There seem to be good reasons for VIZIO to enter the PC market from a supply-chain perspective. Many of VIZIO’s panel suppliers and assemblers make both LCD TVs and PCs.  With VIZIO being a leading brand in the North American LCD TV market, it certainly has purchasing power for LCD panels, a key component of both AIO and notebook PCs.

 This announcement also makes sense from a distribution standpoint in that VIZIO is quite strong in US retail. While the brand fell from its number one spot in the North America LCD TV market in 2011, it still has a higher market share than Sony, Toshiba, LGE, Sharp, and Panasonic.   

 Finally, while it may seem strange, the PC market has higher margins than the TV market; therefore, the strategy seems to make sense for a TV-centric company to continue to diversity its portfolio. With AIO PCs growing 39% Y/Y from 2010 to 2011, there is likely room for additional players. At the same time, notebook PCs are forecast to see at least an 11% Y/Y growth rate in 2012, thanks to new form factors like ultrabooks.

There are some reasons, however, to question the strategy. VIZIO is not the first company of its kind to try to make the cross-over from TVs to PCs (and vice versa). Back in the early 2000s, Dell, HP, and other PC companies tried to parlay their flat-panel purchasing power from monitors and notebooks into TVs, without success. Maybe a better comparison would be ViewSonic, also a strong LCD purchaser, which tried to parlay its success in monitors—at the time a bigger market than LCD TVs—into both TVs and PCs; however, neither of them panned out. There are also differences; for example, ViewSonic was not a strong consumer brand.

 But ViewSonic was quite strong in small-to-medium (SMB) and other B2B markets, and had strong channel partner relationships and brand awareness. However, this presence and the supply-chain synergies were not enough to allow ViewSonic to compete in the PC market. One of the key challenges was meeting the support demands of end customers. VIZIO might indicate that it has gained experience in supporting demanding consumer needs, for example with smart TVs, but the combination of hardware, operating system, and software application support that PC users require will likely be much more difficult. 

 Digging deeper into the growth potential for the PC space also does not bode well for US-centric VIZIO. In 2011, AIO shipments in North America dropped 8%; the growth came instead from China (up 178% Y/Y) and Latin America (up 107%). Likewise, notebook PC shipments (not including tablet or mini-note PCs) were up only 3% Y/Y in North America. Of course the area of most significant growth will be tablet PCs, with a projected growth rate of 58% in North America in 2012, but VIZIOs 8″ tablet  has yet to catch the attention of consumers  the way Apple’s iPad or Amazon’s Kindle Fire have.

So it was somewhat of a surprise to see a Sony 3D “display” (not a TV or a monitor) bundled with a PlayStation 3D and glasses, offered at two different national retail chains in the US.

On the Best Buy website, a glitch in the HTML programming indicates that the product is part of a test market as opposed to a roll-out to all 1,100 US stores.

Screenshot of Listing on BestBuy.com

The same product is also being promoted by gaming retailer GameStop which has 4,400 brick-and-mortar stores, but is not well known for display-related hardware for gaming. A quick search reveals that the product is also available at Target (at least Target.com), Amazon, as well as elsewhere.

The 3D display is branded PlayStation and comes from Sony Computer Entertainment, not the VAIO or TV group. So it is difficult to draw any parallels to the Sony monitors of the past or to the Sony TVs of today. The display seems to leverage an AUO 24” FHD LED-BLU panel.

3D “monitors” are nothing new and have struggled to gain acceptance. The positioning for this one is not very clear, since it is not really a monitor and it is not really a TV, but is basically a dedicated gaming display. We are watching sell-in vs. sell-through trends to see if the “3D monitor” market takes off. If just one major retailer picks up the product for nationwide rollout—as opposed to test marketing—then sell-in to the channel might grow rapidly as retailers need to have at least “one to show and one to go.” But, as always, sell-in does not mean sell-through.

