Category: The Front Line

Mixed Signals about UHDTV

Earlier this week, there were a few “coincidental” press events and trade shows, all in New York City or just across the river in New Jersey. And all of them featured discussions about or demonstrations of UHDTV technology.

First off was the CES 2014 Unveiled event, held at the Metropolitan Pavilion. The morning and part of the afternoon were taken up by an Ultra HD Conference, which featured several panel discussions and a keynote address during lunch. The first panel, titled “Ultra HD: An Evolution, or Revolution?” featured executives from LG, Sony, Toshiba, and Sharp, and set the table for many ad hoc discussions later on in the day, such as (a) does the public REALLY want or understand UHDTV, and (b) will UHDTV stimulate a stagnating market for televisions?

The second panel, moderated by Deborah McAdams of TV Technology, was called “Native Ultra HD Content: Where’s The Beef?” and addressed the elephant in the room; namely, where is 4K video content going to come from, and how will we get it into the home? Panelists from the ATSC, the Digital Entertainment Group, and Rovi tackled those questions, while yet another group discussed “Taking Ultra HD to Retail” later in the day.

LG's 77-inch 4K curved OLED TV wowed attendees at the CES event.

LG’s 77-inch 4K curved OLED TV wowed attendees at the CES event.

 

Given that this was a CEA event, we did hear a lot of positive spin and wishful thinking about Ultra HD (UHDTV). And that’s not surprising, considering that the actual outlook for television sales for the upcoming holiday selling season isn’t all that wonderful. According to Shawn DuBravac of CEA, consumer spending on technology gifts is expected to increase in 2013 by just 2.6% over 2012, with tablet (14%) and notebook computers (12%) leading televisions (11%) as the most desired gifts on holiday wish lists. (Smartphones tied with videogame consoles at 7%.)

More tellingly; when survey participants were asked why they would adjust their holiday gift expenditures lower, 67% replied that they already have what gadgets they need and 68% said they had concerns about the economy. An additional 66% said they didn’t have the money, while 64% cited the increased cost of living as a reason to cut back on spending. None of that is good news for a new class of 4K televisions that retail for about $65 per diagonal inch, quite a premium above the $15 per diagonal inch that 2K LCD and plasma TVs sell for.

The following day, across the reviver at the Meadowlands Convention Center, I taught a class on HDMI troubleshooting at the Almo E4 Expo. This show, which is focused on the commercial AV industry, featured plenty of large screen displays from Sharp, Panasonic, Samsung, and others. And the discussions largely focused on the challenge of moving 4K content around a facility.

Would HDMI 2.0 be good enough? (Not for high frame rate 2160p content with deep color.) How about DisplayPort 1.2? (Yes, it is fast enough to handle 2160p/60 with 10-bit color, but needs to get faster.) Who is using DisplayPort? (Not enough manufacturers to date, although it appears to be the interface of choice for a growing number of digital signage media players.) Are there 4K media players available? (Yes, but in very limited quantities from a handful of manufacturers.)

Panasonic's first-in-class 4K Toughpad will be yours for all of $6,000.

Panasonic’s first-in-class 4K Toughpad will be yours for all of $6,000.

 

One day later, the CCW / SATCON show at the Javits Center had several panel discussions and presentations focused on the nitty-gritty of capturing, editing, and distributing 4K workflows. Several booths featured 4K monitors (Panasonic had both their 4K Toughpad tablet and 31.5” 4K reference LCD monitor at the show), plus 4K encoding/decoding solutions and camera interfaces. Once again, the biggest challenge appeared to be moving enormous amounts of data around reliably and quickly.

I had an interesting sidebar discussion with veteran journalist Stewart Wolpin at the CEA event. I stated that the Chinese are going to wreak havoc on the UHDTV market as they ramp up glass production and slash prices. Wolpin replied that he didn’t see it as a problem: “Who is going to give these brands (TCL, Haier, ChangHong, etc.) any shelf space? They don’t have much if any presence in the U.S. now and just won’t be competitive with the established TV brands. They’re really more concerned with making tons of money selling TVs in their own country.”

