Rhoda Alexander, director of monitor research at Stanford Resources Inc. (SRI; San Jose, Calif.), said LCD monitors are beginning to cut into the sales of CRT monitors. Although the worldwide monitor market is still heavily dominated by the CRT, both in unit volume and total revenue, she predicted that revenue from CRT monitor sales will begin a downward slide in 2005, with little hope of ever recovering.

Only about 57,000 LCD monitors were sold in 1996, yielding $99 million in revenue, according to SRI figures — minuscule amounts compared with the 60 million CRT monitors sold that year, generating $17 billion in revenue. The LCD monitor market had "very slow growth initially," Alexander said, in North America and Europe, the two biggest monitor markets. It nevertheless took off quickly in the relatively small monitor market in Japan, where desktop real estate is more constrained.

By 1999, she said, LCD monitors hit 3.7 million units, compared with more than 90 million units for CRT monitors, and Alexander projected that the year 2000 figure will be 6.8 million LCD monitors, compared with about 105 million CRTs. The mix of geographical markets, however, is "changing dramatically," as North America and Europe gobble up an ever-larger share.

Almost 50 percent of the LCD monitors sold in 1999 went to Japan, with about 41 percent going to North America and Europe, she said. This year, sales in Japan represent only about 37 percent of the worldwide market, with 54 percent or so being sold into North America and Europe. LCDs will capture nearly 40 percent of the overall monitor market in Japan this year in unit volume, and their revenue already exceeds that of CRT monitors. But Japan "will only maintain its dominance for another year or so," Alexander said.

The LCD monitors' increasing success is causing problems for their CRT counterparts for several reasons. While pricing on CRT monitors has decreased slightly, the price decline in LCD monitors has been steep, reducing the CRT monitor's pricing edge, and further declines in the pricing of the mature CRT monitors will be limited.

"Profit margins have badly eroded, CRT component manufacturers are pushing for price increases and CRT monitor makers have already moved to cheaper manufacturing regions," said Alexander. "There's not much more they can do to economize."

The CRT monitors are also being particularly hurt by "a slippery slide down in prices" for 17- and 18-inch LCD monitors, because it's in the larger screen sizes where CRT monitor makers still enjoy margin. According to SRI figures, the price tag of an 18-inch LCD monitor was almost $3,000 in the third quarter of 2000, slipping to $2,500 in the fourth quarter, and it's expected to slip below $2,000 by the third quarter of 2001. "That's a huge problem for CRT monitor makers," Alexander said.

Further, CRT monitor makers are suffering from "glass capacity issues" at a time when they're pushing larger sizes and flat-screen CRTs, which require more glass material than traditional curved screens. And glass makers, she said, are "not sure they want to invest to serve the CRT."

In addition, the smaller 14- and 15-inch CRT monitors "which we thought were dying are suddenly back with a vengeance," with their meager margin, according to Alexander, due to demand in price-sensitive Chinese and other Asian markets. In short, she said, CRT makers "are facing serious problems. They'll have trouble maintaining revenue."

Alexander noted that among users, CRTs are beginning to suffer a perception problem, while LCDs are increasingly seen as the displays of the future. Among corporate planners, she said, "Long-term thinking is beginning to favor LCDs as power and footprint concerns are increasing." And footprint, she noted, is an even bigger issue in the small-office and home-office market than in the corporate side of things. The 17-inch LCD monitors in particular are starting to "capture corporate attention," she added.

According to SRI predictions, the overall worldwide market for desktop monitors in 2006 will be in excess of 200 million units, with over one-fourth of those units based on LCDs. But the LCD monitor, Alexander concluded, "has the potential to become a runaway train." By analogy, she noted that the market for color CRT monitors initially developed slowly, "but the transition away from monochrome CRT monitors, when it occurred, happened in the space of three years."