Americas: Technology: Semiconductors: TV conference takeaways: Market trends favor Trident and Zoran
Goldman Sachs Note October 10, 2007 United States
Takeways from the DisplaySearch HDTV Conference
We attended the DisplaySearch HDTV Conference in Los Angeles, which focused on market trends in flat-panel TVs, DVD players, gaming, and high definition content. Our company-specific takeaways are as follows:
Trident customers gain share in 3Q07, U.S. TV data still strong
LCD TV unit shipments year to date were still strong in the U.S., with 102% year-over-year growth. Plasma TV units sales also grew 41% year-over-year in the same period. While some headlines may point to flattish U.S. TV unit sales YTD in 2007, this was entirely due to sharp declines for CRT (-55% YoY) and projection (-9% YoY) where Trident is not exposed. Trident customers regained net share in the U.S. through August, with Samsung share increasing 320 bp since June, Sony decreasing 130 bp, and Sharp decreasing by 80bp. Given Trident's exposure to each of these customers (Samsung is the largest), we expect Trident's overall market share in the U.S. is on track to increase by about 150 bp in 3Q07.
Zoran should benefit near-term in DVD, longer term in LCD TV
While much discussion centered on the format war DVD standards and content, we think the near-term market dynamics favoring lower cost up-convert DVD players are clearer than ever. Current market estimates now project 27% unit share in 2007 and $85 ASPs for up-convert DVD players compared with less than 5% unit share. We believe that this trend will continue to benefit Zoran with its strong up-convert DVD chip solution, and our checks continue to show strong pricing and unit trends. Separate from the TV shipment trends mentioned above, there has also been a clear trend towards low-end brands via the discount channel. Over the medium term in 4Q07 and 1H08, we expect Zoran to benefit from this trend as it gains exposure to this channel with new OEM design wins.
Sigma Designs: Caution warranted on DVD, quarter should be fine
Updated market estimates of just below 1.0 million unit sales of high definition DVD sales in 2007 and 5 million units in 2008 for the U.S. are just below our own worldwide unit forecasts of 2.0 million and 12 million units in 2007 and 2008, respectively (with the U.S. comprising about half the current market). However, we believe the next quarter should be fine as we think any DVD weakness is likely to be offset by continued strength in the IPTV set top box market.
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