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Philips Electronics (Eindhoven, The Netherlands) (www.philips.com)
has decided to pull out of the LCOS-RPTV business. The announcement
came October 5, stating that the company has decided to
shut down its LCOS panel foundry and stop production on
LCOS engines and RPTVs. Two hundred jobs will be affected
in Brussels, Belgium; Boeblingen, Germany; Briarcliff Manor,
New York; and Vienna, Austria, as well as various business
and sales support operations.
The official word for the shift is that Philips feels that
microdisplays are now moving toward commodity status, and
for the company to compete, it would have to make additional
investments in LCOS. In addition, the company stated that
its market share of the RPTV market was too small, and it
lacked the scale to bring these products to a more mature
level.
Reportedly, the company has invested about $200M in LCOS
to date. Apparently, it judged the rewards not worth further
investment, so now, it will shut down its LCOS operations
by November 19.
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But behind this decision were more troublesome issues. For example,
sources say that yields on the large, 1.18-inch microdisplay have
been low for some time, undoubtedly leading to an unprofitable
manufacturing operation. But yields are reported to have "jumped
double digits" in the last few weeks due to improvements
in the silicon backplane. Unfortunately, the advancements came
too late for Philips and other investors to stop from pulling
the plug.
In addition, the RPTV set performance was also not as good as
the company wanted, with some remaining artifacts and image quality
issues. We have noted before that these sets offered good, but
not top-level, performance. Further, the sets were apparently
not selling well at retail stores either, despite being offered
by major chains like Bose, Magnolia Hi-Fi, Good Guys, PC Richards,
BrandsMart and J&R Music & Computer.
Compounding matters was the need to offer a 1080p solution. The
company's current RPTVs offer a 720p solution, and Philips was
developing a 1080p chip, but this solution faced similar TV performance
issues and a more challenging yield environment.
Philips says it will continue to build 720p RPTVs until inventory
stocks are depleted. It also promises to maintain support and
spare parts for the sets going forward, but will not invest in
any new internal LCOS development efforts.
Already, the repercussions are being felt. Philips' partner in
LCOS panel production, Hana Microdisplay Technologies, Inc. (Lamphrun,
Thailand), will now "substantially reduce the size of its
operation and restructure its business model accordingly,"
said the company in a filing to the Stock Exchange of Thailand.
While contract talks continue, Hana estimates it may have to post
an exceptional charge not exceeding $5M for related machinery,
materials and business reduction costs following the Philips decision.
What surprises us is that Philips kept marching down the large,
single-panel solution path even though things were not working
out. Why not take a look at three-panel or other single-panel
approaches that might be more successful before throwing in the
towel? Why didn't it have a VAN mode solution for high contrast
instead of sticking with organic alignment layers and the potential
lifetime and low contrast problems that entails?
Despite its exit from its commitment to LCOS, Philips did say
it would like to remain in the MD-RPTV market, so it will now
consider alternative microdisplay solutions, perhaps even DLP.
Philips also has the exclusive rights to multi-color primary RPTVs
in a deal it has with Genoa Color Technologies. In this month's
Projection Monthly (October 2004, page 53), we report on plans
to switch all of the LCOS-RPTV line over to multi-primary sets
next year, which we still think is a good idea. Apparently, Philips
will continue to support development of this technology, but not
with Philips-supplied LCOS panels. The door is open to consider
other microdisplay technologies and architectures, so stay tuned,
says Philips.
Philips' withdrawal from the LCOS-RPTV arena follows its exit
from LCD projector manufacture earlier in the year. Here again,
the company felt it did not have the market scale to compete effectively
in a crowded field.
This move possibly puts the future of Philips' Briarcliff Manor
operations in question too. With operations for the LCOS team
closing down before year end, only a few R&D and corporate
activities remain. With perhaps less than 200 people left occupying
a facility that can hold 400, the possibility of selling the nearly
100-acre campus, which lies in one of Westchester County's most
affluent communities, may be very tempting.
By Chris Chinnock and Aldo G. Cugnini
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