Category: The Front Line

4K, Collapsing Prices, and the Declining Importance of Hardware

As I write this, the 2015 season of the National Football League is about to get underway, with last year’s Super Bowl champion New England Patriots taking on the Pittsburgh Steelers. If you’re not a football fan, why should you care?

Simple: Football, more than any other sport or event, drives the sale of televisions. And the TV business is in a major funk right now.

According to IHS’ latest survey of the global television market, worldwide shipments of TVs fell an astounding 8 percent Y-Y during the second quarter of 2015. Even though LCD TVs now account for almost 99% of all TV shipments, “…LCD TV sales have not made up for the lost volume of cathode-ray tube (CRT) and plasma televisions, which have largely left the marketplace.”

The one bright spot? 4K. The IHS report states, “4K TV was a bright spot in the global TV market, with unit shipments growing 197 percent year over year in Q2 2015, to reach 6.2 million units. The growth in 4K TVs is the direct result of increased price erosion and more affordable tiers of 4K models becoming available.”

I’ve written on numerous occasions that we’re on the cusp of an industry switchover from 1080p resolution to Ultra HD (3840×2160) for precisely this reason, plus the fact that it’s becoming increasingly difficult to make any money on the manufacturing and sales of 1080p-resolution LCD panels. That’s part of the reason that Sharp – once the premier brand of LCD televisions – finally threw in the towel and exited the North American television business, selling their Mexican factory and “Sharp” brand to Hisense.

Need proof? Check out the most recent HH Gregg and Best Buy circulars. You can now buy a 48-inch Haier 1080p LCD TV for $298 or a 60-inch LG 1080p smart TV for $898. Want Ultra HD resolution instead? Samsung’s got a curved 55-inch smart model for $1198, and a 60-inch smart set for $1498.

Samsung has slashed the prices on its new S-line of HDR Ultra HDTVs by as much as 20%.

Samsung has slashed the prices on its new S-line of HDR Ultra HDTVs by as much as 20%.

But here’s the kicker: Samsung’s HDR Ultra HDTVs (S-UHD) are almost the same price. A 50-inch model (UN50JS7000) is tagged at $1098 by HH Gregg, while the 55-inch version is $1298. Too expensive? Sharp’s got a 43-inch Ultra HD offering for $598, a 50-inch set for $748, and a 55-inch version for $848. (Not to be left out, LG has cut the price on their 55-inch smart Ultra HDTV to $998, and they’ve also got a 49-inch UHD set for $798.)

Now, step back from that mass of numbers, and think about this: Those are insanely low prices for Ultra HDTVs, which were tagged around $15 – $20K when they first came to these shores in 2012. I know of several friends and acquaintances that had to replace older TVs recently, and every one of them bought an Ultra HD set because of these falling prices.

If overall sales of TVs are falling but 4K TV sales are increasing, it doesn’t take a weatherman to see which way the wind is blowing: 4K and Ultra HD are rapidly taking over the TV marketplace for sets larger than 42 inches. This is happening so quickly that by the end of next year, ALL TVs larger than 50 inches will be Ultra HD models.

There’s a bigger message here. The money isn’t in hardware anymore – it’s moving to software. I find it hard to believe that I would spend more in a year for cable TV and Internet service than the cost of an Ultra HDTV, but that’s exactly what’s happening. Content is king, and who cares about the hardware?

So, why are TV sales in decline? It could be for a very simple reason, and that is the average household has a large-enough TV with enough bells and whistles that they see no reason to upgrade. If you already own a 55-inch or 60-inch 1080p set with “smart” functions ( and the all-important Netflix streaming), then the speed of your Internet connection is much more important than adding another 5 inches in screen size or quadrupling your screen resolution.

There’s a corollary in the world of tablets, where sales and shipments are also slowing down much faster than analysts predicted. There are any number of reasons why, but the two most likely culprits are the shift in preferences for larger smartphone screens (“phablets”) and the fact that people just hang onto tablets longer (at least, until their batteries die), often passing them down to children or off to relatives when a new model is purchased.

