Consolidation Continues… and a New Leader in TV SoCs

By Paul Gray – Director, European TV Research, DisplaySearch

The announcement yesterday that NXP would merge its TV and STB business into Trident is another example of the winds of consolidation blowing through the TV IC business.

The way I read the deal, NXP has effectively gifted the business to Trident, and in return is looking to take a substantial share in any upside. It is a way to contract-out the restructuring of the TV business. The fact that NXP will own 60% of Trident, but will not consolidate it, suggests that it is being structured as a way to prevent any further cash bleed from NXP, which continues to stagger under the debts created at its separation from Philips.

Trident has again pulled off a clever trick-acquisition without spending cash, just like its buyout of the Micronas TV business. As a result, the company now has control of all the highest peaks in video performance in frame rate conversion, and also the leading performance-driven set makers (with the exception of Panasonic, who source internally).

The logic is clear. With a TV SoC costing upwards of $50 million, the upper-end of the market cannot be divided between too many players or there is too little return. There are two distinct tribes emerging: performance players such as Broadcom, ST and Trident, and value players like Zoran, Mediatek and MStar.

This last quarter, after almost a year of challenging, we saw MStar take the crown from Mediatek in TV SoCs. The company gained 19% share in the market in Q2, according to the Q3’09 Quarterly TV Electronics Report. This attests to the power of the right customer engagements, as MStar (like Mediatek and others before it) used Samsung’s huge volume to propel it to leadership. Increasingly, LGE is becoming a second kingmaker in the IC business; indeed Samsung and LGE now account for more than half the sets sold in Europe, according to the Q3’09 Quarterly Global TV Shipment and Forecast Report.

In the performance-led trio, each has different strengths: Trident in high-end video processing, ST in IPTV and content delivery, and Broadcom in networking. All have STB groups, so they understand the content side as well as video processing. However, the oligopoly that is emerging should also calm the hyper-competition that has scarred recent years.

http://www.bizwitz.com David Barnes

Great overview of market conditions, Paul.

I couldn’t help but wonder if the differences in STB maker expertise is the result of nurture or nature. For example, Europe appears to lead the movement toward IPTV and ST is strong in that technology. Is Europe leading the charge because ST has the know how or is ST creating IP because Europe is leading the charge? In the USA, consumers seem more interested in wireless networks with music or video servers. Broadcom leads in such know how… I’m interested in hearing your take on this.

Also, what about the Toshiba “Cell TV”? That seems to be a combo STB/TV play.
http://www.displaysearch.com Paul Gray

ST were the first to get an MPEG-4 solution accepted into the market, and the 7100 series decoders were the de-facto standard for a couple of years. This certainly gave them a head start. Undoubtedly their French history and IPTV being driven in its early days by France helped. Europe’s low penetration (and acceptance) of Pay-TV services and fiercely competitive telecoms market meant it was a cradle for IPTV.
Broadcom have a strong track record in driving the formation of standards, in particular in the US cable oligopoly, and for example in their cooperation with Apple to bring 802.11g to market.

The big driver in Europe is for catch-up and bonus services that supplement free-to-air broadcasting. Roughly half of European households rely on free-to-air, and are pay-TV refusers. For FTA broadcasters, these services should allow them to revalue their business model which is threatened by Internet advertising. It gets closer to a “pay per click”or “pay per eyeball” model for TV ads. Ad insertion and audience profiling become possible.

Regionally the difference in home construction and lower PC penetration accounts for a lot of the difference in wireless network penetration. Wireless appears generally to work better in the USA: homes are of wood / plasterboard construction inside, and generally housing densities are lower. By contrast, European homes tend to be of brick and concrete even for interior walls and floors. For example, in my office I can receive six wireless networks from my neighbours; but I struggle to get coverage from my wireless hub throughout my home.

Consumer behaviour is also important – Europeans are generally considered later adopters of technology, although again I suspect it’s an environmental factor. Consumer mobile telephony was led by Europe, likewise Flat panel TV penetration, while IT has tended to lag a little.

As for the Cell-TV, I saw some photos from CEATEC of the Cell PCB – with liquid cooling and pipes to a giant heatsink! Intel are betting on powerful processors in TVs, but having the same processor as a Blade server feels (to me) excessive for mass-market price points.
While being able to gobble up lots of video streams is in interesting idea, the growth of video services is for ‘on-demand’. There is no need to record lots of programming if you have a catch-up service from the broadcaster. The decline in the PC TV card market is a direct consequence of Internet video.