Projection Monthly - August 2005

Dear Readers,

The August issue of Projection Monthly is now in the hands of our subscribers, with some significant changes and additions this month. If you’ve been getting the Insight Media e-mail blasts, by now you know that we have merged with Ken Werner’s Nutmeg Consultants. Ken is acclaimed internationally as the editor-in-chief of SID’s premier publication Information Display. His group has joined the team here at Insight and we’re already beginning to see the benefits from his editorial contributions. Ken writes an article this month on his recent visit to China and LED backlight manufacturer Diguang Electronics.

Ken’s detailed report uncovers a remarkable price break for a 32-inch LED backlight unit (BLU) for LCD television applications. For $200 technology vendors can offer the significant illumination improvements including an expanded color gamut to 105% of the NTSC color standard. This price is only slightly higher than the $170 typically charged for an equivalent CCFL BLU. This is an important price breakthrough as LED backlights have so far been much more expensive than CCFL versions. Case in point, the $12,000 Sony Qualia 005, a 46-inch LCD with a backlight based on Lumileds LEDs. (See Projection Monthly February-05 issue, p. 85.)

If LCD technology is going to compete in the larger display sizes, it will have to bring to the party more than just the flat screen mantra. PDP technology dominates 42-inch and above with an excellent emissive technology, but the expanded color gamut LED backlights ups the ante in the competition with PDP and MD-TVs.

We’ve expanded coverage this month by adding an article with an “investor’s perspective” written by investment analyst Derrick Irwin of Townhall Proprietary Research. Derrick takes a look at the LCD market and the trend of large panel manufacturers like LG.Philips and Samsung outsourcing the relatively smaller 32-inch LCD panels to Taiwanese vendors and the impact this may have on LCD panel makers and their valuation, profitability and stock performance.

Townhall notes that the 32-inch LCD panel size is very popular now with more demand than can be met by current suppliers. However, this popularity is quickly making 32-inch LCD-TVs a commodity product and margins will shrink rapidly. As a result, LCD makers are already looking for the next “sweet spot” in panel sizes where they can still enjoy greater margins.

But significant new capacity continues to come on line providing an unrelenting price reduction environment with the overriding need to sell LCDs. And at 37 inches and above, LCDs will now face challenges from plasma and projection TVs.

Townhall concludes these factors should contribute to pricing instability at the larger LCD-TV panel sizes and goes so far as to recommend to its readers to “avoid investments in LCD panel and TV makers.” “On the plus side,” Irwin said, “ Corning should continue to benefit from the increase in demand for glass as next-generation plants come online and average TV sizes continue to grow. Other component makers, like Genesis Microchip, will do better than expected if lower prices bring increased demand for LCD-TVs.”

We are also adding more analysis to our three newsletters, Projection Monthly, Microdisplay Report and MD-TV Retailer. In our new “Watch” sections, we will be providing more insight into what is important in this month’s news, what certain developments may mean to the industry, segments or companies and what actions may or may not be appropriate. This expansion is a direct response from the many company visits we have conducted over the last few months. We are listening.

In our LCD Watch section, we profile the current frenzy surrounding the 32-inch LCD panel supply, high demand and pricing pressure, as discussed briefly above. We also take a look at the profitability of current LCD panel suppliers to note that profits returned in 2Q’05, despite dire predicts to the contrary. We sum up the current outlook and note that such profitability may indeed be short lived. Part of this rationale is analyzed in another article which looks at investments for LCD fabs going forward. In essence, strong demand is spurring continued investment. In addition, we take a look at demand by screen size.

In our PDP Watch section, we note that some PDP makers continue to invest in production, but others are exiting the business. Panasonic for example, will invest in a new plant in Taiwan, but Formosa Plasma Display Corporation is getting out of PDPs. What’s going on? Profitability issues. It now looks like the channel is having to absorb margin reductions as PDP prices continue to decline. The bigger players are still finding ways to reduce manufacturing costs, and they have the power to push lower margins onto the distribution channel. Smaller players are finding it hard to compete in this environment.

