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

Contract Manufacturing
Contract manufacturing is the way Dell got into the printer and the PDA businesses. The way eMachines built a virtual corporation successful enough to buy out Gateway and go toe-to-toe in retail with HP/Compaq. The way Apple builds all their ipods and Microsoft their XBOXes. By identifying an unserved market and making deals, instead of building factories.

And this is how Syntax and Westinghouse Digital can beat a Samsung or a Matsushita to market with a new technology: by tapping early, low volume production runs from merchant component vendors. By not having to deploy world-wide and instead focusing on a smaller, more specific market. By being willing to sell their products at a lower margin than their better-known competitors. By willingly riding the wave of commoditization…

As HDTV inevitably evolves away from the domain of the enthusiast into a mainstream consumer technology, it will acquire new features and lose old ones in response to the changing market. Even as we speak, name-brand vendors are responding to the challenge of the upstarts by reengineering their products with simpler interfaces, leaner feature sets, merchant electronics instead of proprietary scalers, and easier-to-build designs that resemble the products of their no-name competitors. Eventually, a consensus will emerge between the upstarts and the high-end vendors on a baseline product, based on what consumers are actually buying, and the commoditization of HD will begin in earnest. It will take time, but consumers aren’t going to move too far out of their comfort zone and the price points have to be met. And they will; I’ve seen credible projections that tell a story familiar to any long-time PC user:

• 2006 - $999 name-brand 32” LCD displays;
• 2007 - $999 name-brand 37” LCD displays;
• 2008 - $999 name-brand 42” LCD displays.

And I’ve seen similar, though less aggressive, projections for Plasma and rear-projection displays. All vendors reluctantly agree: prices will continue to fall for the next three to five years. They have to.

There will be casualties. Some old players will find they are no longer first-tier players while others adapt and prosper. New players will emerge and use the transition to bootstrap themselves up into world-caliber players, like SONY and Panasonic did in the '60s during the transition to transistor radios or Samsung did in the '80s and '90s. Some will make a big early splash and then fade like APEX did in DVD players. But one way or another all will help the market move forward.

Right now, the TV business is in transition and nobody (not manufacturers, not broadcasters, and certainly not consumers), fully understands what a standard display will end up looking like in the Third Age of HDTV. But I suspect that when the platform is fully evolved, say five years from now, it is going to look a lot more like what the upstarts are peddling today than what the big name vendors have been selling for the past five years. That is where commoditization leads.

NEXT: CRT-based display tech is fading. What will replace it? Hint: high volume, low cost, at all sizes. It's all around us, right now.

Felix Torres is a dabbler in home entertainment electronics and a survivor of both the home computing wars of the 80's and the multimedia wars of the 90's who is currently most interested in home media networks and the North American transition away from broadcast media.