Remember stories like this through all the lies we’ll hear in the next few years about the trouble with capitalism and how it’s a tool of the rich.
The free-for-all is a boon to the millions of Americans who want to trade in their bulky analog sets. Thanks to the likes of Westinghouse, which undercut the prices of premier brands by 20% to 40%, LCDs are no longer a luxury item. Nearly one-third of the 30 million TVs sold in North America in 2006 had LCDs, and by yearend they’re expected to account for half of all TV sales. The average 27-in. LCD set now retails for less than $650, compared with $1,000 in early 2006, says iSuppli, while 40-in. models have plunged to about $1,600, down from $3,000 during the same period.
For many in the industry, though, the competition is brutal. Prices for LCD sets are falling so rapidly that retailers who place orders too far in advance risk getting stuck with expensive inventory. Circuit City Stores Inc. (CC) cited plummeting prices in its Feb. 8 announcement that it will shutter nearly 70 outlets. The Asian companies that make the LCD panels that go into the TVs are getting slammed, too. Korea’s LG.Philips LCD Co. (LPL) attributed a $186 million loss in the fourth quarter to the 40% drop in display prices last year. With panel prices expected to fall 20% in 2007, the world’s dozen or so makers of displays are scrambling to sell at almost any price just to generate the cash to survive. “The cuts have stressed everybody in the supply chain,” says Paul Semenza, the vice-president for display research at iSuppli.
No doubt this type of example will fuel people like Sebastian Mallaby into pushing for a bigger safety net, propped up through higher taxes. That would be a bad lesson. Instead, notice how those who want an LCD television can now get more for less. Some who couldn’t afford such a TV last year will now be able to purchase one. This is progress, and it can apply to any field when unrestrained by nonsensical falsehoods. The flaw is never with capitalism, only with how it’s implemented or who does the implementing.