Market research firm iSuppli says the subprime mortgage mess and financial market turmoil could make consumers hesitant to open their wallets and buy pricey TVs this holiday season.
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If the worst-case scenario comes about, it could be a double-whammy for consumer electronics companies like Sony (SNE). It could even have trickle-down effects for computer industry players like Microsoft (MSFT) and Apple (AAPL), which are increasingly trying to sell products such as the Xbox 360 console and the Apple TV set-top box that rely on high-definition televisions to deliver the optimal experience.
What appears to be happening, iSuppli says, is that the price of flat-panel glass is rising because of tight supplies. Tight supply has led TV makers to keep prices high. But if consumer demand trails off at the same time, TV makers could be left with inventories of high-priced televisions no one wants. If that happens, their only choice might be to liquidate the TVs and take losses.
"While LCD panel suppliers expect prices to increase for the remainder of 2007 due to supply tightness, iSuppli believes that inventory increases will result in softness in panel demand among end-product makers and channel participants, especially in the monitor market," said Sweta Dash, director of LCD and projection research at iSuppli. "This may affect fourth-quarter pricing of large-sized panels. The issue could become more of a problem if consumers stop spending and tighten their purse strings because of the mortgage problems in the fourth quarter."