Fifty years ago, consumers were awestruck by a new-fangled device called color television. In April 1954, RCA began assembling the world's first production color sets at a state-of-the-art plant in Bloomington, IN. The CT-100 cost $1,000 and featured a 12-inch tricolor dot screen.
Most people over 40 years old can still remember the first time they saw a television show in "living color." Today, thanks to new technology, TVs are a hot item once again. However, the boxy sets of the past are now sleek flat panels and the tiny flickering screens have been replaced by vibrant images larger than most windows. And, instead of being assembled in the Midwest, most TVs are now produced in the Far East.
The $231 billion consumer electronics industry is experiencing its biggest transition since the transistor revolution of the 1960s. Because of digital technology, a variety of once isolated product segments, such as televisions, DVD players, stereos, cameras, projectors and personal computers, are converging to create a new breed of networked devices.
One of the fiercest battles for digital turf involves televisions. Activity in that key market segment is booming. In fact, the Consumer Electronics Association (CEA, Arlington, VA) predicts that the digital TV market will triple production volume over the next 3 years. In 2007, more than 16 million digital TVs will be assembled vs. more than 5 million in 2004.
According to Gary Shapiro, CEA president, "portability, connectivity and wireless technology were among the significant trends" at the recent Consumer Electronics Show (CES) in Las Vegas. For instance, he says hundreds of wireless phones, personal digital assistants (PDAs) and other data products were on display embedded with video displays, cameras and a proliferation of services such as e-mail capabilities, Web-browsing, instant messaging, gaming and streaming video.
This year's CES show was the largest ever, with a record 2,300 exhibitors and more than 110,000 attendees. "The networked home figured prominently at CES this year as more home owners demand access to content and control features anywhere and at any time," Shapiro points out. "Content now can be stored in the home PC or other products, such as media servers, and controlled by wireless or Web-enabled remotes."
Electronic components equipped with built-in wireless networking allow consumers to transfer and play media on many different devices. And, unlike traditional consumer electronic devices, there are no bulky wires or cables involved.
Shapiro says more and more consumers are interested in sharing digital entertainment content through the integration of personal computers (PCs) and consumer electronic products. In fact, a recent survey conducted by the NPD Group (Port Washington, NY) reveals increasing interest in sharing movies, music and photos using televisions, DVD players and audio systems along with traditional sharing of files, printers and Internet access. In addition, consumers are beginning to embrace home networks for security and for controlling appliances, creating "smart homes."
"Spurred by the current wave of digital convergence, home networking will be one of the first technologies to which consumers will be exposed," notes Stephen Baker, NPD Group's director of industry analysis. "[As more] consumers see the clear benefits of home networking, they'll share pictures and music across multiple digital devices, and will integrate new products into their networks."
Baker says sharing personal media is the most popular application among 40 percent of those planning to install home networks during the next 12 months, up from 33 percent among current home-network owners. Specifically, consumers intend to share personal photos and video (32 percent), distribute music across the network (24 percent), and distribute movies and TV across the network (16 percent). According to Baker, Wi-Fi is gaining on Ethernet, the current standard for home networking. Wi-Fi technology transmits Web pages, videos, music and other digital media through the air via radio waves. Many companies are developing TVs with Wi-Fi built-in.
"Digital technology and an ever-expanding wealth of digital content are profoundly transforming how people live and experience entertainment and personal content within the home," claims Craig Barrett, CEO of Intel Corp. (Santa Clara, CA). He says this transformation is creating tremendous business opportunities and is leading manufacturers to "develop exciting new experiences and interoperable products for the worldwide marketplace.
"Consumers will be able to enjoy content-movies, music, games, photos, communication and information-at any time, anywhere and on any device," Barrett points out. For instance, he says "they want to wirelessly transfer MP3 files from a PC in the den so they can listen to them on their stereo in the family room; they want to view digital photos on their big screen TV; or to watch video content on handheld wireless devices."
