MONITORS: LCD Shortage Keeps CRT Ahead

Just when LCD monitors were beginning to gain popularity in the first quarter
of 2003, came the worldwide shortage, putting CRT monitors back to a stronger
position. The LCD shortage began sometime in March 2003, putting a halt to their
sliding prices. Since then, the price of LCD monitors has remained steady or has
risen just a little.

However, the growing demand for LCD monitors never put the CRT market in a
weaker position given the size and diversity of the Indian market. The price
advantage of CRT monitors will also ensure that their demand will continue for
some more time to come. Even though LCD monitor prices have been moving
downward, LCDs still sell over two-three times the price of CRTs.

Despite the price differences, verticals like BPO continued to buy LCD
monitors and drive growth. According to estimates, the unit share of LCDs has
been steadily increasing. For instance, 98% of Samsung's India units sales
came from CRT and 2% came from LCD in 2002. In 2003, 96% of its sales came from
CRT and 4% from LCD. In 2004, Samsung expects 90% of its sales to come from CRT
and 10% from LCD. Going by Samsung's statistics, the LCD business appears
quite promising.

Trend Setters

Though the total replacement of CRT with LCD monitors may be a distant dream
in India, worldwide trends show that LCD monitor sales have surpassed the CRT
monitor sales in many developed and developing countries. This, along with an
increased use of LCD panels in many other applications, found LCD manufacturers
being unable to match the demand.

iSuppli/Stanford Resources, in a recent research, found that the shortage for
LCDs is caused due to simultaneous surges in demand from the laptop, television
and desktop PC monitor markets. For the vendors, the LCD business has fatter
margins compared to the CRT business, which has now become increasingly
commoditized and, hence, margins are at bare minimum levels. Some industry
experts also attribute the shortage to a financial crisis in Asia, which has
restricted the supply of money that is needed to add new LCD manufacturing
capability. According to analysts, Taiwan is the primary source of supply for
flat panels, which means that the growth of the market will continue to be
suppressed if demand remains consistent.

The LCD shortage in the Indian market remained until the first quarter. There
will be some respite only after the new production facilities, that are expected
to come up in South Asia from some major LCD panel manufacturers, come up. But
prices may not dip immediately, because most vendors, starting July 2004, would
be fulfilling orders placed earlier. And, come Christmas season, demand is
expected to pick up again.

LCD Potential

The market has a lot of potential for LCD monitors and many corporates have
already started looking for these monitors. But it is yet to gather steam. The
total replacement of CRT with LCD monitors will happen only in the distant
future and shall be restricted to a few segments that benefit significantly from
using LCD monitors.

Today, LCD monitors are being increasingly adopted by medical professionals,
banks, financial institutions, the aviation industry, stockbrokers and hotels,
among others. The SOHO segment holds tremendous potential as prices of the LCD
monitor have come within the sub-Rs 20,000 category. In the LCD range, the
15-inch monitor is definitely the most popular, simply because of the value it
offers at the price it commands. Over the years, the LCD monitor has definitely
become more affordable. It is now possible to buy a 15-inch LCD monitor at about
Rs 20,000. A year ago, the same model would have cost around Rs 10,000 more.

Holding its Own

The demand for 17-inch CRT monitors continued to heat up as monitor and
system integrators worked hard to push them on the basis of the thin price
differential over 15-inch monitors.

However, despite industry predictions that 15-inch monitors would soon fade
away, they were far from dead. 15-inch monitors still contribute a major part of
the entire monitor business. Channel partners claim that it's here for another
couple of years. The potential for the range of CRT monitors is in the home and
the SOHO segment. The buying trend today is focused on the 17-inch flat
monitors. Over the years, the CRT monitor market has moved from 14-inch to
15-inch. It is now graduating from 15-inch to 17-inch and flat models. With the
difference between the 15-inch CRT and 17-inch CRT being only about Rs 2,000,
users don't mind opting for the 17-inch model.

Focus on Regions

More and more vendors are looking at B-, C- and D-class cities as the new
opportunity area. Samsung claims to have made its presence felt in 85 cities
with 238 Star Elite partners. It feels that its presence is fairly strong in all
the cities it is present in. With five distributors, the company now plans to
expand further into some B-and C-class cities.

Similarly, LG has established a strong presence in Rajasthan, Madhya Pradesh,
Gujarat and Andhra Pradesh. But despite 460 regional distributors in the
country, the company still feels that it has some way to go. It is now planning
to increase its presence in some parts of the up-country market in the coming
fiscal.

Philips boasts of a strong presence in MP, Bangalore, Lucknow, Kerala and
Kolkata, where they were placed either No.2 or No.3 in the OND quarter of 2003.
The strong presence of the two monitor giants in the metros have forced, brands
like Philips, HCL, Microtek and others to focus only in certain regions.

Partners Eye Growth

Most resellers feel that the growth in CRTs and LCDs has been good in the
last year. The trend shows that metros are more inclined towards buying LCDs
rather than CRTs and after the reduction of prices in the LCDs, it is seen that
most of the metros favor LCDs. The growth for most of the resellers in CRTs and
LCDs were between 20% to 25% on a QoQ basis. Since the margins are less in CRT
monitors, channel partners find marketing LCDs a promising business as it
commands higher margins. On brand leadership, the general market sentiment is
mixed, swaying towards both Samsung and LG.

Nelson Johny in Mumbai with
inputs from Atanu Kumar Das in New Delhi A DQ Channels India analysis