Most people are unfamiliar with Electrograph Systems.  They were one of the largest distributors of flat panel products in the United States, if not the largest.  Today, they are liquidating all of their assests.  They are another victim of the global recession that we are currently experiencing.

Electrograph was founded in 1982 and they were a national distributor of technology solutions, including plasma displays, LCD displays, LCD and DLP projectors and other specialty displays. The company specialized in display, audio, connectivity and other complementary technologies for both the consumer and commercial markets.

I used to work in this industry and had extensive dealings with the people there for many years, all of whom were top notch.  I feel sorry for them because they are now looking for work in a contracted economy.

I can see the parallels between the technology/consumer electronics industry and the auto industry.  While the auto industry is getting all the headlines, the consumer electronics industry is suffering just as much.  In a recession, as I have mentioned in previous articles, people tighten their purse strings and only buy essentials.  Businesses work much the same way.  Flat panel televisions are considered luxuries, and as such they will not be purchased during tough economic times.

First Vizio, then Pioneer, now LG?  LG (short for Life’s Good, but us old-timers remember them as Lucky Goldstar) is considering ceasing production of plasma televisions.  They have cited the global economic downturn as the reason.  That would leave only two companies, Panasonic and Hitachi, now manufacturing plasma glass.

I have said it many times, that plasma televisions just look better than their LCD counterparts.  However, if nobody is buying them, companies will stop manufacturing them.  Better latency and much better black levels among other things.  Don’t take my word for it, go out there and look!  I’m not in the business anymore, nor am I a salesman.  I am a technician first and foremost, so when it comes down to brass tacks I don’t really care what you end up purchasing.  I hope the world doesn’t end up with LCD as the only option.

The news out of Japan is that Pioneer Electronics is abandoning consumer electronics entirely.  The company forecasts losses of almost 850 million dollars through March of this year.  Of this, 40% is from the home electronics division.

This does not mean people should not purchase Pioneer.  The company is not insolvent, but plans to restructure around its car audio business, which accounts for the majority of its sales.  On the contrary, people looking to buy a plasma should snap up what Pioneer still has out there!  Pioneer, hands down, manufactured the highest quality plasma display panels and televisions in the industry.  Nothing holds a candle to their plasma product.  Nothing.  Take it from someone who has seen almost all of them.

When I worked at AVDeals (plasma.com), I sold literally hundreds of Pioneer panels.  They were generally the most expensive panels out there, but they were also the highest quality panels on the market.  For the most part, they sold themselves.  However, given the economic downturn, and the improved quality of the competition (noteably Panasonic, with whom Pioneer had a deal to manufacture their panels prior to this most recent turn), consumer choice has shifted to a price-based model vs. the quality-based model that Pioneer products preach.

Pioneer will continue to manufacture DVD players, however they will do so under the Sharp brand.  Sharp and Pioneer have been close for many years, often building complementary products to one another.

Pioneer has called a press conference for Thursday to discuss these matters when it releases their earnings statement.

As I have written before, the cutoff date for analog transmission in the United States was February 12th.  This has been extended to June 12th, 2009.  This is, believe it or not, a good thing because without this extension many Americans would be without TV.  On the flipside, no TV might be considered a good thing as it would force them to do something else other than to stare at the Idiot’s Lantern.

I love snow days…they are like a small bonus…get paid to stay home.  Obviously not all companies have these, or support them.  However, when you get them…take ‘em.

I’m using the day to get caught up on projects that I have ongoing around the house, and updating all my various websites.  I have many things on the go, and I am busier than ever.  This is a good thing though, because it keeps me out of trouble.

In other news…The new digital transition date in the United States is now June 12th.  This will give the new Obama administration enough time to get things sorted out.  If stations are digitally compliant and wish to switch sooner, there is no legislation preventing them from doing so.  It quickly became clear less than a month ago that the digital switchover date of February 17th was not feasible.

*** Update ***

Congress did not pass this motion as of Wednesday.  To pass legislation a 66% majority is required, and the bill did not meet this requirement.  Therefore, as it stands now, the February 17th transition date is still in effect.

An interesting bit of news today.  As many know, the digital conversion from analog television is scheduled to take place on February 17th in the United States.  All analog transmissions will be shut down at midnight.

However…there is a problem (because nothing ever goes smoothly).  The NTIA and the Department of Commerce have run into a cash shortage with respect to providing consumers coupons for the digital to analog set top converters, which has created a backlog of approximately 1.1 million customers.  These set top boxes allow analog tv sets to display digital signals, and are necessary due to the fact that once the digital conversion occurs, these televisions will cease to function otherwise.  The coupons offer $40.00 off the price of these boxes, which typically run anywhere from $45.00 to $80.00. 