New technology and communication standards are converging to make this vision a reality. According to Barrett, more than 20 years of PC innovation has set the stage for "the next revolution in digital technology. Personal computing and consumer electronics interoperability, broadband connectivity and rich digital content have established a foundation that will lead to new capabilities, applications and business models." Barrett says the new generation of connected devices will work together on a seamless, wireless home network.
Traditional computer and semiconductor industry heavyweights such as Hewlett-Packard Co. (Palo Alto, CA), Intel, Microsoft Corp. (Redmond, WA), Motorola Inc. (Schaumburg, IL) and Texas Instruments Inc. (Dallas) are bullish on the future of home networks. In fact, those companies are quickly becoming major players in the consumer electronics industry. For instance:
• Hewlett-Packard recently unveiled a PC-based media center that operates as a traditional consumer electronics device. It incorporates a digital video recorder and a DVD player and has ports to plug in cable television, a VCR, a digital camera and audio devices. In addition, Hewlett-Packard is launching its own brand of large flat-screen TVs.
• Intel is investing $200 million in companies making digital consumer products that use its microchips inside. The company is also developing a new microdisplay technology that allows for an extremely thin rear-projection TV.
• Microsoft is embedding its Media Center software program directly into televisions and other consumer electronic devices. The platform allows end users to link digital photos, music and videos stored on their PCs to entertainment centers in their den, family room or living room.
• Motorola is lending its name to a line of flat-panel TVs made by Moxell Technology Inc. (Hong Kong).
• Texas Instruments has developed a microdisplay technology, called digital light processing (DLP), that makes digital TV images more crisp.
With PC penetration approaching 70 percent of all U.S. homes, computer companies are looking for new growth opportunities. And, the digital TV market-with just 1 percent penetration-is ripe for growth. In addition, many products can be assembled by contract manufacturers. Original design manufacturers (ODMs) have made it easy for new companies to enter the digital consumer electronics market.
An ODM is a company that manufactures products of its own designs, which are then sold under an OEM's brand name. Typically, the ODM determines what products to build and the OEM simply purchases the items ready-to-go. More and more OEMs are considering the ODM model because it offers them a complete turnkey solution and a quick way to enter a hot market.
According to International Data Corp. (IDC, Framingham, MA), consumer electronic devices offer higher margins than PCs, despite shorter product life cycles. For instance, flat-panel TVs or DVD recorders that link to PCs have margins up to 30 percent vs. 10 percent or less for computers, which are now a commodity.
Many companies are developing entertainment PCs, which are traditional PCs connected to a television screen. They can be used to organize and consume digital content such as music, movies, TV programming, games and high-definition video. The devices are capable of sharing content wirelessly and operate with a remote control instead of a keyboard.
"The big story in 2004 will be the convergence between consumer electronics and computing products," says Jay Srivatsa, principal analyst for consumer electronics platforms and embedded microprocessors at iSuppli Corp. (El Segundo, CA), a market research firm. "This phenomenon is spurring the entry of PC companies into consumer electronics."
Traditional barriers between personal computers and consumer electronics are eroding. For example, the devices needed to play media content are more and more like PCs. Instead of the proprietary systems that were traditionally used by consumer electronics manufacturers, the new digital products feature off-the-shelf components and standardized chips.
In addition to Hewlett-Packard, new players include Dell Inc. (Round Rock, TX) and Gateway Inc. (Poway, CA). Dell began marketing 17-, 23- and 30-inch LCD TVs several months ago, while Gateway is offering a 56-inch rear-projection TV.
"More PC- and semiconductor-oriented companies will expand their presence in the consumer electronics [market]," predicts Srivatsa. He expects well-known high-tech manufacturers such as Advanced Micro Devices Inc. (Sunnyvale, CA), Apple Computer Inc. (Cupertino, CA), IBM Corp. (Armonk, NY) and Sun Microsystems Inc. (Santa Clara, CA) to compete for market share against established consumer electronics players such as LG Electronics Inc. (Seoul, South Korea), Matsushita Electric Industrial Co. (Osaka, Japan), Royal Philips Electronics (Amsterdam), Samsung Electronics Co. (Seoul), Sony Corp. (Tokyo), Thomson S.A. (Boulogne, France) and Toshiba Corp. (Tokyo).
