IFA’s first press day saw the official launch of the 50th IFA and press events from Panasonic and Sony.  As usual, they approached their communication in their own styles: Sony provided World Cup goals, Howard Stringer and a live performance by Lang Lang; Panasonic was heavier on product and technology.

However, underneath they had broadly similar messages. Both spent a significant part of the presentation in 3D: Panasonic had 54 3D plasma sets, with chairs clustered round each of them, while Sony had a large 3D LED public display screen and passive glasses.

It was always going to be a difficult event for either of them—the message this year is one of incremental development of 3D with more TV models, more Blu-ray players, and the arrival of 3D camcorders and (finally) 3D digital cameras.

While to me the 3D sports events are still not particularly convincing, the 3D gaming sequences shown by both Panasonic and Sony were breathtaking in their realism and added hugely to a sense of presence and immersion.  Although 3D in TV remains an open question (dogged by lack of content), if 3D gaming is anything like as good as the demonstrations, it is definitely here to stay.

The surprise announcement that Trident intends to license its motion detection patents raises questions on the company’s intentions.

These patents are fundamental to the operation of many 120 Hz or 240 Hz frame rate conversion (FRC) systems in the market, although there are alternatives:  Zoran use a wavelet computation and Broadcom appear to use a pixel-based approach to identify moving objects.  Mediatek already uses Trident’s fundamental patents (a legacy from the days when Philips owned the patents) and apparently pays a license.

Trident’s comments in its interview with EE Times suggest that it has strong suspicions that some of its patents are being infringed—and is therefore offering license terms is a first salvo in what is likely to be a longer battle.  Its targets are apparently in Taiwan, but one company is in Silicon Valley.  It has always been a subject of conjecture how MStar’s FRC algorithm works, so it will be interesting if the suspects get named.

It makes sense for Trident to take action to fortify its commanding position in FRC, especially as it is an essential component of 3D sets, and it fortunately avoids Trident locking horns with any of its potential customers.   Trident may also be under pressure from its customers to allow a second supplier—understandable this year when IC foundry capacity is in shortage.  The concern is whether Trident mutates into (in its CTO’s words) a ‘patent troll,’ which would serve nobody well.

Apple announced an update to its Apple TV product, which has been referred to as one of Steve Jobs’s hobbies. It will now be 1/4 the size of the previous generation, and 1/3 the price at $99. With no local storage, everything is streamed to the device via wired Ethernet or built-in 802.11n Wi-Fi. It has the requisite HDMI output along with optical audio and USB, and since the power supply is integrated, there’s no power brick either.

In the past, Apple TV was a pretty slick device that allowed users to seamlessly connect their TVs to iTunes content. And that was the fatal flaw that kept Apple TV from becoming a success: limited access to new content. iTunes has always had new movies, TV shows and music available for purchase, but the variety of content and the lack of true streaming meant significant limitations placed on Apple TV’s utility.

So will I buy a new Apple TV for $99? Yes. Probably two of them: one for the living room and one for the bedroom. Here’s why.

I like the interface a lot and buy all of my music through iTunes, but not my TV shows or movies. In fact, I prefer to rent my movies and DVR my TV shows since I refuse to pay for something I can watch for free on broadcast TV. In the past Apple has charged $2 or more to buy these TV shows, which was far too much. But I hate paying nearly $100 a month to my pay-TV provider to watch a few dozen shows on a handful of channels. I’d much rather just pay for access to the channels I watch frequently or just the shows, but at the $0.99 per show Jobs just announced, it’s still too pricey, especially for content from the major networks. But the battle for the living room between traditional media/CE companies and new age internet/IT companies is just heating up.

I have been looking for the utopia of a single, discreet device that aggregates all of my content from every device in the house so that I can watch it on my HDTV, the best screen in the home. All previous devices I have tried in the past, from HP’s Entertainment Notebook PC to Sony’s latest Blu-ray player with BRAVIA internet video, have been disappointing in some way, usually in ease of use, set-up and seamless integration. The biggest problem has been accessing my personal content. The full-fledged PC approach resulted in poor performance and limited ability to navigate content easily. The networked Blu-ray player from Sony worked brilliantly for Netflix and their other content partners, but the DLNA access to my home server and PCs has been a problem. DLNA was a nightmare to set up and use in the best of circumstances, and completely unusable in the worst.