One downside of these technologies is that they can have higher power consumption. Since, traditionally, desktop monitors are driven off of AC power and have power “bricks” or built-in power supplies, the issue of power-draw has been less relevant for desktop displays than for battery operated mobile PC displays. Recent green initiatives have tried to shed light on the power consumption for desktop displays, and the use of LED backlights has helped reduce power draw, but lower power consumption is hardly a selling proposition. 

A tangible benefit of lower power monitors, however, is the ability to “cut one cord” of a desktop display or future cloud monitor. Current monitors and all-in-one PCs require at least a video cable, a power cable (and/or power brick), and an Ethernet connection. LCD monitor players have offered several solutions to cut at least one of these cables:

• Power from USB 3.0
• Power from DisplayPort
• Power from Ethernet (still requires a separate video connection)

Asus showed a USB-powered monitor at Taipei COMPUTEX, but its brightness was only 200 nits (stated power draw was 6.5W). Many LCD monitor panel roadmaps show low power monitor panels allowing for an 8W total solution, but these are mostly for low brightness (200-250 nits) TN panels from Taiwanese or Chinese panel makers that might not have as much access to advanced technologies like IPS/PLS. 

So the near-term desire to push IPS/PLS technologies to the mainstream of desktop computing could have a side effect of hindering other monitor advancements, such as power over Ethernet, that are needed for the development of consumer cloud monitors.

Monitor brands were once able to capitalize on the overlap with small TVs, particularly in the smaller home sizes in Europe. In 2009, both LGE and Samsung saw strong growth in their MFM shipments, each enjoying more than 70% Y/Y growth rate. The rules of the game changed in 2010, however. The transition from analog to digital broadcasting were mostly complete, and economic conditions were difficult in most of Europe. LGE and Samsung both saw their MFM shipment growth rates drop by more than half. The sales mix for TVs smaller than 30” size remained in the 20% range throughout 2009 and 2010, with LGE in particular enjoying a 42% Y/Y growth rate in their <30” LCD TV sales.

In 2011, it is clear that MFMs cannot simply grow from the increasingly saturated small-size TV market. Each of these companies has moved their monitor divisions into the CE groups along with smaller size TVs, making the intra-company competition even more visible. Many of LGE and Samsung’s monitor competitors had hoped that this realignment would cause each company to re-classify their MFMs and simply recognize them for what they are—smaller TVs—but most of the growth in their desktop monitor sales have been driven by MFM shipments. Thus, the monitor divisions are not willing to give up on this class of product, lest they expose the relatively flat monitor market in Europe. In China and other regions, the fact that there is still growth in the pure monitor market makes this less of an issue.

Figure 1: MFM Shipments for 2008-2010

While the desktop monitor market is far from the boom market that it once was, it is still a very large market. Even though it is mature, it is not immune to the challenges associated with high-volume, big ticket commodity purchasing. Desktop displays are caught between a rock and a hard place with the upgrade cycle from CRT to LCD essentially complete across the globe, and with only minor demand generated by multi-monitor usage, notebook/monitor bundles, and standard-to-wide upgrades. Monitors are quite necessary in the overall computing landscape and are still a big source of TFT LCD demand, but they have lost control of their own cost structure. Supply/demand dynamics for LCD TV panels have the greatest impact on LCD monitor pricing, and demand from personal computers with embedded displays (like tablets, notebooks, netbooks, and AIOs) affects both the long-term outlook for desktop displays and the near-term pricing for panels.

LCD monitor panel makers are now negotiating to raise prices to help them get back into the black. Our analysis indicates that many panel makers were operating in the red in 2H’10 and do need to increase prices in order to move back to profitability. But in a negotiating ploy that is not being received well on the buy-side, increases in panel price are being associated with recent events in Japan. This gives many brands the impression that panel makers are using a natural disaster as an excuse to raise prices without any concrete evidence that the supply chain has been negatively impacted. The price increases are coincidental to the disasters in Japan, but not related, so it is hard for many to disassociate the two.