This shift to 4K and Ultra HD resolution is also impacting the commercial AV industry, which is heading for some serious interfacing issues. More and more of the large displays that will be installed will have Ultra HD resolution. And that will create a major headache for integrators, as the predominant interface for pro AV is still HDMI 1.4, even though version 2.0 was announced two years ago.

None of this is good news for the projector manufacturers, who are struggling to defend their turf from the large, cheap LCD displays. Unlike panel manufacturers, projector brands are moving slowly to adopt 4K resolution, which isn’t surprising because of the cost involved to tool up and manufacture microdisplays with 4K resolution and the much smaller market for projectors.

As for the naysayers who still think 4K is a fad, I would just advise them to wake up and smell the coffee. The world of consumer electronics absolutely drives the world of commercial AV – what’s happening over there is going to happen here, and that means you as an integrator will be installing more and more displays with UHD resolution; from desktop monitors and TVs to single-panel and tiled wall-mounted displays.

Count on it!

 

 

 

xFinity: “The Future of Awesome” Is Looking A Bit Less Confusing…

In a previous post, I detailed the horror show I ran into trying to upgrade my old cable modem/router and migrating from a shopworn TiVo HD to two of Comcast’s new (Samsung) xFinity set-top boxes.

Those adventures took place w-a-y back in May and early June, and I won’t recap how everything turned into a three-ring circus. Instead, I will talk about the fact that since early June, I’ve lost (at one time or another) my Internet, TV channels, phone, and EVERYTHING. Yep, no signals at all.

There have been about six of these outages in all, and the one which cut off all service resulted in my waiting from 1 to 4 on a Friday afternoon for a tech who never showed up (apparently he went to the wrong address!). Ditto the following Monday, even though our service came back on its own.

Comcast has an “escalation” email address, we_can_help@comcast.net, that seems to get you through to the right people when you’ve hit a wall. I had suspected that our service problems were more due to things happening outside the house, possibly at the street drop where our underground cable connects up.

After all, the cable was installed nearly 30 years ago, when the house was built. And even “non-contaminating” coaxial cables eventually go bad and let in moisture, shorting out along the way. So my repeated calls to Comcast customer service stressed that a tech should check the outside wiring.

After getting nowhere with this approach, and experiencing another drop-out of signals (as witnessed with my spectrum analyzer), I sent yet another “fix the damn connection!” email to Comcast. I finally got a call from the executive office confirming that a tech would be here today (although no one had previously called to tell me that, or ask when I’d be around).

The executive “escalation group” had also done some checking into service records and discovered (lo and behold) that other customers in my neighborhood had also experienced service outages. (More ammunition for my argument.) So it sounded like I was finally making headway.

A three-truck service call is definitely an

A three-truck service call is definitely an “escalation.” But it was about time!

The tech called and said he could be over in a jiffy – much earlier than expected. Great! Soon, one truck, then two trucks, then THREE trucks pulled up my street and parked. Wow, they really called out the cavalry!

In short order, the two techs and a supervisor opened the street drop, found a bad cable (it pulled right out of its connector) buried near the house, and ran a new waterproof coaxial cable to the street. They also installed a new junction box and ground wire, and ran a new cable into the basement where everything. The street splitter “rang out” okay.

Now, to the basement. The lead tech advised me that the “new” Arris 2.4 GHz DOCSIS 3.0 wireless modem/router I had installed back in late May (ironically, at Comcast’s suggestion) was actually an “older’ model. And that he had a newer, dual-band Cisco wireless router in the truck, and did I want to swap it out?

The

The “drop” with a rat’s nest of cables and taps. It was determined that an entirely new cable to the house was need. (Wow, what a surprise!)

 

The tech fastens the house cable while a supervisor installs a termination box and ground wire.

The tech fastens the house cable while a supervisor installs a termination box and ground wire.

Well, of course! In no time at all, the “older” new router was removed and replaced. After some phone calls to the head end to activate everything, I now had a dual band, 2.4 / 5 GHz modem with 802.11ac channel bonding capability. Given that I had recently gotten several teaser emails from Comcast, advising me that my Internet speeds had been upgraded to 75 Mb/s, I was quite happy to finally see that extra speed when all was said and done.