True, China is the only part of the world where there is growth in TV sales Y-Y right now. But they have become a presence to reckon with, if for no other reason than they can make inexpensive 4K TVs with all of the bells and whistles that sell for about as much as a 1st-tier 2K TV. TCL has shipped a 50-inch 4K TV that will retail for $999, and Seiki is also raising eyebrows with their recent announcement of a 65-inch 4K TV for $2,999.

It would be a fool’s errand to predict just how fast UHDTV will be embraced by consumers. Not all parts of the ecosystem are in place yet (HDMI limitations and the lack of H.265 encoder chips are just two stumbling blocks), and there’s still the issue of content delivery to be addressed.

Even so, the trend towards using 4K glass in larger LCD (and eventually, OLED) TVs is pretty clear. Remember the days of 720p and 1080p TVs? The move to 4K will follow a similar pattern, especially where LCD panel manufacturers are seeing little or no profit cranking out 2K glass.

So – UHDTV is definitely coming, from this analyst’s perspective. How fast is still hard to tell. Check back in a year!

The Diverging Fortunes of Sony, Panasonic, and Sharp: Is There Life After Television?

Last week; Sony, Panasonic, and Sharp announced their financial reports for Q2 2013. And it’s clear that all three would benefit from phasing out the production and sales of televisions.

Panasonic, who is on track to shut down production of plasma display panels by the end of the current fiscal year in March of 2014, turned in a strong performance and raised its operating profit forecast to $2.75B, according to a story on the Reuters Web site.

The company posted a net profit of $627M for the period from July through September, helped by strong sales of automotive and battery products. This number just exceeded an estimate of $621M by industry analysts.

The surge of black ink was helped by downsizing plasma TV operations, along with semiconductor and smartphone manufacturing. Panasonic also concluded a sale of 80% of its healthcare business unit to KKR for about $1.7B.

Not long after saying the company would increase shipments of lithium ion batteries to carmaker Tesla Motors by nearly 2 billion cells through 2017, Panasonic also announced it will exit plasma TV manufacturing, which along with its LCD TV operations lost $261M in the second quarter.

Down the road, Sharp (who operates the world’s largest LCD fab in Sakai, Japan) managed to pull a rabbit out of its hat and announced a profit of $138M for the same quarter, largely due to increased demand for solar cells and a weaker yen against the dollar.  Just one year ago, Sharp had a $5.5B net operating loss and required transfusions of cash from Samsung (2012) and Qualcomm (2013) to stay open.

While both companies have seen a steady decline in their worldwide TV market share (Panasonic dropped 26% from a 7.8% share in 2011 to 6% in 2012, while Sharp plummeted 22% from 6.6% to 5.4%), they’ve obviously figured out that it’s time to re-focus their efforts on more profitable products and are making progress in that direction.

Not so Sony, who evidently never heard Einstein’s famous definition of insanity as “…repeating an experiment and expecting different results.” Sony’s latest financials showed a net operating loss of $197M for the 2nd quarter, largely attributable to its TV operations. The fact that Sony Pictures also had a disappointing quarter didn’t help.

The TV group lost $95M between July and September after recording a $53M profit during the previous quarter. Sales of cameras, camcorders, and Vaio computers were also weak, with only smartphones showing any strength. The company also has high hopes for its PlayStation 4 platform, which will debut later this month.

Still, analysts aren’t convinced that Sony’s strategy to maintain its traditional consumer electronics products presence will work anymore. In a related Reuters story, Makoto Kikuchi, CEO of Tokyo-based Myojo Asset Management, was quoted as saying, “I still cannot see any fundamental and believable strategy for the rebirth of Sony’s electronics business. On the other hand Panasonic, which is shifting its business away from consumer electronics, is reporting better-than-expected results. The contrast is like night and day.”