Separate from the increase in LCD monitor panel pricing is a new variable in OEM assembly for desktop monitors and notebooks. OEM contract manufacturers are now pushing to raise their pricing to major brands, citing increases in costs associated with logistics, materials and labor. In the past, OEMs might have just bid a monitor-build project based upon fixed LOP (labor, overhead and profit) rates, even though these rates can vary greatly depending on such variables as the cost of oil for shipping. The rising cost of oil also impacts components manufactured from oil, such as plastics; according to the Quarterly LCD Monitor Cost and Price Forecast Model, the plastic components of an LCD monitor can account for 4-5% of a total monitor’s FOB price.

Perhaps the most important aspect of LOP is the increase in labor costs incurred in 2010 but not yet passed along to brands. Foxconn (Hon Hai) significantly increased worker’s wages in 2010 in some part due to negative press on their labor conditions. Most major Taiwanese OEMs followed Foxconn in increasing worker compensation in order to remain competitive and to keep workers. The result of this increase in labor cost is now likely to flow to end-markets through brands.

In rolling out a new technology (or a new spin on an older technology), proponents often try to parlay success in one category of products to other categories. In the case of 3D, many in the PC space looked to piggy-back off the hype in the TV space over the past year. While 3D monitors for vertical applications such as topographical modeling or advanced medical imaging will continue to exist, the evolution of stereoscopic 3D displays and the emerging delivery infrastructure (3D Blu-ray, 3D broadcasts from ESPN, gaming, etc) could potentially open the door to mainstream PC adoption of 3D for both desktop and mobile computers. Many monitor and PC companies showed some type of 3D solution at CES in January.

With uncertainty in timing for mainstream 3D TV in the home, the market for 3D monitors seems to have come and gone already. Sell-through of “3D Vision-ready displays” as listed by NVIDIA in the first two quarters of 2010 is less than 3,500 per quarter in all major US PC outlets combined:

• Acer GD245HQ 120 Hz LCD 
• Acer GD235HZ 120 Hz LCD
• Alienware OptX AW2310 120 Hz
• ASUS VG236H 120 Hz
• BenQ X2410
• LG W2363D 120 Hz
• LG W2363DB 120 Hz
• NEC F23W2A
• Samsung SyncMaster 2233RZ 120 Hz
• ViewSonic FuHzion VX2265wm 120 Hz
• ViewSonic FuHzion VX2268wm 120 Hz LCD display

This represents just about 0.1% of all desktop monitors shipped through both consumer and commercial channels, making the market for 3D monitors essentially a rounding error at this point.

Throughout the PC display industry, it seems that the excitement for 3D is fading. NVIDIA, which once was aggressive in working with monitor brands to develop 120 Hz desktop monitor solutions, seems to have shifted away from desktop 3D solutions to focus more on 3D in other areas. Other companies, such as iZ3D, have pulled out of producing monitors to focus on software and glasses. We have no major 3D AIO solution in any region, and it even seems that 3D for portable personal computing may also be fading.

So what’s new in the world of desktop monitors? The buzz in the supply chain has shifted from 3D displays to “smart” LCD monitors, which are ill-defined at this point, but more on that later…

This week saw two deals involving Asian manufacturers investing in venture-backed Silicon Valley companies that have been developing advanced materials applicable to displays and solar cells, among other applications. Both of these companies have been in business for a decade or more, raised tens of millions of dollars, and amassed large patent portfolios, and have also lived through the “hype cycle” surrounding the printable electronics and nanomaterials segments.

On August 9, Teijin Limited announced that it had acquired NanoGram, which has been developing silicon-based nanoparticle technology. Teijin said that the investment will facilitate its entry into the market for flexible devices developed with silicon-on-plastic technologies, which can be integrated with Teijin’s materials such as polycarbonate resin, polyester resin and bioplastics. Teijin intends to mass produce these materials for use in printable electronics, and said it would provide samples of silicon inks to makers of TFT LCDs, solar cells and other devices. Since February, 2009, Teijin had been working with NanoGram on the optimization of silicon nanoparticles and inks and to develop processing technology to sinter silicon nanoparticle film at a relatively low temperature of below 200ºC. This technology could enable the use of printing techniques to create TFT arrays on plastic or other substrates, which could be used in active matrix displays (OLED, LCD, electrophoretic) and thin-film solar cells.