The good news is; both techs and the Comcast supervisor were “on the ball.” They hung around to make sure the modem and all phone lines were working, and also that I had reconfigured the wireless network names and new passwords correctly. (The Cisco modem has a quirky habit of re-booting every time you make even the slightest change to its settings.) It’s nice to work with people who listen to you, understand the problem, and work quickly to diagnose and repair as needed.

So – now, I finally have the new cable drop to the house I asked for multiple times. And even though I am working on my third wireless modem/router in three months, it is great to have the extra speed through the 5 GHz wireless connection (better than 50 Mb/s sustained). And I’m hoping that the service outages I’ve been plagued with are finally a thing of the past. (Knock on polypropylene.)

With that done and behind me, I’m now waiting for the “awesomeness” to set in…

Are the Folks at QD Vision Worried?

Although QD Vision’s message at Display Week in San Jose was bullish, if I worked there I’d be worried. Why is that?

TV set architecture is progressing along two parallel paths: 1) Very thin sets with LED edge lighting, and 2) somewhat thicker sets with direct backlighting. Initially, QD Vision’s Color IQ linear quantum-dot optical element seemed as if it would be the preferred approach for large-screen TV, but it is only applicable to sets with edge lighting. To the extent that direct backlighting takes a significant share of sales, QD Vision’s total available market will decline.

The good news for QD Vision is that quantum-dot backlight enhancement will capture only a small share of the market in 2015. Only 1.3 million TV sets sold in 2015 will be QD-TVs, growing to 18.7 million in 2018, according to IHS/DisplaySearch. So, in the immediate future, there’s plenty of growth to go around.

The bad news for QD Vision is that the direct-backlighting approach captured more than 60% of the market in 2014, according to TrendForce. Fundamental considerations strongly suggest that the penetration of direct backlighting will continue to grow, according to Nutmeg Consultants.  (Disclosure:  The author is Principal at Nutmeg Consultants.)

What are these fundamentals? First, direct backlighting is compatible with local dimming of the backlight, which is required for high dynamic range (HDR), one of the features to be hotly promoted for the next generation of premium TVs. Second, it is now possible to use fewer LEDs with direct backlighting than with edge lighting, reduces cost. Third, direct backlighting eliminates the relatively expensive light-guide plate. Fourth, wide-angle lenses for the LEDs are decreasing the thickness of direct-backlit sets to the point it will not be objectionable to most consumers in most situations.

Both the linear optic of QD Vision and the Quantum-Dot Enhancement Film (QDEF) of 3M and Nanosys will provide the same enhanced color gamut, another of the features to be hotly promoted in new sets. So, how important is HDR likely to be?

For the first generation of UHD sets, the manufacturers stressed the increased pixel content, but the UHD spec encompasses far more than that. When fully implemented in succeeding generations of sets, UHD will also encompass extended color gamut (through quantum dots in LCD sets) and high dynamic range. Setmakers are moving energetically in this direction because they have been doing studies that show consumers are not excited by the difference in resolution between 2K and 4K sets. (Some of us may not share this perception, but if you are reading this column it’s a good guess that you are not a typical television consumer.) Typical consumers are, however, excited by increased color gamut and HDR. You can expect advertising for high-end sets to emphasize these aspects of the UHD spec soon.

The new Hisense H6510B2 has 3840x2160 pixels, extended color gamut 10-bit color depth, high dynamic range, and local dimming, all for  US $3000.  (Photo:  Hisense)

The new Hisense H6510B2 has 3840×2160 pixels, extended color gamut 10-bit color depth, high dynamic range, and local dimming, all for US $3000. (Photo: Hisense)

The movement toward direct backlighting and QDEF is illustrated by two press releases distributed by Nanosys in the last few days. The first concernes the launch of Hisense’s 4K ULED H10 Series 65-inch curved smart TV. The ULED series features the QDEF film and HDR. Hisense maintains its ULED TV will “compete with the picture quality of OLED TV and [Samsung’s] SUHD TV at a lower price. For $3000, Hisense provides a 100% NTSC colorgamut, 3840 x 2160 pixels, 10-bit color depth, 120Hz frame rate, 900 nits peak luminance, H.265 video coding, and a claimed dynamic contrast of 800 million to 1. You will be able to buy it this month at Amazon.