Furthermore, there is a shortage of the boxes on the market.  People cannot find these units (amusingly enough, they are all manufactured in China), and therefore are unable to purchase them.

As a result, the incoming Obama administration has asked Congress to mandate a law postponing the digital conversion.  Republicans do not want to change the date, and neither do some Democrats.  We shall see what occurs in the next few weeks as the date becomes closer and closer.

In December, Panasonic Corporation quietly began a 9-billion dollar takeover of their rival Sanyo.  Sanyo has been on shaky financial ground since 2006, and the current global economic downturn has not emboldened their ability to recover.  Sanyo’s fall, however, was not as much due to mismanagement as one would believe.  In 2004, their semiconductor plant was destroyed following an earthquake, and they have been unable to recover.

in 2006, large investors such as Goldman Sachs infused the company with approximately 3.2 billion dollars (USD).  However, the caveat was that Panasonic would have first option to purchase the shares that these investors own.  This takeover will create the worlds largest electronics company, with revenues in excess of 110 billion dollars (USD) per year.

Sanyo, in essence, was born from Panasonic.  The founder of Sanyo, Toshio Iue, was the brother in law of Konosuke Matsushita, who was the founder of Panasonic.  Mr. Iue started Sanyo in 1947 manufacturing bicycle lamps in an unused Panasonic plant that was lent to him by Mr. Matsushita.  Once the takeover is complete, however (in April 2009 projected), Sanyo will not disappear.  Panasonic has indicated that they will keep the brand separate.

Sanyo also has close ties to Sony, supporting numerous Sony projects throughout the years, such as Betamax and Video8.  They did not support Blu-Ray, however, though to my knowledge only had one HD-DVD player that made it to market (the HD-S100).  I do not believe that it debuted on North American shores (though it was demonstrated at CES 2006).  This relationship could bring Panasonic and Sony closer together.  Steering forward – now what a merger would that be!

At any rate…looking at Sanyo and Panasonic, they directly compete on a number of different levels.  Specifically, as it related to the consumer electronics industry, projectors.  Sanyo and Panasonic both manufacture LCD video projectors, ranging from very affordable to very high end.  It would make no sense to run two parallel brands competing for the exact same dollar.  The likely scenario would be to manufacture projectors that do not compete with one another, or shut down one brand’s production entirely (and rebrand the other surviving brand).  Thinking forward, they may decide to jump into the DLP side of things, giving Panasonic-Sanyo good coverage for the video projector business.

Of course, digital video projectors are just one small line in both of these massive companies’ global portfolios.  Both companies offer such a dizzying array of products that itemizing them all would take a few pages.  Microwave ovens, washing machines, televisions, solar cells, and more.

In the United States, the digital switchover takes place early in 2009 (February 17th, to be precise).  The OTA analog frequencies will cease to function, and everything will be digital.  For some people, such as those with ATSC tuners in their televisions, will not be affected.  Neither will those people who are currently subscribing to cable and satellite services.

For those who are affected, they will need to purchase an analog to digital converter box.  These boxes are priced in the neighborhood of $60.00, but the federal government is offering a $40.00 coupon to alleviate some of the cost.  You will need to have one of these devices on each analog TV that you own.

In Canada, this transition is not scheduled to take place until August of 2011, but to the best of my knowledge that is an open date and has not been completely finalized yet.  Canadians who live near the border who pick up analog signals from the United States will no longer receive these channels after February 19th of next year.

The sale of the NTSC spectrum is going to reap billions of dollars for the United States Government.  Major players such as Google, AT&T, Motorola and others will purchase this bandwidth.  Some companies do not even know what they will do with it, but they recognize it as too valuable of a commodity to pass up.

Those who subscribe to satellite service are already enjoying the benefits of a mostly digital signal.  Cable companies in the United States are mandated to carry analog signals through 2012.  However, there is an interesting battle shaping up between the FCC and and the cable/satellite companies.  The reason is over the costs of a digital transmission and bandwidth, if it is good for the consumer, and if they can pass these costs down.  The reason to implement an early transition to digital is due to one reason:  bandwidth.

Bandwidth is all that these companies have to sell, when you look at the big picture.  If they do not have enough bandwidth, they are unable to provide such services as internet and cable (or with respect to cable, they cannot carry as many channels).  This is what is motivating the transition to digital.

An analog cable channel takes up 38.4 megabits of bandwidth.  An SD digital channel occupies only 3 megabits, and an HD digital channel is less than 9 megabits.  When a channel is converted to digital, a fair amount of bandwidth is freed up.  Imagine – the crappy weather channel takes up more than four times as much as HDNet!

