Why Unwanted TVs Mean Cheaper Cell Phones
By Om Malik and Matthew Maier

(Business 2.0) – When it comes to thin screens, you can have too much of a good thing. No one knows that better than the LCD industry. Last year, anticipating a rush to upgrade the family TV, Samsung, LG Philips, and the other leading makers of liquid crystal displays shifted their focus from small screens for cell phones and other handhelds to larger ones for higher-margin TVs. So tight was the supply for gadget makers that PalmOne and Nintendo both blamed LCD shortages for their failure to meet consumer demand.

Trouble is, the LCD TV rush never materialized. While Americans are indeed upgrading their sets, they're snapping up the lower-priced alternatives that have flooded the market since late last year. Plasma screens and digital light-processing rear-projection screens give consumers more for less: While a 42-inch Sony Wega LCD TV retails for $10,000, a 42-inch plasma set can be had for about $4,500. LCD TVs accounted for a measly 3 percent of all sets sold in the United States in 2003.

Meanwhile, as the major LCD makers scrambled to readjust production, a slew of Taiwanese manufacturers saw an opportunity. AU Optronics, Chi Mei Optoelectronics, and Chunghwa Picture Tubes, to name just a few, raced to add LCD capacity that is finally set to come online. Predicts Erik Willey, senior product manager at display maker ViewSonic, "We're going to see an oversupply for the foreseeable future."

The lion's share of this new capacity is now headed to the small screen--and consumers will be the beneficiaries. Not only will they soon see a plentiful supply of smartphones, laptops, and hot portable gadgets like DVD players for cars, but--just like the screens--the prices will be getting smaller. -- OM MALIK AND MATTHEW MAIER