Apple Affected by LCD Price Fixing by LG, Sharp, Chunghwa

[MacRumors]

CNet reports that LG Display, Sharp, and Chunghwa Picture Tubes pled guilty to criminal charges for LCD price-fixing and agreed to pay $585 million in fines.

The three companies worked in concert to set prices on thin-film transistor LCDs, which are used in computer monitors, notebooks, televisions, mobile phones, and various electronics, according to the antitrust unit of the Justice Department.

The three LCD companies are reported to have held meetings about setting prices on LCD displays and agreed to charge predetermined prices to customers. Apple, Dell and Motorola were among the companies affected by this illegal price-fixing.

Based on the article, Apple was only affected between September 2005 and December 2006 when the company used Sharp's LCDs for the iPod's screen.

Article Link: Apple Affected by LCD Price Fixing by LG, Sharp, Chunghwa

[Mr Maui]

Maybe Sharp will offer discounts on a new Macbook / Mackbook Pro to those they helped rip off.

OK, it's a dream, but ...

[jessica.]

Originally Posted by Mr Maui

Maybe Sharp will offer discounts on a new Macbook / Mackbook Pro to those they helped rip off.

OK, it's a dream, but ...

Why? Apple still made a premium on the panels without a doubt. Overall, they make a premium on every computer. As far as Apple is concerned, it probably hurt them more because I seriously doubt they would have opted to drop prices even if the panels were less expensive.

[SFStateStudent]

So, LG, Chunghwa and Sharp pay to the big Kitty, and then we get scraps, right? $5 of free iTunes downloads or a replacement iPod for the overpriced one that I gave to my brother. Pretty certain "we won't see JACK"...

[hiptobesquare]

This is good for competition.

Without the fixed high price, EVERYONE who produces LCDs will get downward pressure. The same competitive downward pressure that tries to pull the prices of consumer goods lower, to chase more scarce demand right now. Funny how the free market works when allowed to, and not hindered by illegal private, or regulatory government price fixing forces. This market will likely respond pretty quickly, due to being relatively un-regulated by civil regulations. Fraud prosecution, as what happened here, is the proper way to handle these situations. Although the fines that the LCD companies have to pay merely go to a bloated government, not to some other good use.

As these companies start having to compete with each other, they will undercut prices, and add more features. This will bring the whole LCD market to that point, of either adding value, cutting price, or both.

Just in time for the rumored dive in prices for LCD HD televisions around black friday, and through the christmas season, where this sort of tech goods were rumored months ago to take a heavy price dive, in light of the economy, but also the digital change-over in February.

[Shasterball]

Wow, this is pretty big. Kind of hard for electronics producers to take a hit like that during these economic times.

[guzhogi]

Originally Posted by jessica.

Why? Apple still made a premium on the panels without a doubt. Overall, they make a premium on every computer. As far as Apple is concerned, it probably hurt them more because I seriously doubt they would have opted to drop prices even if the panels were less expensive.

Agreed, as I said before, I find that Apple is more interested in getting high margins rather getting high volume of sales. I've heard rumors (correct me if I'm wrong) that Apple doesn't have anything less than a 28% margin on its products. I'm not sure if that's 28% more than just the bill of materials or what (I'm no businessman). I'll admit, I'd understand putting jacking up the price to make up for labor/advertising/R&D costs, plus a small profit. But after awhile, I've got to ask, how much profit do these companies really need? To me, there's a difference between a fair profit, & too much profit. Where that lays, varies.

I'd like to know by how much they jacked up the price. I wonder what the cut off point is between a "fair profit" and criminal price-fixing.

[sterlingindigo]

...goes around.

[DipDog3]

Wirelessly posted (Mozilla/5.0 (iPhone; U; CPU iPhone OS 2_1 like Mac OS X; en-us) AppleWebKit/525.18.1 (KHTML, like Gecko) Version/3.1.1 Mobile/5F136 Safari/525.20)

maybe that LCD tv will drop in price now.

[twoodcc]

i'm just glad that they were caught, so this doesn't happen in the future. maybe we'll see cheaper displays soon?

[miiles]

Wow, I wonder whats next for the LCD market...

[howie78]

Originally Posted by twoodcc

i'm just glad that they were caught, so this doesn't happen in the future. maybe we'll see cheaper displays soon?

Umm..not from apple.

[broncopde]

It seems that something like this only affects Apple's profits on those products during that time, not the customers, because Apple was gonna charge the same round $X49 or $X99 price on the iPods.

