According to a CNNMoney report published yesterday, consumer electronics juggernaut Sony (NYSE:SNE) is grounding its hopes for a return to healthy profit margins on a new line of LCD "flat-panel" televisions. Sony's "Bravia" series of LCD TVs will begin selling in Japan in October (it's already for sale here in the U.S.) and will be the first flat-panel line built using panels manufactured in cooperation with Samsung.
As we noted back in January, one key advantage that Sony has lacked in the past, and one that competitors such as Matsushita (NYSE:MC) and Sharp have had at their disposal, was the ability to manufacture its own flat panels for assembly into televisions. That changed earlier this year when the Sony/Samsung venture came online, making Sony's production of LCD TVs a bit more vertically integrated (although it still doesn't manufacture the key flat-panel component -- ultra-thin glass).
By bringing panel production essentially in-house, Sony expects to be able to reduce the cost of its LCD televisions. And by gaining an edge on pricing, the company aims to snag 30% of the Japanese market for large-screen LCD TVs (up from its current 20%).
Unlikely. Because cutting prices in order to increase market share isn't exactly an original idea. As a matter of fact, it isn't even an original idea for this month. Just last week, archrival Sharp announced that it, too, has begun marketing a new line of Sharp "Aquos" brand LCD TVs, and these sets, too, come with price cuts. Sharp intends its new and improved line of LCD TVs to retail at suggested prices as much as 26% lower than its previous models. Meaning that Sony's savings will have to be significant indeed if it's to cut prices and gain market share and boost profitability -- all at the same time.
Once again, it looks to be consumers who will be the real beneficiaries of the Japanese TV price wars. For as the Wall Street Journal reported last week when describing Sharp's plans, as much as Sharp (and now Sony) intend to cut their recommended prices, big-box electronics retailers such as Circuit City (NYSE:CC) and Motley Fool Stock Advisor pick Best Buy (NYSE:BBY) will likely sell the sets for even less.
For more flat-panel Foolishness, read:
- Has LG.Philips Hit the Turn?
- LG.Philips' Fading LCDs
- Sharp's Enormous LCD TV
- Can Flat Panels Level Off?
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Fool contributor Rich Smith has no position in any company mentioned in this article. The Motley Fool has an ironclad disclosure policy.
