Growth In LCD Shipments Tied To Steady Price Cuts

Even so, some solution providers are expecting tight margins and dropping prices to continue for the foreseeable future.

DisplaySearch said it measured a 38 percent increase in worldwide LCD monitor unit shipments during the first quarter of the year compared with the year-ago quarter—but at the same time the market showed a 12 percent drop in revenue year-over-year.

The analysts said in a report that for many vendors, "historically low prices dipped below costs," including street pricing that dropped to $199 for 15-inch LCDs and $299 for 17-inch LCDs—much lower than historic pricing for those configurations.

"I can't imagine pricing going up," said Anatoly Ben, a sales manager at IT Pros, a Mamaroneck, N.Y., solution provider that also operates a Web-based unit, FlatPanelMan.com. "It will probably go down."

For example, in the higher-end plasma-display space in the commercial market, Ben anticipates prices to drop from $2,000 today to between $700 and $1,000 over the next few years. Although flat-panel margins are declining along with pricing, IT Pros has begun to make it back in volume, Ben said.

One vendor grappling with bloodbath-level pricing is LG Electronics, the Englewood Cliffs, N.Y.-based unit of the global electronics giant. The company is battling the market conditions by focusing on higher-end solutions as well as working to build out its nascent solution provider channel.

"We're seeing pricing [drop] as much as 40 percent," said Christopher Neff, director of marketing for LG Electronics' U.S. IT Brand Division. "We're hearing from our partners that they need better pricing from us." The company continues to work to provide channel partners with product margins of between 10 percent and 15 percent—sometimes in the form of back-end rebates and marketing assistance. In addition, Neff said LG Electronics is strengthening its Web presence by providing a listing of its local resellers from its Web portal in addition to its larger, retail and online resellers.

"We want to direct the good business to our good [channel] customers," Neff said.