As more and more consumers use their PCs to access movies, music and photos, the convergence trend is blurring the traditional boundary between entertainment and computing. Indeed, almost every PC manufacturer now offers a multimedia package based on Microsoft's Media Center operating system.
"The same dynamics that drove the PC revolution are moving to consumer electronics," claims Paul Otellini, Intel's president. "As the world of consumer electronics and content shift from analog to digital, there is a great opportunity to advance the rate of improvement in performance, cost and integration of features in consumer electronic devices.
"Think of this as Moore's Law applied to yet another industry," Otellini points out. Moore's Law is a theorem first outlined by Intel cofounder Gordon Moore that states that the number of transistors on a chip roughly doubles every 2 years, resulting in more features, increased performance and decreased cost per transistor. "Our goal is to eliminate boundaries between electronic devices inside and outside the home . . . to create products that work simply and easily together, provide greater flexibility and offer increased power and usefulness for consumers," says Otellini.
The World Is Flat
The ongoing shift from analog to digital television has spawned tremendous competition. For instance, at the recent Consumer Electronics Show in Las Vegas, more than 50 companies were displaying new television models. Thin, flat, big-screen displays dominated the trade show.
"One of the most dramatic product advances has been in flat-screen TVs," says CEA's Gary Shapiro. "A TV that can hang on the wall has been the ‘holy grail' of the industry for half a century, and we're finally seeing them approach mass-market prices."
Shapiro says the average U.S. household has 2.75 televisions. Most of those use traditional technology that relies on bulky cathode ray tubes (CRTs). In 2003, 27 million picture-tube TVs were manufactured vs. 650,000 flat-panel TVs. However, by 2007, flat panels are expected to account for more than 20 percent of the lucrative TV market.
"The flat-panel TV market is very different from the traditional tube-based TV market, and the old rules don't necessarily apply," notes Bob O'Connell, director of personal technology at IDC. "New players, new channels, new margins and new ways of doing business are poised to flip the conventional TV industry on its ear."
Digital television products accounted for $6.1 billion of revenues in 2003 on nearly 4 million units, representing an increase in dollar sales of 44 percent and an increase of 56 percent in units over 2002 figures. New display technologies have helped fuel that tremendous growth.
The CEA predicts another banner year for digital TV sales in 2004, with total shipments of more than 5.7 million units on dollar sales of $8 billion. Sales of plasma display panel (PDP) TVs are expected to zoom from $1.5 billion in 2003 to $2.2 billion in 2004, while an archrival technology called liquid crystal display (LCD) is projected to top $1 billion in 2004 from $651 million in 2003.
The new generation of televisions are extremely thin and light enough to be hung on walls or hidden in picture frames. Both technologies are expensive-large-screen TVs start around $3,000, but the prices are quickly dropping. According to DisplaySearch (Austin, TX), within 2 years, 42-inch flat-panel TVs will sell for less than $2,000, while 30-inch flat-panels will be available for less than $1,000.
LCD TVs are similar to the LCD monitors used in PCs. They work by passing current through tiny liquid crystals. While LCD TVs are currently smaller than plasma products, they offer a brighter picture.
Plasma refers to the gas trapped inside each pixel, which lights up when an electric charge is applied. Despite drawbacks such as phosphor burn-in and poorer picture quality than traditional picture tubes, plasma displays are catching on. Within the last 2 years, the steep price tag has dropped 45 percent. A 40-inch plasma TV costs approximately half of what a similar-sized LCD set costs.
However, demand for LCD TVs is expected to skyrocket as prices drop. Most experts predict LCD technology will eventually dominate midsize units between 15 and 40 inches, because other flat-screen technologies don't work as well in those sizes.