Significant for the near future is the announcement that AUO will be making Advanced LCD (ALCD) display modules featuring UHD at up to an 85-inch diagonal. AUO’s modules are naturally available to all TV brands that wish to incorporated them. “AUO ALCD technology puts TV brands in position to create devices capable of reaching Rec.2020,” says the release. AUO says it will enter mass production by the end of this year.

At Display Week, after a QD Vision executive said the company was comfortable with the number of edge-lit sets that would continue to be sold, he said casually that of course the company was also looking at other form factors. I am guessing that this “look” is anything but casual. QD Vision probably leads its competitors in quantum dots that resist degradation from high temperature and luminous flux. That knowledge could be leveraged into a lower-cost solution that is compatible with 2D local dimming and HDR, but everyone I talk to agrees the needed materials research will take time. The race is on.

Ken Werner is Principal of Nutmeg Consultants, specializing in the display industry, manufacturing, technology, and applications, including mobile devices and television.  He consults for attorneys, investment analysts, and companies using displays in their products.  You can reach him at kwerner@nutmegconsultants.com.

A Trend Is A Trend – Until It Isn’t

A story posted on the CNET Web site for August 22 might have gone unnoticed – except that it shows that the tide is now flowing the other way when it comes to smartphones and tablets.

By “tide,” I mean market forces and analyst predictions. The former is showing a decided preference for ever-larger smartphone screens, while the latter is prematurely writing the epitaph for notebook and laptop computers.

When the first iPads burst onto the market, everyone had to have one. There was nothing like it, and what we know as a smartphone was still in the toddler stage, with small screens and limited ability to take photos and stream videos.

Indeed; as recently as two years ago, analysts were predicting that sales of desktop PCs would eventually fizzle out and notebook computers would follow in short order. To some extent, they were right – you can now buy high-powered notebooks for less than $500, a consequence of lowered demand and an oversupply of components, including LCD screens.

But analysts are often more wrong than right, and they definitely got it wrong with the future of larger smartphone screens. “No one will buy a phone with a 5-inch screen. And a 6-inch screen? That’s crazy!” they thundered.

Um, guys – The hottest category now for smartphones is that same 5-inch to 6-inch screen size category. Apple’s sold plenty of iPhone 6s, as has Samsung with their Galaxy 5 and 6. I upgraded from a Motorola Droid Razr Maxx (4.7” OLED screen) to a Galaxy 5 (5.5” OLED screen) last December, and love it. I rarely make calls with it, but I do text, take pictures, shoot video, use sports scores, and even read newspapers while having breakfast or when traveling.

The ever-larger size of smartphones, combined with a somewhat stagnant market for phone sales, has depressed the sales forecasts for tablets. According to the CNET article, “Sales of slate-style tablets are expected to fall 8 percent, according to a report from research firm Strategy Analytics. Sales in Apple’s iPad business, meanwhile, fell 18 percent year over year in its most recent quarter, the sixth consecutive quarterly decline.”

How fast things change. Back in early 2014, tablet sales were forecast to grow 18% by the end of the year. Now, we’re seeing the numbers run in reverse. And part of the problem is that people don’t turn over tablets as fast as they do phones – my wife still uses an iPad 2 from 2011, although the battery is starting to go.

I have a Barnes & Noble Nook HD that’s also vintage 2011 and hardly gets any use anymore, thanks to my new Samsung Galaxy Tab 8.4. Somewhere in a drawer, I have a Nook reader with “Glowlight” that crapped out about six months ago. (And my wife’s Nook Tablet, vintage 2010, still works just fine.)

