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Why next-gen TVs can't save the market

Asian electronic firms are banking on a next generation of televisions known as 4K to bolster sales, but Jeffries warns that the new technology won't make a dent in a saturated market.

Sony's 4K Bravia liquid-crystal-display television.
Tomohiro Ohsumi | Bloomberg | Getty Images
Sony's 4K Bravia liquid-crystal-display television.

"4K is not an impactful technology to revive the TV market and the price premium will keep decreasing rapidly. We think 4K is not really a differentiated offering and it may not be able to revive TV demand or average selling prices," said Atul Goya, equity analyst at Jeffries in a research report.

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Also referred to as ultra-high definition (UHD), 4K is the new buzzword in the television industry this year. The technology essentially delivers four times the resolution of regular high definition (HD) units and is the latest venture in an industry full of tiny margins and continuous price pressures.

Data from research firm Display Search shows 4K accounted for less than 1 percent of TV sales in 2013, but is expected to rise to 5-6 percent this year.

Chinese maker Skyworth is estimating that 4K will make up 25 percent of total television sales this year, while Samsung is hoping for at least 1.5 million of its 47 million estimated sales.

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But a lack of content, a decline in price premiums and the advance of new technologies are all likely to make 4K just another additional feature, not a game changer, according to experts.

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Lack of content

Currently, the only 4K content available is Youtube and the second season of Netflix's 'House of Cards.' This dearth of 4K-compatible content is a key factor that is expected to weigh on the adoption of the TVs, explained Bryan Ma, associate vice president for devices research at IDC Asia-Pacific.

"The content industry is definitely on the path towards 4K, but it won't get mainstream anytime soon," he said, adding that the process could take several years.

But he remained optimistic, stating that live sporting events are usually a key driver for content. Sony hopes to sell nearly 1 million units this year after launching the world's first 4K television broadcast earlier this month for the FIFA World Cup.

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Competition from low-end models

Japanese brands like Sony focus on very high-end models for 4K televisions, pricing them around $2,500, which makes them vulnerable to increased competition from low-end Chinese makers, stated Jeffries' Goya.

As the gap between low- and high-end models shrink, average selling prices are also likely to decline, which would deal a further blow to the 4K market, he said.

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With over 70 percent of 2013 demand for 4K TVs coming from the mainland, makers with just high end products really do not have a presence in China, he added.

Here comes 8K

Lastly, new technology in the form of 8K – an even higher resolution than 4K – could derail the advance of 4K.

"Japanese broadcaster NHK aims to start the test broadcasting in 2016 so that it can broadcast the 2020 Tokyo Olympics in 8K. Therefore 4K technology has very little runway, before 8K technology is ready to take off. Consumers may want to wait for 8K TV rather than pay high premiums on 4K TVs," Goya noted.

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