"The first major battle between LCD and PDP in the large-format flat-panel display wars is being fought on the 30-to-39-inch battleground, and LCDs are gaining ground rapidly," notes William Coggshall, president of Pacific Media Associates (Menlo Park, CA), a market research firm. He says LCD TVs have grown dramatically to account for nearly 34 percent of this size category.
The worldwide market for flat-panel display TVs over 30 inches is expected to grow 50 percent annually between now and 2007. "The conventional wisdom is that LCDs will dominate in sizes below 50 inches by 2007," explains Coggshall.
Both LCD and plasma flat-panel TVs are assembled from a small number of standard parts similar to the way PCs and cell phones are produced. For instance, an LCD screen is coated with millions of thin-film transistor arrays. Tuner circuitry, color filters, polarizers, liquid-crystal material and a fluorescent backlight are sandwiched into an assembly that is less than 1-inch thick.
Demand for large-screen TVs has been exceeding initial expectations, leading to a tight supply of flat-panel displays. Manufacturers are scrambling to perfect production processes that will reduce costs and time to market. For instance, Applied Materials Inc. (Santa Clara, CA) has developed new machines for mass-producing flat-panel TVs. Its latest equipment can handle huge sheets of glass that make six 37-inch TV panels at once.
Glass manufacturers are pouring millions of dollars into factories capable of making the larger sizes. Corning Inc. (Corning, NY) is investing $600 million to boost production of the glass used in flat-panel LCD TVs. It makes the super-smooth, extremely thin glass that acts as the "bread" around a sandwich filling of liquid crystals and transistors.
Sharp Corp. (Osaka, Japan) just opened a state-of-the-art plant in Kameyama City, Japan, to assemble large-screen LCD TVs. By using an integrated production process, the company expects to be able to assemble 100,000 units a month. The vertically integrated facility is designed to streamline and enhance material flow, production, and test and inspection processes.
In addition to LCD and plasma technology, a new generation of microchip devices promises to revolutionize TV manufacturing. "The biggest challenge facing consumer electronics manufacturers is to find some way to add exciting, but complex, features to their products, while hiding the complexity from consumers in devices that are small and light," says Stuart Lipoff, vice president of Applied Value Corp. (Lexington, MA), a management consulting firm. Many manufacturers are developing new products based on microdisplay technology.
Microdisplays are tiny video displays whose images can be blown up to fill a big-screen TV. Televisions built with microdisplays are expensive, but they're cheaper than plasma-based sets.
The most popular microdisplay technology on the market is Texas Instruments' DLP projection system. At the heart of the system is an optical semiconductor known as a digital micromirror device, or DMD chip. The chip contains a rectangular array of up to 1.3 million hinge-mounted microscopic mirrors. Each mirror produces a single picture element and reflects the light of a 200-watt bulb. The end result is an extremely bright, ultrasharp display that makes digital images more crisp and lifelike.
At larger screen sizes, TVs based on DLP technology are much more affordable. The technology offers superior picture quality, lower power consumption, no phosphor burn-in and a longer product lifetime. Some industry analysts believe DLP could become as ubiquitous as Dolby sound in stereos.
Intel has developed its own line of microdisplays using a rival technology called liquid crystal on silicon (LCOS), which combines a silicon chip with a liquid crystal layer. In DMDs, there is no liquid silicon layer; the reflective surface is rotated to create polarization. Unlike DMDs, the LCOS-based chips have no moving parts.
The LCOS technology sandwiches a layer of liquid crystal between a cover glass and a highly reflective, mirror-like surface patterned with pixels that sits on top of a silicon chip. These layers form a microdisplay that can be used in projection displays such as large-screen, rear-projection TVs. The image on the LCOS chip, which is less than 1-inch in diameter, is magnified by lenses several times to fill a large screen.
By increasing the transistor count on the silicon used in the LCOS microdisplay, Intel engineers claim they can integrate additional functionality to improve display performance such as brightness and image quality.