The more channels that are pushed to digital is the more bandwidth that these companies can allocate to other uses, such as broadband Internet (or adding more channels).  In this age, the need for speed across the Internet is omipresent.  Applications are being developed that require as much bandwidth as we can give them.  A good example of this is YouTube.  If the bandwidth was available they could increase the bitrate of their service, allowing for a much better viewing experience.

The caveat to all of this is that people who are subscribing to basic cable with analog television sets would be required to obtain a digital cable box.  Where the FCC gets involved is determine who pays for this box.  Is is the consumer, or the cable providers?

Being a tech junkie, I’m all for digital cable (better quality, less bandwidth) and faster Internet service over analog tv service.  However, I see the other side of the coin.  I don’t know if this is the right solution or not, but what I would do is start by grandfathering digital cable into the homes.  Split the cost of the cable box between the consumer, the cable company, and the FCC.  All new subscribers would be purely digital.  At the same time, start rolling out pure digital areas in select towns and cities, and upgrade existing users using the aforementioned formula.  The cost would be about $20.00 per party.  Initally, the cable companies will take a hit but by being able to offer better services across the board, they would quickly make up that lost revenue.

A common theme right now is the ongoing economic crisis.  Ordinary people who have invested their money are watching it vanish with the woes of the stock market and the ups and downs of the dollar.  The Bank of Canada today lowered interest rates to their lowest level in nearly half a century in order to encourage consumer spending.

Regardless, this will take months to trickle down through the system.  The only way to get out of a depression or a recession is to spend money.  Not just the government, but everyone.  This is what stimulates the economy.  However, as I mentioned previously, this does not fix the larger problem.  This only makes the economy run in a cyclic pattern.

I’m glad that I am no longer working in the home theater or consumer electronics fields.  I think that this luxury sector will be hit very hard as we get deeper into this recession.  The  big box stores such as Wal-Mart and Costco will survive, not only because they are diversified but they sell these products ridiculously cheap.  The Internet-based companies will, for the most part, continue to exist due to the fact that they have low overhead and slim profit margins.  The specialty home theater companies, that rely on high markup and low volume, will feel the most crunch.  In this economy, they simply will not be able to survive.

Sony announced that they are laying off 8,000 full time people and 8,000 seasonal people globally today.  Due to the high value of the yen, it is costing Sony more to manufacture their product, which in turn leads to higher prices.  Higher prices lead to less sales, especially when you are competing against discount brands such as Vizio and I-Inc (or whatever Chinese company).  Sony has a great name in the electronics industry – so much so that there are people who will only buy Sony products.  I own my share of Sony product, but a name only carries you so far.  Merry Christmas from Sony.

The North American auto industry is in dire straits as well.  The CEO’s of Chrysler, Ford, and GM have been petitioning Congress to provide them bailout money.  Their Canadian counterparts have asked the provincial and federal governments to do the same.  While I understand and sympathize with these companies, if the governements are to provide any monies then serious restructuring is necessary.  A handout cannot be allowed to happen.  Furthermore, the unions, who are opposed to any kind of salary restructuring for their members, must also give in.  Auto workers are some of the highest paid people per hour in the world, and good for them being able to negotiate those deals.  However, the trough is almost dry now, and if everyone is to feed, then everyone needs to take a little less.  The Japanese auto makers are doing just fine – so it’s not the industry itself.  People are still buying cars.  They are just not buying American made cars.

I can see one of the big three companies closing its doors prior to any injection of cash by either government.  Of the three, Ford is in the best shape, followed by GM, and then Chrysler.  Looking at the big picture, if one of these companies close, all their workers will be laid off.  However, the suppliers of parts to the company that is rendered insolvent will also have no customer.  Therefore, they will shut their doors and lay off their employees.  And so on and so forth.  This trickle-down would affect thousands of people.  Tens of thousands.  The United States is already reeling from a staggering November job loss of over 500,000 people.

Even the Chinese are affected.  Last year, Wal-Mart cancelled over two billion dollars of orders from their Chinese suppliers.  Now, the Chinese are being hit with factory closures and layoffs due to the sluggish economy.  They are getting a brutal lesson in Capitalism.  China is due though.  The majority of their exports are to Europe and North America, and people are getting fed up with their shoddy manufacturing efforts.  Initially, the goods were of decent quality and they were cheap.  Now, the majority of the goods produced look, feel, and last relative to the cost to purchase them.  They grew too fast, and now it is catching up with them.