Digital Home Thoughts: The HD TV Evolution: Part 2 – The Dreaded “C-word”

And Then, Things Started to Change…
New players slowly crept in with products that were obviously not meant for the established market. Strange names: Syntax-Olevia, Maxent, Polaroid, Westinghouse, Digimate, Astar. The first splash was made by Syntax-Olevia, who, in 2004, went from zero to 6% market share on the strength of their bargain-priced 30” LCD display. Then came Westinghouse in 2005, with a product that didn’t just match the big name players, but actually beat them to the gate with features that many of the better known players are only now starting to match, but at higher prices.

How did this happen? Simple economics: demand creating supply.
As we’ve seen, 85% of the US TV market is up for grabs. That is big time money. And big time money draws attention from players big and small. And while the big name vendors have been merrily feeding the upper 15% of the market with their home theater-grade products, they’ve been ignoring technology developments that can bring HD to the unserved 85% - the folks looking for replacements for their 27” CRTs.

HDTVs cannot remain a high-end product forever. At some point they have to become a consumer product, a commodity. And the way this is happening is via contract manufacturing, the practice where companies like HTC, Wistron, Flextronics, Celestica, etc., provide their facilities and personnel to manufacture another company’s product. This is not OEMing (a simple re-labeling or tweaking of an existing product), but, rather assembling a new, exclusive product where the customer brings his or her own design, his or her own component sources, his or her own supply chain.

This, of course, requires independent sources for these components.
For HDTVs, this means display components like TI’s DLP chips and LG/Phillips, AUO, and CMO’s LCD panels that are freely available to all. It means standard interface chipsets to handle inputs via HDMI or DVI, from companies like Silicon Image. It means image processing chips from companies like Genesis, Pixelworks, HQV, Trident and the like. And yes, these sources currently exist. And much like Intel, Seagate, and NVIDIA/ATI in the PC world, these are large, well-funded, tightly focused companies determined to dominate their particular piece of component technology. All are investing heavily and if the aggregate investment happens to exceed demand… Well, the other guy will have to lower his prices…Familiar game, isn’t it? Excess component capacity leads to component commoditization which leads to product commoditization via competitive component supply-chains and contract manufacturing.