IN MD-TV Watch, we cover the merger of Syntax and Brillian and what that may mean for its product offerings in both LCD-TVs and LCOS-RPTVs. We also note renewing interest by Japanese players to sell MD-TVs in the domestic Japan market. While perhaps 2,000 MD-TVs were sold in Japan in 2004, demand could jump to 20K in 2005.

US brand leader in the category, Sony, is targeting 10K units for consumption in Japan along with several other manufacturers. JVC, which entered the domestic rear-projection TV market in May, is planning to release a new large-screen model ahead of the year-end shopping season. Sanyo and Mitsubishi started selling rear-projection TVs late last year and in February this year, respectively. Mitsubishi is also expected to launch new RPTVs in the Japanese market this summer.

Insight Media analyst John DiLoreto notes that all this activity in the large screen space is expected to heat up competition igniting a war of brand and technology attrition. But don’t write RPTVs in Japan off; as DiLoreto puts it, “there is, and will always be an economic advantage toward rear projection above a certain size threshold.” If these RPTV sets can be made economically enough, the volume will be there. What Japanese consumers seem to be just beginning to learn, according to DiLoreto, is that, with 1-2 million pixels on the screen, it warrants having a larger than 42-inch screen in even a typical Japanese living room. Sony and other seem to be betting that in the long term, mass consumers will be willing to pay for it if the price is right.

Lastly, turning to projectors this month, we took the recent shipment announcement on the new Optoma “MovieTime” all-in-one DVD projector, as an opportunity to take a look at the new category six months after CES. In this Projector Watch article, what we found is four projector manufacturers with limited degrees of success in penetrating the market and carving out a niche for this new all-in-one category.

Not only are the manufacturers integrating a primary content player (DVD) in the front projector, they are including decent sound, some with 2.1channel digital sound and one features a 30W sub-woofer.

HP, maker of the Instant Cinema, told us the driving motive is to get the DVD up and running on the screen in under 90-seconds. The way to do this: minimize or eliminate complex connectors and confusing cables and deliver superior sound and image quality in a really big screen experience. HP got most of this right but did admit some pull-back in the US market due to SVGA resolution (just shy of supporting wide ED at 854 x 480p).

Optoma’s MovieTime seemed to have made the most progress in penetrating US distribution. They’ve signed Ingram Micro and D&H and have Amazon.com, Dell, Tiger Direct, Buy.com, PC Connection for web retail, with brick-and-mortar stores like Fry's, J&R, CompUSA, Office Depot, and Future Shop in Canada.

RadioShack also launched their version of the all-in-one called Cinego. The retailer is limiting distribution to select RadioShack stores in just 12 states. Some market watchers believe this product can open up consumers taste for very large viewing in a much smaller package than even LCD offers.

This is a new category and the vendors are taking a fairly cautious approach – and no one is really tracking progress in this segment. This is an interesting opportunity, we think.

And, there’s our usual coverage with 100+ timely stories, all organized into over 30 sub-sections for easy review and reference. If you are a subscriber, you can build a library of past issues that is key word searchable – a very valuable business intelligence reference tool.

Projection Monthly is a subscription-based newsletter that covers the entire big-screen display industry, including all technologies, markets and applications – from the supply chain through the distribution channel. If you would like to evaluate a sample copy of Projection Monthly, please reply to: info@insightmedia.info

See the Table of Contents for the August issue of Projection Monthly by clicking here.

Until next time…

Steve Sechrist
Insight Media
steve@insightmedia.info

About Insight Media

Insight Media (www.insightmedia.info) provides a full array of market research, news, analysis and consulting services for the microdisplay industry, with special attention to projection and near-to-eye products. Tracking the complete supply chain from finished products and distribution to components, microdisplay-based products, technologies, trends and analysis is delivered through newsletters, technology reports, forecasts, conferences and custom consulting activities. Insight Media has developed a world-class team of industry analysts and associates to provide the most comprehensive coverage and analysis of the microdisplay industry has to offer.

To be removed from the Insight Media News list, please click here.