On August 10, Nanosys and Samsung Electronics announced a strategic alliance and licensing arrangement for development of commercial applications of nano-architected materials for the electronics and thin film solar markets. Under the terms of the deal, Samsung Electronics will contribute funding and resources to co-develop products using Nanosys technologies, in addition to $15 million equity investment from Samsung Venture Investment Corporation. As we covered recently in The Emitter, Nanosys has developed quantum dots, nanometer-scale crystals made from semiconductor materials, which can be tuned to absorb and emit light selectively. Nanosys has been working with LG Innotek to use its material to convert blue LED light to red and green, enabling simpler and more efficient LCD backlights. The company has also pursued applications in solar cells and energy storage.

The acquisition of NanoGram could enable Teijin to integrate downstream, providing higher value to their polyester films and plastics, and to take a leadership position in the emerging area of plastic electronics. Samsung Electronics’ investment in Nanosys could have broader implications: Not only is the company a leading producer of TFT LCDs and AMOLED displays, but it has been moving into solar energy, as well as batteries (via its sister company Samsung SDI). In 2008, Samsung Electronics acquired Clairvoyante, another venture-backed IP company, which had developed the PenTile display pixel architecture; Samsung is using PenTile in its AMOLED displays and kept on key staff, which now operates as a R&D arm called Nouvoyance. It will be interesting to see how Samsung moves forward with Nanosys—and how LG reacts to its investment.

We look forward to hearing more about these deals, particularly from Jason Hartlove, Nanosys’ CEO, who will be presenting at the DisplaySearch Emerging Display Technologies Conference, August 19 in San Jose.

“This over-supply is coming so fast and so hard,” said a senior sales manager at a TFT LCD company. Apparently, panel price reductions are more severe than anybody expected. Both the buy side (brands, ODMs and OEMs) and the sell side (panel makers) seem to be panicking about panel prices and losing confidence in market stability. Everyone is expecting panel prices to crash to panel makers’ cash cost very soon—maybe within two to three months—before we see a possibility for stability.

In August deals, prices are down 5-7% M/M from July for LCD monitor panels, 3-4% M/M for notebook panels and 4-5% M/M for LCD TV panels. Prices are dropping faster than the 3-4% M/M DisplaySearch predicted in the Monthly Large-Area LCD and PDP Pricing Report.

There are many factors triggering the over-supply this time: surplus inventories accumulated, the desire of brands to improve their margins, weak panel buying in China, full capacity utilization in 1H’10 due to over-optimism, Korean makers’ aggressive pricing tactics versus Taiwanese, and the brands’ need for lower panel prices so they can promote products for the 2010 end of year hot season.

In the history of the TFT LCD business, the longest downturn lasted 10 months. Although DisplaySearch forecasts that panel prices will continue to fall until Q1’11, the bottoming out of panel prices may come even earlier. And if prices hit bottom earlier, they will rebound earlier, especially when panel makers reduce utilization and stop producing because panel prices are approaching or falling below cash cost. The following is a possible scenario:

1. Inventory control and pushing panel prices down are the top two missions for panel buyers.
2. Panel makers panic about demand vanishing and prices crashing; panel buyers aggressively ask for rebates, price protection or market development funds.
3. Prices fall faster than anyone has forecast.
4. Capacity utilization drops faster than anyone has forecast because the whole supply chain is nervous.
5. Due to lowered panel prices, brands launch aggressive price cuts in the end market to stimulate demand; therefore end-market demand and sell-through are strong in Q4’10, which gives the supply chain more confidence.
6. Reduced panel supply + better sell-through = faster bottom out. This happens in Q4’10.
7. In early Q1’11, the market atmosphere improves, as utilization from Q4’10 remains low and panel prices are at historically low levels too. After two quarters of adjustment, brand inventories are finally healthy or even too low. Panels start to pile up downstream. At that point, the market will probably turn positive.