So, where’s the growth in mobile computing devices? Looks like it’s now happening with so-called “2 in 1s;” devices that combine a detachable keyboard with a larger tablet screen. Microsoft’s Surface Pro is one example; Lenovo’s Yoga Pro is another. The CNET article says that sales of these devices are expected to grow by 5x this year over last, and new processors such as Intel’s Core M give them CPU speeds comparable to midrange laptops.

In terms of turnover, tablets are lasting 5 to 7 years. (Not good news for Apple, I suspect!) Smartphones are still driven by the length of service contracts, nominally 2 years. But Intel claims that buyers of 2-in-1s are turning over laptops and notebooks much more frequently – on average, 18 to 24 months.

We’ve also seen much sales of much larger tablet screens pick up. Samsung’s 10.4-inch Galaxy Tab is popular, and the CNET story mentions a rumor that Apple plans to unveil a 13-inch iPad Pro this fall. (No word on whether it will have a detachable keyboard, a feature that Apple has resisted for now.)

The demand for the Surface Pro product stands in stark contrast to its earlier failures at launch three years ago. (Wow, has it been THAT long?) At one point, the company had hundreds of thousands of unsold units sitting in warehouses, no doubt due to the public’s emphatic rejection of Windows 8 software.

Now, Surface Pros are a popular product, and can run special versions of Office software. With gradual acceptance of cloud-based storage as opposed to CD drives, these tablets are quite powerful, thin, and lightweight.

A move to larger screens on smartphones can’t continue indefinitely: The 6-inch Galaxy is about the largest phone size I can fit into a shirt or pants pocket, so we may be hitting a wall in that area (although I have heard of plans by one Chinese brand to come out with an 8-inch 4K smartphone!).

So if any device will be sacrificed on the CE altar, it will be mid-sized tablets – 7 to 9 inches – and that’s already happening, based on market numbers. As the owner of a still-running Toshiba 10.4” notebook with OS 7, I’m intrigued by the idea of replacing all of that weight with a same-size tablet and keyboard – and a higher-resolution display, too.

For AV connectivity, the market switch creates its own headaches. Micro HDMI? MHL? Lightning? In all likelihood, the interface of choice will become wireless, most likely using 5 GHz Wi-Fi channel bonding technology for more reliable video streaming. Or, we may see some early adopters of 60 GHz wireless links for “2-in-1s,” using the 802.11ad protocol or SiBEAM’s Snap wireless docking system.

Keep your eye on the new USB 3.0 Type-C connector. This could be a game-changer: Like Lightning, it is symmetrical and thus reversible. It can carry high-speed data (up to 10 Gb/s), DC power for charging, and in Alternate Mode, transport display signals like DisplayPort 1.3 (packet) and superMHL (TMDS).

It’s a good bet that as the market ramps up production of “2-in-1s,” they’ll include the Type-C interface and probably drop everything else except power connections. For that matter, Type-C is in a position to displace everything from Mini DisplayPort to HDMI as it is the closest thing we’ll have to a do-everything, universal I/O connector going forward.

As for picking winners and losers in the smartphone/tablet/notebook/laptop game, better leave that to the “experts.’ They’re just as confused as anyone else…

We’re Not Having Fun Anymore…

Last Friday (7/31), Sharp Corporation made the announcement that they would finally throw in the towel and withdraw from marketing and selling televisions in “the Americas,” opting to sell the company’s LCD TV manufacturing plant in Mexico to emerging Chinese CE giant Hisense.

Sharp also indicated that it would allow Hisense to sell TVs on this side of the Pacific that are branded with the Sharp name. (Hitachi, JVC, and Toshiba have similar arrangements.) This announcement came just months after the announcement that industry marketing veteran Peter Weedfald was being hired by the company, presumably to try and turn the U.S. consumer electronics operation’s fortunes around.

Sharp also had a nice line show of nine new Ultra HD (4K) TVs back in May, signifying a commitment to the U.S. TV market. Now, it appears everything was for naught.

This has to be quite a blow to the ego of the company that basically created the LCD television business, and that just 9 years ago held a 21% worldwide market share in LCD TV shipments. Today? They’re not even on the radar, having ceded ground to Samsung, LG, Sony (who also is struggling), and most recently, Hisense and TCL.

