The market for small to medium sized displays is continuing to see falling prices, pushing some analysts to believe consolidation between manufacturers may be necessary in the future.

At the Flat Information Displays conference hosted by market research firm, iSuppli, a panel of market experts noted that display pricing has fallen 20 to 30 percent over the past few years.

This erosion is not sustainable with some further consolidation (of suppliers), said Marcel Fuhren, senior director at small/medium display maker TPO Displays Corp.

Richard Blair, of LCD panel maker Sharp Corp., agreed that such price reductions cannot continue at present rates.

(Price erosion) is making suppliers’ lives difficult, Blair said. I can’t imagine these drops continuing indefinitely. All the suppliers are driving down the costs of materials because of this.

Vinita Jakhanwal, iSuppli's principal analyst for mobile displays, said in addition to cost reductions, suppliers can counter the impact of price erosion by gravitating toward higher-end displays using more attractive form factors and more advanced technologies. Such displays command higher margins, thus countering the impact of price reductions.

If you look into detail in the product mix, the price declines are mainly for entry-level and lower-end displays, Jakhanwal said. The decline for higher-end displays is more limited. For example, there’s a great deal of demand for thin form-factor displays.

Thin panels have come into higher demand due to their use in fashionable products like Motorola Inc.’s RAZR mobile phone and Apple Computer Inc.’s iPod nano MP3 player.

Jakhanwal predicted the worldwide small/medium display market will grow to 3.8 billion units in 2010, up from 3.5 billion in 2006. Meanwhile, global revenue in this market will decline marginally, with sales amounting to $22.3 billion in 2010, compared to $23.1 billion in 2006, illustrating the impact of price erosion on small/medium display suppliers.