News

15/9/2003

Report predicts shakeout in microdisplay industry

Market research firms Insight Media and McLaughlin Consulting Group have released the sixth edition of their popular Microdisplay Forecast Report. This year's edition comes at an exciting yet troubling time for the microdisplay industry as a perfect storm of competitive and market forces could precipitate a major shakeout of the microdisplay industry over the next two years.

Microdisplays are tiny flat-panel displays that power business front projectors, rear-projection TVs, home-theater projectors and viewfinders in digital camcorders and cameras.

The continuing worldwide business recession and the cutthroat competition among display technologies, and within the microdisplay arena itself, are combining to put continued and sustained pressure on microdisplay pricing, cramping incumbent suppliers and making market entry even more difficult for newcomers.

And, at the finished product level, prices are coming down faster than manufacturers can reduce costs. As profitability shrinks, manufacturers must increase unit shipments to avoid slipping into the red. There are also changing channel dynamics and margin pressures that will precipitate realignments. "Other industries like DRAM, disk drives and even the PC industry have faced similar pressures in the past, which has resulted in industry consolidation," stated Chuck McLaughlin, president of McLaughlin Consulting Group. "Similar forces are now at work in the microdisplay industry, which may become mature before it has barely become an adolescent industry."

Such forces have led to the "conservative" forecast detailed in the report. But other factors could play out too, which have resulted in the "optimistic" forecast also described in the report.

"Many microdisplay industry participants are counting on being saved by projection TV," observed Chris Chinnock, senior analyst at Insight Media. "Clearly, we are in the early stages of a revolution in big-screen display technology with both plasma and LCD big screens offering consumers a flat-panel option. And the fact is that plasma and LCD flat TVs have the momentum at this time. Microdisplay-based RPTVs need to overcome this and displace CRT-RPTVs - and it is not clear that the pieces are in place to do this. Microdisplay-based RPTVs need to create significant market share in 2004 before the onslaught of LCD-TVs begins in 2005 or else the category may languish."

The optimistic forecast assumes that microdisplay projection TV is competitive and that branders and integrators successfully build consumer enthusiasm. Sales of projection TV are forecasted to grow from the current level of 4 million units annually to 11 million in 2007 (8 million RPTV plus 3 million front consumer projectors). Further, microdisplay technology is expected to rapidly displace CRT technology in RPTVs (65 percent share by 2007).

In the optimistic case, sales of all big-screen technologies ramp up dramatically from 16 million in 2003 to 40 million in 2007. Everyone wins in the battle of displacing CRT direct-view TVs from the high end of the market, providing huge market growth overall.

A more conservative assessment of the market is that total growth for projection TV will be moderated by the onslaught of flat-panel big screens and that total RPTV unit sales will plateau at 5.5 million units in 2007. In this more competitive market, microdisplay-based RPTV sets find it more difficult to displace CRT technology due to microdisplay cost and lifetime issues, resulting in microdisplay technology capturing only 40 percent of the smaller market in 2007. Add to that a more conservative 1.5 million front home projection forecast and the total microdisplay potential shrinks to 7 million units in the conservative case.

In the business-presentation segment, revenue growth has already stalled. Major IT players like HP and Dell are having an impact on prices and margins, forcing pro-AV dealers to seek other services and solutions to survive. If the industry can sell its way out of the current revenue doldrums, based on sustained price reductions, unit growth of 26 percent could result. Then systems will increase from 1.7 million in 2002 to 5.5 million in 2007. Revenue will grow to $5.75 billion, just a bit ahead of current levels.

In the conservative case, price reductions drive sales to only 4.5 million units in 2007 and as a result, system revenues decrease 3 percent to $4.7 billion.

In near-to-eye microdisplays, there is only one real application today: electronic viewfinders (EVF) as other potential big applications continue to be elusive. Again, a conservative and optimistic forecast takes into account the various factors that could drive growth in embedded viewfinders and headsets.

The new forecast looks at the upside and downside views and identifies the key issues in each market. It then integrates those scenarios into a comprehensive look at the competitiveness of the array of microdisplay technologies and suppliers and provides a forecast of the hot TV industry as well as the other established microdisplay industries in business projection, embedded viewfinders and head-mounted display systems.

The nearly 400-page report includes comprehensive profiles on more than 30 microdisplay development/production companies including market leaders like Texas Instruments, Sony, Seiko Epson, JVC, Hitachi, Three-Five(r) and Philips. These profiles include an assessment of the company's strengths, weaknesses and its competitive position in the marketplace. Also included are customer information, product development road maps, display specs and current/planned production rates.

www.insightmedia.info