LG Needs To Decide Where OLED Should Live

Multiple LG Electronics representatives have told me their OLED TVs are comparable to a pristine car or a vintage watch. In other words, they say it is a luxury item. If we are just talking about picture quality here, I am sure many TV aficionados would very well agree.

I fundamentally disagree, because luxury items are generally of superior quality, and have a sense of timeless about them. For example, a 1972 Cadillac or a 1940 Rolex can become collector's items and are sometimes sold at exorbitant price at auctions. For TVs, I am yet to be invited to a home where the host proudly shows off their 1960 Sony CRT TV or, for that matter, even a 2007 plasma display unit.

I don't think any electronic devices can really be called luxury items, and I think that is why Apple Watch has had limited success. Cars and watches break down all the time, too, of course. They require constant maintenance -- which can be a hassle for some, but part of the experience for others. But their value as classic, luxury items are predicated not on their performance alone, unlike most electronic devices. It's a mix of timelessness, design, and history. Electronic devices are rarely perceived this way and are generally not expected by consumers to require the same care.

For the sake of argument, let's say LG's OLED TVs are luxury items due to their great resolution. After all, customers have the right to their own opinions and hardcore TV lovers appreciate their deep blacks.

Luxury is a matter of perception and TVs can be precious commodities for some. No product is perfect, however, and LG's OLED TVs have been known to suffer from burn-in. Burn-in, or permanent image retention, happens when pixels die from overuse. It happens precisely because TVs are electronic devices.

But let's be fair to LG. Is burn-in a big problem? The answer is yes and no. That depends entirely on the opinion of individual customers. And for some LG OLED TV owners, they may never have to deal with it. But for those who do face it, if you have problems with a CNN logo burnt-in at the corner of your screen, that's you.

Personally, as a TV's core function is to be watched, it seems like a major defect because it directly impedes on that.

See also: LG's OLED TV strategy needs to change or face mobile's plight

Does it occur a lot? This question is harder to answer. But what is certain is that it occurs and has occurred before, constantly and consistently throughout the years since LG first began the global sales of its OLED TVs in 2013. It still occurs in the 2019, as shown in posts  as recent as August 25 appearing on LG's community website for US consumers. Models affected by defects range from 2016 to 2018, according to numerous complaints posted on the website. There has even been highly methodical testing done by a third-party indicating that burn-in happens far sooner than LG claims.

A disparate warranty policy

Of course, no brand or manufacturer can eliminate defects completely. That is why there are warranties. So-called luxury cars or watches have different warranties depending on the model, but customers are usually offered many options, such as extended warranties depending on purchasing time. Sometimes these are up to five to 10 years or sometimes life-long after services. Even without the warranties, most customers purchase them with full knowledge of the care they require due to the brand's long history.

For its OLED TVs, LG offers one year warranties in the US and UK. In Europe, the warranty is two years. But burn-in is explicitly stated as not being included on the company's warranty. They still offer changes, repair, and fixes for a problem depending on the circumstances, but each country's policy is slightly different.

There seems to be some customer confusion about this, so here's a breakdown of the official policies of each country where demand for OLED TVs are relatively high.

In the US, where demand is highest, customers get the best deal. If you buy LG's OLED TVs from BestBuy, and buy the retailer's extended warranty, burn-in is covered. BestBuy's standard warranty won't, however. Buying from other channels also won't cover the defect. US customers also have the community website mentioned above, but it is the only country where the South Korean company has set up such a website. Customers can post complaints on the community website as well as on LG USA's social media pages such as on Facebook. If the customer can provide LG with a verifiable photo of burn-in on their sets, the company offers free repairs or screen changes as a "good will gesture" or "one-time courtesy", giving the underlying message that "we don't have to do this, but we will". LG will also sometimes refuse to do so.

See also: LG Display changes boss amid LCD and OLED market squeezes

If you are in Australia, you are in luck. Under Australian consumer law, consumers that purchase faulty products may be entitled to a repair, refund, or replacement when the manufacturer's warranty does not apply or has come to an end. Customers who had their OLED TV affected by burn-in can file complaints to the Australian Competition & Consumer Commission, and if their claim is legitimate, the commission can order the company to offer repairs. Customers can directly contact LG to demand the repair.