[mkrishnan]

What shocks me most about this is that Dell was actually overpaying for LCDs they use in displays... meaning that it would now be possible for Dell to deliver displays at even cheaper prices than the absurdly cheap prices they had before. Wowsers.

[Michael CM1]

If you had been looking at prices of LCD televisions over the past few years, this isn't shocking. I bought a 27" tube Toshiba television about 3 years ago for $250. Until very recently, a comparable-size LCD wasn't even close to that price. Probably about twice as much. Since most places don't seem to carry many, if any, tube televisions any more, you would think that the prices would've dropped a lot quicker. Maybe this is why.

Sounds like a good reason to not buy any products from Sharp or LG for a while. I'll stick with my Samsung goodies.

[reallynotnick]

Originally Posted by guzhogi

Agreed, as I said before, I find that Apple is more interested in getting high margins rather getting high volume of sales. I've heard rumors (correct me if I'm wrong) that Apple doesn't have anything less than a 28% margin on its products. I'm not sure if that's 28% more than just the bill of materials or what (I'm no businessman). I'll admit, I'd understand putting jacking up the price to make up for labor/advertising/R&D costs, plus a small profit. But after awhile, I've got to ask, how much profit do these companies really need? To me, there's a difference between a fair profit, & too much profit. Where that lays, varies.

I'd like to know by how much they jacked up the price. I wonder what the cut off point is between a "fair profit" and criminal price-fixing.

Everything is fair profit as long as their are competitors, price fixing would be if all the competitors decided to be, well non competitive.

Really it looks like this really doesn't matter for Apple as it was just for a short period of time on iPod screens, but I guess you multiply that by all the iPods and their is a nice chunk of money. Oh well 2006 is long gone now, and this is not going to help iPods now get any cheaper or anything. Glad they were caught.

[SolRayz]

Price fixing I could care less about if they would atleast offer their customers quality goods. The MBP line has been afflicted by a flood of bad LCD panels, dead pixels, light leakage etc etc. My mid '07 MBP is on its fourth lcd replacement because of poor manufacturing and quality control.

[air-ick]

Let the rebates begin!!

Oh, wait - it's Apple. Nevermind.

[clyde2801]

Great! Now Apple can make more money by sticking those crappy little screens in their Macbooks! I'm thrilled!

[BlueRevolution]

Originally Posted by hiptobesquare

This is good for competition.

Without the fixed high price, EVERYONE who produces LCDs will get downward pressure. The same competitive downward pressure that tries to pull the prices of consumer goods lower, to chase more scarce demand right now. Funny how the free market works when allowed to, and not hindered by illegal private, or regulatory government price fixing forces. This market will likely respond pretty quickly, due to being relatively un-regulated by civil regulations. Fraud prosecution, as what happened here, is the proper way to handle these situations. Although the fines that the LCD companies have to pay merely go to a bloated government, not to some other good use.

As these companies start having to compete with each other, they will undercut prices, and add more features. This will bring the whole LCD market to that point, of either adding value, cutting price, or both.

So, instead of price fixing, they'll start trying to undercut one another. Unfortunately, I was pretty sure the entire post was filled with hidden sarcasm until I got to the end. What will happen is that they'll do their level best to drive their competitors out of business, succeed, then fix prices again with nobody in a position to complain.

This is good for competition.

[ryanwarsaw]

It isn't like Apple will pass the savings on anyway. Even when SSD prices go down consumers don't see any difference from Apple.

[zombitronic]

This news comes out and their stocks are up in after hours. What gives?

[Xavier]

Shrug it off Apple.

[lewchenko]

This did not hurt apple. They still made their 30%+ Margins on the screens.

It did however hurt us... the people who were ripped off.

However, for all we know .. had the screens been cheaper in the first place, apple may well have made 40%+ margins instead.

So it sucks to be the customer no matter what.

[lewchenko]

Originally Posted by zombitronic

This news comes out and their stocks are up in after hours. What gives?

Situations like this typically occur because the level of the fine was deemed smaller than expected, and thus the company has been less hit (so in effect has more capital than the analysts thought they would).. so confidence in them goes up a little and their stocks go up.

Stock prices often take into account events like this in advance. So their stock was probably depressed down somewhat awaiting the news. If the fine had been x2 as much, only then would the stocks have fallen as the fine would have been much more than expected.