Let’s be clear: Neither Panasonic or Sharp is out of the woods yet – far from it. Panasonic’s TV operations took an even bigger hit than Sony (-$261M) in Q2 ‘13, and Sharp is still sitting on the edge of bankruptcy. But Sony’s insistence on maintaining a losing CE presence may cost it dearly: Moody’s is apparently considering dropping Sony’s credit rating to junk status.

The fact is; Japanese manufacturers can’t sell TVs and remain profitable anymore; not as long as Samsung and LG maintain aggressive pricing and newcomers like Hisense, Haier, and TCL crash the party (not to mention discount giant Vizio).

And the move to 4K won’t help. Although Sony, Sharp, and Panasonic all have 4K LCD TVs at retail for about $80/inch, the Chinese appear primed for a 4K TV price war that they will inevitably win. Consider that without China, the worldwide market for TV shipments actually declined in 2012 by 4%. Add China to the mix, and it’s an eight-point upward swing.

To sum up; Panasonic seems to have gotten religion, while Sharp is still sobering up. But Sony apparently needs an intervention. Will disgruntled shareholders and/or downgraded credit and a higher cost of borrowing force the issue? Stay tuned…

UHD-TV, Small OLEDs, and Market Forecasting

Forecasting the market for technologies and for product categories early in their commercial lifetimes is a very tricky business.

First there are no straight lines — or even curved ones — representing historical sales data that can be projected forward. Of course, reputable market intelligence companies, and there are some, don’t make their predictions based only on the projection of historical data. They also interview individual manufacturers and supply-chain participants to obtain their predictions of their own output, and add up the results for a grand total. In addition, they interview major purchasers, such as Fry’s and Best Buy, for estimates on how many units they expect to buy in the future. There is, of course, no guarantee that the number of units manufacturers expect to sell equals the number retailers expect to buy, which provides the opportunity for some creative number-crunching.

All of this assumes that everybody is giving honest answers to the market intelligence firm’s questions, which may or may not be the case. One can easily think of situations in which one company or another would think it is in its interest to high-ball or low-ball the numbers. But even if everybody is providing their speculative numbers as honestly as they can, there is still plenty of room for a market intelligence company to get its projections spectacularly wrong. One of our leading display-industry prognosticators — which is still very much in business — was wildly optimistic in predicting the ramp-up of small OLED displays, which were, and still are, produced almost entirely by Samsung. It then revised its estimates of the timing and volume of the market ramp-up, and was once again spectacularly wrong. These cycle repeated several times before sales actually began to take off.

The problem was that virtually everybody, including the people in Samsung, did not anticipate how difficult it would be to manufacture small OLED displays at high yield and low cost. Fortunately, it was Samsung, with its deep pockets and impressive corporate patience, that was carrying the ball. Ultimately, the problems were solved and the products and manufacturing processes continually refined. Now, small OLEDs for smart phones please handset makers and end consumers, and constitute a successful and profitable business for Samsung.

Which brings us to Ultra High Definition Television (UHD-TV), otherwise know as 4K-TV. There are still a few analysts around who say that UHD-TV is being over-hyped and will, like 3D-TV before it, fail to be an important product. These analysts are wrong.

UHD-TV MarketNow, Displaybank IHS has published an interesting market projection for UHD-TV display panels in its “LCD Market Tracker — Q3 2013.” Please remember what I said about the reliability of market projects early in a product category’s lifecycle, but this one is (mostly) okay because it supports my position. IHS reports that 0.4 million UHD-TV panels were sold in Q2’13, with 0.8 million forecast for Q3’14. Market penetration by units is projected to be 1% is 2013, rising to 8% in 2017. IHS goes on to predict that penetration by revenue will rise much faster, and reach 20% by 2017. Panel makers would love that to be true, because it would mean they have a product to sell with more than a paper-thin margin. Maybe. The history of the display industry cautions us that high-performing panels generally command a higher margin for a relatively short time before becoming commoditized. But the unit penetration projections strike me as realistic.