We are currently evaluating the possibility of this scenario, and will adjust our forecasts if it becomes more likely. Stay tuned.

Recent media reports about legal rulings on duty suspension for 16:9 desktop displays in Europe have implied that the decision covers LCD panels. However, LCD panels imported to Europe are duty free (a previous 5% import tariff on LCD panels has been suspended). The rulings have nothing to do with panels, only LCD monitors. The confusion may arise from the fact that the media in Europe often uses the word ‘panel’ to describe TVs and monitors.

As reported by Meko, on April 28, Dutch customs classified a range of wide format monitors up to 27″ with features like DVI-D with HDCP and DisplayPort as being usable as data monitors, meaning that the would not be subject to any duty. The lifting of the import tariff now applies to 22″W and larger LCD monitors (not 19″W and above as reported in the media) with DVI functionality; it is likely that this applies to LCD monitors with HDMI functionality as well.

This case has a long history, and is connected to a case lodged by Kamino International Logistics, when an EU court ruled that customs could not automatically apply a 14% tariff on such screens purely on the grounds that they could be used as a TV (previously, 14% tariff was applied regardless of the intended use). The EU court ruled that if the screen is to be used as a monitor, then 0% tariff will be applied; however, if it is to be used as a monitor TV or a TV, then the 14% tariff will continue to be applied. Since the Kamino case began in 2008, the EU has relaxed its stance towards the tariff, and now allows individual governments to make their own decisions. (This is different from media reports that the tariff will be lifted before the final outcome of the ruling).

The EU is under pressure from a forthcoming decision in a case brought before the WTO by Taiwan. Should Taiwan win the suit, then the EU will likely improve the related law, and Taiwan or other members of the WTO may request compensation. A related issue is that the EU is in the process of ratifying a free trade agreement with Korea, which would put Taiwanese companies at significant disadvantage unless the duty issue is resolved.

The underlying issue is that the boundary between small TVs and monitors is increasingly blurred. The problems started with the narrowing of the gap between TV and monitor functionality, which made it possible to watch TV by using a monitor and DVB-T set top box. Eventually the duty definition of a TV was simply defined as having a 16:9 aspect ratio. However, as this was happening in 2008, panel makers forced a switch to 16:9 for monitors, which caused confusion between TVs and monitors. With connected TVs acquiring network connections and advanced processors, they will increasingly overlap with all-in-one PC functionality. The duty definition problem can be expected to return!

Today SMART Technologies announced the acquisition of NextWindow. Canada-based SMART is a leading provider of interactive whiteboards, which are mainly used for education/training applications. It has both resistive and optical imaging touch technologies.

New Zealand-based NextWindow (Next Holdings Limited) was founded in 2001, and has been a leading designer and manufacturer of optical imaging touch technology for integration into all-in-one computers, desktop monitors and large-format screens.

Optical imaging touch screen technology uses image sensors to track the touch location, and is cost-effective because it only requires two cameras and an IR light source. The cost advantage scales with panel sizes. The larger the panel is, the more cost-effective, but the reverse is also true. Optical imaging also has the advantage of 100% transmissivity, since it doesn’t require any overlay on the display. (One piece of glass can be used for good durability.)

In April 2009, SMART filed a patent infringement lawsuit against NextWindow to enforce its DViT (Digital Vision Touch) technology patent portfolio. NextWindow has defended itself; recently, I spoke with NextWindow’s CEO Al Monro, who indicated that NextWindow has independently developed their touch technology. NextWindow has been granted five patents and has over 20 patents pending.

Although both companies are using optical imaging touch technology, their target markets are different. As SMART’s CEO, Nancy Knowlton indicated that NextWindow’s “business model, patent portfolio and focus on the consumer market make it an attractive acquisition for us.”

The touch screen industry continues to undergo rapid change. What does this acquisition mean for other touch screen suppliers, particularly optical imaging touch suppliers? Where is the industry headed? These and other questions will be discussed and analyzed at the SID/DisplaySearch will hold the SID DisplaySearch Business Conference on Monday, May 24 in Seattle, at SID Display Week.