LG and Samsung recently made smart decisions in the emerging OLED TV industry. Good for them, because competitive advantage comes from smart decision-making. What’s remarkable is that their smart decisions take them in opposite directions.
Remember the bitter VHS versus Betamax war? Of course you don’t. You’re too young. I remember, though. I even took a stand in favor of Betamax. Betamax lost.
Remember the more-civil Blu-ray versus HD-DVD war? Of course you don’t. You were too busy pecking at your new iPhone. The iPhone came out in 2007. Blu-ray beat HD-DVD in 2008. That time my favorite won. No, that doesn’t mean I got smarter. It means the rest of the world did.
Now we have a war that didn’t happen, sort of, if we can imagine such a thing. According to Scott Wilkinson, Editor of AVS, LG is “forging ahead” with its OLED products for 4K/UHD TVs.1 (Don’t panic. That just means really, really good TVs.) Mr. Wilkinson also says Samsung has decided not to build a new facility to manufacture OLED panels for TVs, thereby calling off the war with LG.
LG and Samsung took opposite strategies, and both made smart decisions. The decisions would be equally smart if it were Samsung that was forging ahead and LG that was, as AVS said, “hitting the pause button.” But one of those smart firms is sure to be denounced later on for making a bad decision.
You might have seen an OLED TV. They are about three molecules thick (well…), big, and gorgeous. Some are curved, which, as a home-theater enthusiast, I find odd. You might have seen an OLED TV but you probably haven’t purchased one. That’s because they’re very expensive. They cost twice as much as similarly sized 4K/UHD TVs that don’t use OLED technology, and several times as much as non-OLED HD TVs.
It’s the classic new-technology problem. OLED needs high demand to build experience and scale to drive costs down. But while costs are high, prices are high, which keeps demand low.
LG and Samsung will split demand while both are in the market, which prevents both from building experience and scale. Samsung has chosen to leave at least temporarily — nothing is permanent — which frees resources for use elsewhere. (Samsung has partly hedged its bets by investing in OLED technology for phones.) LG has chosen to stay. Samsung’s vacation raises LG’s odds of success. Also Samsung’s, elsewhere.
Those look like smart bets. But just wait ‘til the judgment starts pouring in, as I also predict it will for Facebook and WhatsApp (see “We’ll See How Smart Mark Zuckerberg Is”). If LG strikes it rich with OLED TVs, the superficial will laud LG for its vision and lambaste Samsung for missing such a great opportunity. If LG flops, the superficial will laud Samsung for its prescience and lambaste LG for its foolhardiness.
For now, though, the non-superficial congratulate both LG and Samsung for intelligent decisions. Competing means competing. It doesn’t mean delivering on mutually assured destruction.
P.S. There will come a time when LG succeeds and then seems to lose ground. Remember, then, the ironic judgment of “The First-Tagger Advantage.”
1 OLED = organic light-emitting diode. 4K and UHD (ultra-high definition) are the new, improved version of high-definition TV. OLED + 4K/UHD = spectacular pictures, thin, light, large.