We will soon see how UHD-TV prices will shake down for the holiday season. It will also be interesting to see if the very-low-price UHD-TV sets from China and (in one case) Japan will offer acceptable 4K image quality.

It’s “Fade To Black” for Plasma and Projectors in Japan

Are we seeing the end of a golden era for display manufacturing in Japan? It sure seems so.

Earlier this month, Reuters published a story quoting sources inside Panasonic that state they are finally pulling the plug on plasma TV production. The exit is to be complete by the end of March 2014, otherwise known as the end of the company’s current fiscal year.

According to the Reuters story, Panasonic has been unable to stem the tide of red ink resulting from its television operations. In the past two fiscal years, Panasonic has lost $15 billion, with TV operations accounting for a $913 million hit in fiscal 2012.

I can’t say this decision was all that surprising. Ever since plasma TV shipments hit their peak in the mid-2000s, market demand has shifted rapidly to LCD technology. In fact, during FY 2012, there were more CRT TVs shipped worldwide (6.9% market share) than plasma (5.7% market share), according to NPD DisplaySearch.

Of course, LCD technology remains king of the hill with an 87.3% market share – an increase from last year, even though overall TV shipments dropped by 6% worldwide. And LCD still has plenty of legs – witness the advancements in TFT design (IGZO), backlights (quantum dots), and resolution (4K) that are now breaking into the market.

Panasonic is a strong player in LCD, and operates a Gen 8 fab that cranks out IPS-Alpha glass in Himeji, Japan. In fact, they shipped more TVs last year than Sharp and weren’t that far behind Sony.  But Panasonic had already idled a good portion of its plasma TV fab capacity by the start of 2013, including a brand-new facility in Shanghai and about 50% of its Osaka operations.

The departure of Panasonic may also result in Samsung and LG dropping plasma from their TV portfolios. For each company, plasma TVs remain the “value” product offering, with 60-inch LG 1080p plasma sets going recently for about $800 while equivalent 60-inch LCD sets with some bells and whistles command about 10% – 30% higher prices.

Still, the market for TVs is expected to continue a slow decline, thanks to shifting interest in tablets and smartphones for media consumption. There just isn’t any more time (or money) left to indulge small niche display technologies. It’s enough of a challenge for Japanese TV makers to approach profitability.

And things will only get worse. Japan can’t compete with Korea, and now has to deal with Chinese LCD TV manufacturers. In Q1, China was the only country to show an increase in LCD TV shipments Y-Y, while in the rest of the world, TV shipments fell by 4%.  The Chinese have enthusiastically embraced LCD manufacturing and are now cranking out big 4K panels, with the current world’s largest model (110 inches) coming from the CSOT fab in Shenzen. And they’re enjoying the strongest profit margins in the industry, too.

One result of this trend is super-cheap LCD TVs, often selling for less than $40 per diagonal inch. And the commercial AV channel has taken notice: Instead of specifying front projectors and screens, they’re putting in 70-inch, 80-inch, and 90-inch 1080p LCD screens instead. No more lamp changes, no ambient light issues, and “set it and forget it” operation – these are all strong selling points that financial and higher education markets have now embraced.

It’s hard to make a buck selling projectors – margins are very slim, and a great deal of product moves through distribution channels these days. Combine those thin margins with a trend away from front projection, and you have the “beginning of the end” for more than a few notable projector brands.

Consequently, Mitsubishi Electric Visual Solutions announced on October 11 that they were pulling out of the projector market for good, and also ceasing sales of large LCD monitors. Previously, the company had enjoyed good market share across a number of projector categories and even announced a new line of hybrid and “cloud” projectors at ISE and InfoComm.

Now, that’s all history. Mitsubishi will instead concentrate on tiled displays and videowalls, categories where they’re still profitable.  But they won’t be the last company to bid adieu to projectors: Sharp’s InfoComm and ISE booths have focused almost exclusively on large LCD displays, but they still list projectors on their Web site despite dwindling market share and continued struggles with red ink and underutilization of their huge Gen 10 Sakai LCD fab. How long before Sharp throws in the towel on projection?

