Sony, Like Everyone Else, Seeks to Expand LCD Market Share
The Wall Street Journal (Subscription req’d) reports:
Sony Corp. aims to boost its liquid-crystal-display television shipments by more than 60% to about 10 million units next fiscal year ending March 2008, a company spokeswoman said.
Given that the estimated end market growth is less than 60%, this implies Sony wants to expand its market share. The problem is, so does everyone else. Therefore, all of the suppliers will produce more LCD panels than they think will be needed, and make the oversupply conditions worse than they already are.
We had a similar response to a comment left on a recent article about Intel and AMD. Paraphrasing here:
It is fair enough to argue that [Sony] doesn’t want to lose further share. However, somebody is making too many processors and needs to stop. The auto makers bought the share loss argument for too long, and produced vehicles sold into fleets at little profit in order to avoid share loss. The same will happen in semiconductors unless supply and demand return to balance.
So [LCD manufacturers] have a couple of options:
1) they can [all] produce an amount higher than end demand, hoping that the excess production gives them excess market share. If [all] companies continue to follow this strategy there will be little or no share shift, only excess supply (and lower prices) plaguing [all] of them.
2) only [some] can produce a higher amount than end demand, and gain share. [None] will allow [others] to do this.
3) they can [all] reduce capacity growth to the level of end demand, in which case [all] can maintain their share and profitability. There could easily be fluctuations cack and forth as one or [another] develops a superior [product] according to one metric or another.It is a simple mathematical identity that [all] companies cannot gain market share. Right now they are playing a game of chicken to see which one backs off first. While the consequences of being the one to chicken out may be embarassment and a small loss of market share, the consequences of neither chickening out are far worse.
While they are playing chicken, we are too chicken to buy their stock.
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