How Did TVs Get So Cheap?

Summary

You’ve probably seen this famous graph that breaks out various categories of inflation, showing labor-intensive services getting more expensive during the 21st century and manufactured goods getting less expensive.One of the standout items is TVs, which have fallen in price more than any other major category on the chart. TVs have gotten so cheap that they’re vastly cheaper than 25 years ago even before adjusting for inflation. In 2001, Best Buy was selling a 50 inch big screen TV on Black Friday for $1100. Today a TV that size will set you back less than $200.The plot below shows the price of TVs across Best Buy’s Black Friday ads for the last 25 years. The units are “dollars per area-pixel”: price divided by screen area times the number of pixels (normalized so that standard definition = 1). This is to account for the fact that bigger, higher resolution TVs are more expensive. You can see that, in line with the inflation chart, the price per area-pixel has fallen by more than 90%.This has prompted folks to wonder, how exactly did a complex manufactured good like the TV get so incredibly cheap?It was somewhat more difficult than I expected to suss out how TV manufacturing has gotten more efficient over time, possibly because the industry is highly secretive. Nonetheless, I was able to piece together what some of the major drivers of TV cost reduction over the last several decades have been. In short, every major efficiency improving mechanism that I identify in my book is on display when it comes to TV manufacturing.How an LCD TV worksSince 2000, the story of TVs falling in price is largely the story of liquid crystal display (LCD) TVs going from a niche, expensive technology to a mass-produced and inexpensive one. As late as 2004, LCDs were just 5% of the TV market; by 2018, they were more than 95% of it.Liquid crystals are molecules that, as their name suggests, form regular, repetitive arrangements (like crystals) even as they remain a liquid. They exhibit two o...