These are not happy times for Japan Incorporated’s once-dominant TV industry, which is undergoing the same sort of painful downsizing the U.S. TV industry endured in the 1980s and 1990s.

Back in the day, Ernest Hemingway wrote a famous novel titled, “The Sun Also Rises.” If and when some future author records the last days of Japanese display manufacturing, that account could well be called, “The Sun Also Sets”…

Financiers Focus on Flexible Displays

On Wednesday, October 16th — a day that came close to living in infamy — I stood on a New Haven Line station platform and, luckily, thought to check my email. I was on my way to a luncheon presentation for a large New York financial advisory group that wanted me to speak on the present and future of flexible displays, and answer questions about where the investment opportunities might lie.

Instead, I checked my phone, saw an urgent request to call my contact, and found that the threatened Congressional refusal to raise the debt ceiling had required the folks who would otherwise be attending my presentation to busily help clients navigate their ways through a volatile market. So, meeting rescheduled.

The interest in flexible displays goes far beyond the investment group I will eventually address. A quick look around the Web will show lots of interest from the investment and consumer electronic communities. Despite the intense interest, it seems many people don’t realize that using a flexible display doesn’t mean the end product will be flexible. The Samsung Galaxy Round, introduced last week to the Korean market, is a perfect example.

The Samsung Galaxy Round curved phablet was introduced to the Korean market on October 9, 2013.  (Photo:  Samsung Electronics)

The Samsung Galaxy Round curved phablet was introduced to the Korean market on October 9, 2013. (Photo: Samsung Electronics)

The Round uses a flexible 5.7-inch, Full HD, Super AMOLED display, which is used to enable a product that curves gently around a vertical axis. The curved case, however, is every bit as rigid as comparable flat cases. Indeed, Samsung seems to have struggled to figure out what a rigid curved case night be good for. Reportedly, this rather large phablet fits comfortable in a user’s hand, thanks in part to the curve. Samsung has also designed the software to respond to the case being rocked when its convex side is lying on a flat surface. (When the device is rocked in sleep mode, basic information appears on the home screen.) LG Electronics has also promised a curved phone for 2014.

Why is the Round being offered only in the Korean market, at least at first? We can speculate that Samsung wants to work out any bugs while volumes are relatively small, or that manufacturing capacity is limited, or that manufacturing yield for the flexible display is low. If capacity or yield (the two can be related) is low, why might that be? One possibility is that flexible OLED displays require flexible moisture barriers. Effective flexible barrier films have been expensive and may not be available in large quantities. However, the fact that this flexible display is of the “bend-once” variety may allow the use of a simpler barrier-film structure.

When many people think of a flexible display, they think of the “flex-many” type, which could be rolled up inside a small cylinder and unrolled whenever you want to use it, assuming the particular design allowed the display to be rolled to a small radius of curvature multiple times without deterioration of performance.  Although we have seen technology demonstrations of such concepts, there are no commercial products now and probably will not be for some time. When we do see the first flex-many products, they will probably have limited flexibility, such as the concept shown in the graphic.

Samsung Round, end view  (Photo:  Samsung Electronics)

Samsung Round, end view (Photo: Samsung Electronics)

Cambrios flexible phone concept  (Graphic:  Cambrios)

Cambrios flexible phone concept (Graphic: Cambrios)

What is delaying the introduction of flex-many products? The answer is: almost everything. Not only must the display itself (including the backplane and barrier film) be flexible and not deteriorate over many flexing cycles, but so must the other components of the device, including the touch screen, circuit boards, and battery. Hard switches and buttons must either be eliminated or designed to work with a flexing substrate and, perhaps, case. None of this is easy, but solving the problems are where the product and investment opportunities lie. That is what I will be discussing with the New York investment group when the current economic tensions die down.