In the UK, Germany, and the Netherlands, there are no retailer warranty options that cover burn-in like the US's BestBuy. In the UK, if a customer is able to get a repairman to authenticate the burn-in, regardless of the launch year of the model and can send proof photos to LG, the company will then decide whether to offer repairs, for free or for a cost, or to outright refuse the claim. For customers with expired warranties or those who are deemed to not have followed recommended use, the Korean company considers that the customer has acted negligently and will not offer free repairs.

In Germany, customers can sometimes get free repairs before the warranty expires if LG deems their complaint legitimate. But after the warranty expires, as a rule, there are no free repairs; but if the customer complains strongly, the company will offer to send the repairman for free but will require them to cover the material cost. In the Netherlands, LG offered free repairs within the 2-year warranty period for TV models made up to 2016. For TVs launched after 2017, LG only offers paid repairs if the customer's complaint does not fit their own guidelines.

"While image retention is a real phenomenon, at the end of the day whether one experiences image retention comes down to viewing conditions which there are many. Too many, in fact, to simply list under a warranty," LG said in a statement to ZDNet.

 "We look at everything case by case and if there is an issue that we believe warrants coverage, then that's what we'll do. We can't forget the fact that the vast majority of LG OLED TV owners are extremely happy with their products."

Real innovation in electronics is competitive pricing

What I don't understand about LG's OLED TV warranties are the mixed messages it sends. LG says its OLED TV doesn't suffer burn-in in regular viewing situations yet its warranty policy is conservative in the company's favour. It's a "luxury item" that requires care, but the company will guarantee its quality like it would your average washing machine. 

LG Electronics posted revenues of $54.4 billion in 2018 and LG Display, which supplies the OLED panels, posted $21.8 billion in revenue in the same year. LG's 2019 55-inch model is priced at $2,500 and 77-inch model $13,000. According to Statista, a 55-inch OLED panel had cost an average $432 as of the second quarter of 2018, meaning that the prices for current offerings are a bit of a head scratcher, after distribution and marketing costs are also taken into account. Even if panel prices are too high to offer free repairs all the time, LG claims burn-in doesn't happen in regular viewing situations, so it shouldn't be a big burden then if it happens only irregularly.

LG saw its TV business' operating profit halved in the second quarter from a year prior, but what is worse is that it saw its sales drop 4.5%. The decline was exasperated by the "return" of LCD by Samsung and Chinese manufacturers from the quantum dot camp. Currently, an average 65-inch LCD TV is less expensive than a 55-inch OLED TV.

See also: Samsung to invest $11 billion into QD displays

LG's reasoning behind keeping OLED prices high has been that it is the only manufacturer of the technology -- so the rule of scarcity applies. This is again confusing as the South Korean technology giant previously vowed to increase the production capacity for OLED starting in the fourth quarter this year thanks to a new factory line in Guangzhou, China. This would mean that LG wants to scale: It's a move designed to cut panel prices down, which would cut the finished product's prices down. So is OLED TV a limited option luxury item or a premium consumer electronic commodity?

Chief rival Samsung this month announced its plans to invest $11 billion into the development of QD displays, or QD-enabled OLED displays, with production for 65-inch panels set to begin in 2021. Planned spending indicates that Samsung's panels will almost certainly be more price-competitive compared to LG's. What this means is that LG may have no choice but to eventually drop prices down.

TVs are no doubt the centrepiece of the modern home. With that, I have very high expectations for LG's new OLED TVs that will be showcased in 2020. More than anything, I will be looking for a lowered price tag and a warranty that is reflective of -- not even a luxury item -- but a premium consumer electronic product which OLED TVs really are. Maybe LG's OLED TVs were luxury items when they were first introduced, but today, that claim is doubtful. 

It seems LG can't make up its mind on whether it wants the high-end consumer or the mass market, but it's trying to figure that out, as LG Display's recent change of leadership would indicate. The display maker posted an operating loss of 437 billion won for the third quarter this year, its third consecutive quarterly loss. Its combined operating loss so far for 2019 stands at 938 billion won, already exceeding its record annual loss of 924 billion back in 2011. It has also lowered its annual estimated shipment of OLED panels to 3.5 million, its second adjustment after initially saying it would move 4 million before lowering it to 3.6 million. Things are serious.  

The company needs to make up its mind to defend its market share.

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