Another key aspect of the LCOS technology is that it enables the creation of multiple microdisplays with increasing levels of resolution without changing size of the microdisplay. A number of leading OEMs and component manufacturers are currently developing products based on LCOS technology.
Many experts also believe nanotechnology will play a key role in future consumer electronic devices. "Demand for large flat-panel displays will not explode until manufacturers reach a price point that is reasonable to the average consumer," says IDC's O'Connell. He believes the market is ripe for carbon nanotubes that provide a high quality image at a significantly lower price than current LCD and plasma offerings. Many manufacturers are working on the technology. For instance:
• Samsung is developing a nanotech-based 40-inch flat-panel TV that will be commercially available this year. Its screens use carbon nanotubes comprised of atoms less than 1 nanometer in diameter that are bonded together to form molecular tubes.
• Motorola is working on integrating nanotechnology into large flat-panel displays called nano emissive displays (NEDs). The technology may enable manufacturers to assemble displays of 50 inches or larger that are only 1-inch deep and exceed the image quality characteristics of LCD and plasma TVs at a much lower cost.
• DuPont Electronic Technologies (Research Triangle Park, NC) is developing thick-film materials containing carbon nanotubes for use in flat-panel displays. The materials will be used to make field emission displays (FEDs).
• The Institute of Electrical and Electronics Engineers (IEEE, New York) is developing a technical standard that will define electrical test methods for individual carbon nanotubes.
Another display technology that is quickly emerging from research labs involves organic light-emitting diodes (OLEDs). These devices are extremely flexible, allowing displays to be wrapped around numerous consumer electronic products.
Because OLEDs emit light, they consume significantly less power than LCDs, which require backlighting. The materials are brighter and easier to manufacture than devices based on liquid crystal technology.
One of the first active-matrix OLED displays on the market provides a 2.2-inch screen for a digital camera marketed by Eastman Kodak Co. (Rochester, NY). Samsung is also actively developing consumer electronics based on OLED technology.
Digital video disc (DVD) players are one of the most successful consumer electronics products of all time. Since they first debuted in 1997, the DVD market has seen unprecedented growth. Largely driven by rapidly falling component prices, DVD players have been integrated into a wide array of consumer electronic devices.
According to the CEA, DVD players are the fastest-growing new consumer technology product, with 39 percent growth representing more than 17 million units. Unlike a videocassette recorder (VCR), which has more than 100 moving parts, a DVD player uses mostly standard off-the-shelf digital components.
The average price of DVDs dropped from more than $700 in 1997 to less than $100 in 2003. Consumers are now buying twice as many DVD players as VCRs. DVD recorders burn TV shows, movies and photographs onto recordable disks.
Multipurpose DVD devices that play and record are expected to become even more popular in 2004. For instance, CEA's Shapiro says worldwide DVD recorder shipments and sales will double to 10 million units worth $3.2 billion.
"The DVD market will continue to exhibit strong growth through 2006, driven by falling costs, diverse form factors and widespread adoption of DVD recorders by consumers," explains Susan Kevorkian, a senior analyst with IDC's consumer devices and technologies program. As prices fall, DVD recording functionality will be integrated into more and more products, including DVD players and home theater systems.
More and more automakers are equipping vehicles with mobile theatre systems that feature personal LCD screens and DVD players for entertaining backseat passengers. "Consumers increasingly want to have their media with them wherever they are," notes Rob Enderle, principal analyst at the Enderle Group (San Jose, CA), a company that specializes in emerging personal technology.
Enderle claims portable media players (PMPs) will be a hot product during the second half of 2004. The devices will enable consumers to access their favorite music, movies and photos anytime and anywhere. A PMP with a 20-gigabyte hard drive can store up to 70 hours of video, play 700 hours of music and hold up to 2 million photos.
"Portable media centers, particularly when they are coupled with PC-based media centers, will change the way people acquire, use and share their multimedia experiences," claims Enderle. Several major media companies, such as EMI Group PLC (London) and Napster LLC (Los Angeles) plan to sell musical content optimized for PMP devices.