flat panel television sets. In an interview with Reuters, the president of Sony's European division admitted that while his company has had no problem obtaining supplies of flat panels per se for use in assembly of flat panel television sets, it lacks capacity to assemble enough of the gizmos to meet European (at least) demand.

This production snafu could not come at a worse time for Sony. As Reuters correctly pointed out, sales of flat panel TVs are picking up as their prices inch down (and these two trends are certainly related.) Roughly 30% of all consumer electronics dollars this Christmas season are expected to go to television sales, and flat panel TVs are the "hot" item in the AV segment this year.

Considering the still-large size of the price tags attached to flat panel TVs, making sales this month may well turn out to be a "now or never" proposition -- or at least a "now or Christmas 2005, by which time I hope to have paid off my American Express (NYSE: AXP  ) card" proposition. If Sony lacks the goods to sell now, when consumers are primed to spend, then by the time it gets its production capacity expanded to meet demand, demand may have already left the station.

Who will benefit from Sony's misstep? Reuters points to local favorite Philips (NYSE: PHG  ) , which currently has the lead in European market share for flat panels at 18.8%. Philips subsidiary LG.Philips (NYSE: LPL  ) (along with co-owner LG Electronics) should logically also benefit as the primary supplier of panels for Philips' assembly needs. It's also likely that Sharp (Pink sheets: SHCAY), world leader in LCD flat panel sales, will boost its share in Europe at Sony's expense.

For more Fool news on developments in the LCD/plasma industry, read:

Fool contributorRich Smith has no position in any of the companies mentioned in this article.

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