ProAVmag

With Technology, Know When to Fold 'Em

It doesn't matter if one of the competing technologies has been developed by consensus-or if it appears to be more logical, more cost-effective, or even a superior performer-it can still lose out. 5/05/2008 5:54 AM Eastern

With Technology, Know When to Fold 'Em

It doesn't matter if one of the competing technologies has been developed by consensus-or if it appears to be more logical, more cost-effective, or even a superior performer-it can still lose out.

LAST MONTH I TALKED ABOUT THE BATTLES ACROSS OUR industry (and parallel industries) to adopt one technology or another as a “standard.” It doesn't matter if one of the competing technologies has been developed by consensus—or if it appears to be more logical, more cost-effective, or even a superior performer—it can still lose out.

I made the comment that commerce often trumps consensus (and sometimes common sense), which is why DisplayPort will have such a tough uphill battle against the long-established HDMI interface. DisplayPort may have the weight of VESA behind it, but Silicon Image got there first, and HDMI is now a ubiquitous video/audio/data interface, found on everything from DVD players to set-top boxes, HDTVs, and video scalers.

THREE STRIKES AND YOU'RE OUT

Lately, commerce has been swinging its scythe with vigor, mowing down some prominent names in the electronics industry. The most notable is Pioneer Electronics, which announced in March that it would cease all production of plasma display panels (PDPs) used in its high-end HDTVs and industrial monitors.

Although it could be argued that Pioneer had the best-looking plasma displays out there (not to mention some of the best-looking HDTVs, period), it was always a small player in a land of giants, in terms of PDP fabrication capacity. Consider that the world's largest plasma manufacturer (Panasonic) is aiming to produce over 11 million panels next year from six factories, with Samsung SDI nipping at its heels and LG Electronics close behind.

In contrast, Pioneer would be lucky to ship half a million plasma modules from its three factories in Japan, one of which will now be mothballed. The other two will remain open to assemble HDTVs from PDP modules that Pioneer will outsource from elsewhere—presumably from Panasonic.

What led Pioneer to this do-or-die decision? For starters, three straight fiscal years of red ink, beginning with a massive $700 million loss in fiscal 2006 that slowed to $60 million-plus in fiscal 2007 and then zoomed back to $145 million in fiscal 2008.

To make matters worse, Pioneer was the only plasma manufacturer not to benefit from the Q3-Q4 2007 “bounce” in plasma HDTV sales that was attributed to shortages in LCD product.

While Panasonic, Samsung, and LG all saw their 2007 market share zoom upwards, Pioneer's dropped 39 percent from 2006, to 3.2 percent, according to NPD DisplaySearch. (Even Hitachi posted a modest 17 percent increase in market share for 2007.)

The third strike was Pioneer's Don Quixote–like attempt to maintain higher retail prices in a business that has cannibalized profits and margins. There simply weren't enough high-end home consumers or professional customers willing to pay the substantial premiums Pioneer wanted for its product, something the folks at Fujitsu finally admitted last year when it exited the home theater plasma business.

Going forward, the big question is what happens to Pioneer's Kuro plasma technology. The guess here is that no matter which company Pioneer signs an OEM agreement with (and the smart money is on Panasonic), it will wind up sharing all of its accumulated patents and intellectual property to keep Kuro going. But prices will have to drop on all Pioneer-branded products, no matter what the outcome.



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With Technology, Know When to Fold 'Em

It doesn't matter if one of the competing technologies has been developed by consensus-or if it appears to be more logical, more cost-effective, or even a superior performer-it can still lose out.

THROWING IN THE TOWEL

There have been other companies that were forced to throw in the towel recently. The most notable was Toshiba, which decided it was too much an uphill climb to make HD DVD a success, particularly in a sluggish consumer electronics market where it's not even certain there will be substantial interest in a next-generation DVD player. The company has recently made comments about pursuing direct downloads of movies and TV shows over fast Internet connections, eschewing optical disc recording and playback altogether.

Another manufacturer that woke up and smelled the coffee is Sony. Late last year, the company made a low-key announcement that it would stop production of its SXRD-based rear projection HDTVs and shift all remaining production to flat-panel LCD technology. (SXRD, which stands for Silicon X-tal [crystal] Reflective Display, is a form of liquid crystal on silicon technology that uses a vertical liquid crystal alignment layer.)

This past February, Sony announced a new joint venture with Sharp in which the latter would receive a 34 percent investment from Sony for its new Gen-10 LCD fab, now under construction in Osaka, Japan. In return, Sony gets 34 percent of the plant's output. The Gen-10 facility is expected to produce 72,000 LCD substrates a month, with each piece of mother-glass measuring 2,850 millimeters by 3,050 millimeters (about 112.2 inches by 120 inches, or 9.35 feet by 10 feet) from which six 65-inch or eight 57-inch panels could be extracted.

Given the cyclical price drops in LCD fabrication and the fact that the worldwide sweet spot for TV sizes is still in the range of 32 inches to 46 inches, it doesn't take much guesswork to realize the future of large-screen HDTVs is in flat panels and not rear projection, with the majority of flat-panel business captured by LCDs.

Last year, Canon was forced to retreat from its nascent SED (Surface-conduction Electron-emitter Display) technology when a court ruled that Canon's partnership with Toshiba to produce SED HDTVs violated the terms of a patent license with Nano-Proprietary. Although Canon hasn't officially given up on SED, advancements in plasma black levels, light output, color saturation, and lower power consumption have pretty much written SED's epitaph.

JVC also has apparently walked away from rear-projection TVs that use its homegrown D-ILA liquid crystal on silicon imaging panels. Although no public announcement was made, the writing was on the wall at CES 2008 where not a single new D-ILA rear projection HDTV was shown—only a new line of super-thin LCD HDTVs.

In every case listed, commerce decisively won the day. Yes, SXRD and D-ILA rear-projection TVs had their advocates. Yes, SED produced what were (at the time) the flat-out best video images ever seen on a flat panel. And yes, HD DVD worked very well, even bringing IP-enabled interactive functionality to market long before Blu-ray players had it.

But they're all history now. Sometimes you've just gotta know when to fold 'em.

Contributing editor Pete Putman is president of ROAM Consulting in Doylestown, Pa. He can be reached at pete@hdtvexpert.com.



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