There are nine new Ultra HDTVs in the Sharp line now, ranging from 43 inches to 80 inches.

What will happen to Sharp’s new line of Ultra HDTVs?

But it’s the right move. The company’s world-largest Generation 10 LCD fab in Sakai, Japan became a white elephant almost immediately as the world went into a recession in 2008-2009. Pressed for cash, Sharp sold 46% of the Sakai fab capacity to Hon Hai Precision Industries for about 20 cents on the dollar not long after the plant opened.

Several years of red ink followed, as did numerous rounds of financing. In the 1st quarter of this year (April – June), Sharp booked an operating loss of 28.8 billion yen ($231.87 million), down from a 4.7 billion yen profit a year prior, with a net loss of 34 billion yen ($270 million). The company still maintains it will be profitable to the tune of 80 billion yen ($644 million) by the end of March 2016.

According to a Reuters story, Sharp’s CEO Kozo Takahashi was “…open to major restructuring including some kind of strategic deal for its LCD business.” It’s well-known that Hon Hai CEO Terry Gou would love to buy the Sakai facility – he already owns almost 50% of its capacity, and Hon Hai subsidiary Foxcon sources LCD glass from Sharp for various Apple i-products. Gou also stated earlier this year that he would be willing to put more money into Sharp in exchange for a seat on its board.

While Sharp continues to wrestle with black ink, Sony posted what appeared to be positive financial results for its 1st quarter. The once-formidable CE brand logged an operating profit of 97 billion yen ($781 million), far exceeding the estimates of financial analysts.

There’s no question that camera sensor manufacturing is a lucrative business for Sony. Hundreds of millions of cameras and phones use Sony sensors, and the company announced a few months ago that it would expand sensor manufacturing capacity at two plants in Japan.

The strong first quarter was helped by an increase in operating income for its gaming (PlayStation) division of 350% to 19.5 billion yen ($153 million). So everything is coming up roses in Tokyo – right?

Not really. Sony’s beleaguered mobile phone division strung up a loss of 22.9 billion yen ($184 million) for the same quarter, and according to a Reuters story, the company is now predicting a loss of 60 billion yen ($483 million) for the fiscal year that ends next March, citing “a significant decrease in smartphone unit sales resulting from a strategic decision not to pursue scale in order to improve profitability”.

Drilling down into Sony’s Q1 FY2015 Consolidated Financial Results, the Home Entertainment and Sound group posted 168.9 billion yen ($1.36 billion dollars) in sales during Q1, with operating income of just 7 billion yen ($56 million). (That is a margin of 4.1%.) Sales were down 13.8% from the same period last year due to a “…decrease in unit sales of LCD televisions, mainly in the mid-range” and a “decrease in home audio and video unit sales reflecting contraction of the market.”

For all of 2014, Sony sold 14.6 million LCD TVs. Their current forecast calls for 11.5 million to be sold by the end of next March, a drop of 21% Y-Y. (2.6 million LCD TVs were sold by the company in the first quarter.) The TV business has long been a cash-sucker and Sony has been racking up losses in this market segment for a decade.

If Sony was to cut loose its mobile and home entertainment businesses, it would be quite the profitable company. For that matter, even the digital camera segment is seeing a downturn, as the year-long forecast for camera sales (5.9 million units) represents a drop of 30% from last year’s numbers – which were 26% down from 2013.

Aside from PlayStation, the long-term view for Sony’s consumer business isn’t good. Cameras in general are being displaced by smartphones, and even powerhouses like Samsung are seeing their mobile phone business decline as Chinese companies gain more market share in Asia.

And it’s pretty clear what’s happened to the Japanese TV business – only Sony, Sharp, and Panasonic retain a presence in the United States, and Sharp just announced it’s getting out. Look for Panasonic to do the same by year’s end, as their market share is miniscule and supporting continued sales of televisions doesn’t make much sense financially.

That just leaves Sony, who once proudly exclaimed that they had a chain of products “from lens to screen.” Well, that was in the good old days, when everyone was having a great time selling consumer electronics.

But we’re not having fun anymore…