Samsung and Sony Face New Contention over Pricing

Of course one has to understand this news in the context of the U.S. QE2 and export economies’ FX interventions.

From Bloomberg:

Sony Corp. gave up yesterday on a goal to profit from televisions this fiscal year and Panasonic Corp. forecast price drops will deepen this quarter. Earlier, Samsung Electronics Co. predicted “severe” competition for the year-end season, echoing comments from LG Electronics Inc. a day earlier.

Projections from the world’s four largest TV makers signal the industry will fail to capitalize on the biggest sales quarter of the year, with some analysts predicting price declines of as much as 25 percent in 2010. Companies from Microsoft Corp. to Intel Corp. are increasingly counting on corporate demand as consumers are reluctant to shop.

“There’s going to be a price war this Christmas season and there’s no way around that,” said Tsutomu Yamada, a market analyst at kabu.com Securities Co. in Tokyo. “The whole strategy this year is ‘sell earlier and sell for less.’ That makes life miserable for the manufacturers.”

TV makers were betting earlier this year that pricier LED TVs with brighter screens or 3-D sets would keep prices from falling the typical 20 percent to 25 percent annually, according to Atul Goyal, a senior research analyst at CLSA Asia-Pacific Markets in Singapore. That bet hasn’t materialized as pessimism has increased recently and shoppers in the U.S. aren’t willing to pay extra for higher quality sets.

U.S. retailers such as Target Corp. and Wal-Mart Stores Inc. are sweetening discounts ahead of the holiday season to move merchandise as joblessness hovers near a 26-year high. Target, the second-biggest discount retailer behind Wal-Mart, said this month it would lower prices on more than 1,000 toys to attract shoppers. Wal-Mart responded with its own discounts.

Sony Chief Financial Officer Masaru Kato said yesterday the maker of Bravia TVs is forecasting a loss from the business this fiscal year and the company is bracing for “harsh” competition. Sales of 3-D sets, projected to account for 10 percent of the 25 million annual TV target, are trailing Sony’s previous expectations, he said.

Panasonic, the world’s biggest maker of plasma TVs, said yesterday falling prices, the stronger yen and more expensive raw materials prevented the maker of Viera TVs from raising its full-year profit forecast even though earnings during the first half exceeded the company’s projections. The yen trading near a 15-year high against the dollar isn’t helping.

“The strong yen will be a major hurdle in the TV business in the second half,” Hideaki Kawai, the executive officer in charge of finance and accounting at Panasonic, said in Osaka yesterday. “It’s an extremely severe situation.”

South Korea’s Samsung and LG, the world’s two-biggest TV makers, have voiced similar concerns after the advantage of having a weaker won, the worst-performing major Asian currency from April to June, dissipated. The won’s 5.3 percent gain against the dollar since September makes it the region’s best performer during the period.

Samsung yesterday forecast earnings are poised to fall from their record high in the three months ended Sept. 30 and said competition in the TV market will be “severe” during the fourth quarter.

“We expect increased oversupply and price declines in the memory market, as well we possible further declines in LCD panels,” said Robert Yi, vice president of investor relations at Samsung. “Combining these with a possible appreciation of the won, we expect the overall fourth-quarter business conditions to be difficult.”

Fourth-quarter prices of LG sets will probably fall as much as 8 percent from the preceding three-month period, as TV makers clear mounting inventory, Chief Financial Officer David Jung said on Oct. 28.

“The Christmas season makes or breaks you and this year you’ve got unemployment and deflation,” said Yamada of kabu.com Securities.

http://www.bloomberg.com/news/2010-10-29/sony-samsung-brace-for-miserable-christmas-sales-as-tv-price-war-looms.html