The key for me is that it has to work right away, with limited and easy set up, and provide access to the content I use most frequently. I am technology-savvy, but I have little patience for CE devices that are hard to use. With the new iOS 4.2 coming in November for the iPhone (we own two) and iPad (which I do not own, yet) and the built-in AirPlay feature, the Apple TV will be able to wirelessly stream movies, photos and videos from the iPhones, along with the same content from my PC.

I greatly appreciate the seamless way Apple integrates their devices and services; while they cost a little more, my experience has shown me that there is value to this. I buy all of my music through iTunes, and stream movies from Netflix (which the Apple TV will support), but have lacked the ability to easily watch my own photos and videos, let alone stream music to the living room. Apple TV seems like it will do all of this, and use an excellent, beautiful user interface I am familiar with. I may even start buying some movies from iTunes if the release window is better than Netflix currently is for streaming. And I’ve still got a Blu-ray player for the absolute latest movie releases on DVD.

Now if I can just find a way to cut the cable altogether and not miss out on time-shifted free broadcast shows and cable network shows. Will Google TV devices from Logitech and Sony be competitive in both price and performance? Few details have emerged. Can a coalition of companies be as seamless and effective as a single company? I hope the content partnerships start getting sorted out soon and that the cable and satellite companies find a way to work harmoniously in the coming digital TV revolution. The alternative is ugly; just look at the pain the music industry has endured for the past decade.

On August 20 2010 AUO and Wistron announced the establishment of a joint venture for  TFT LCD panel module manufacturing in Zhongshan, China. Total investment in the JV, tentatively named Zhongshan BriVision Optronics Corporation, is expected to be limited to $10 million; AUO will own 51% and Wistron will hold 49%.

This is the latest in a series of tie-ups between TV set makers and panel makers, which have the goal of better supply-chain integration in LCD module and LCD TV manufacturing. For TV makers, integration of LCM manufacturing with TV production can increase the value they can add, secure stable panel supply, and enhance cost competitiveness through qualified supply capability and optimized logistics. A strategic partnership with panel makers for stable cell supply and panel technology is essential for TV OEM makers. The same is true for LCD panel makers; such partnerships can diversify their customer base and provide in-time and value-added services for their customers, particularly with strategic TV brands. Normally, panel makers take the majority ownership in these partnerships, given the investment and value they provide.

As reported in the DisplaySearch Quarterly LCD TV Value Chain Report, Wistron is the #7 LCD TV OEM maker worldwide in Q1’10, with a manufacturing presence in China, Mexico and the Czech Republic. Wistron has a long and well-established TV OEM business with Sony, which has more than 80% of its production. Wistron also makes sets for Toshiba and Best Buy. As we reported recently, Sony may outsource 80% of LCD TV assembly in 2011. Following its acquisition of Sony’s factories in 2010, Foxconn passed Wistron as the leading supplier to Sony; with the creation of Chimei Innolux as part of the Hon Hai Group, Foxconn can now utilize internal panel sources for their LCD TV production. This joint venture is one way for Wistron to compete for business from Sony, as well as other global brands.

However, Wistron may find that they do not have exclusive access, as AUO has formed several LCM manufacturing companies, including Briview (an affiliate of AUO), as well as joint ventures with TPV, Chang Hong, and Haier. The motivation for AUO to ally with Wistron could be to win more Sony business. In Q1’10, 8% of AUO’s TV panels were shipped for Sony. Most TV brands control panel procurement. But in 2010 Sony began to let some TV OEM makers source panels. This shift in power could change supply relationships, and as a result, a Korean panel maker that is eager to rebuild its business with Sony has shown interest in working with Wistron in the LCD module partnership.

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.

On May 27, 2010 Acer and Founder announced that they had signed an agreement to work together in the China PC market. On August 4, the companies announced that they have deepened their cooperation. These moves are clearly intended to help Acer achieve its goal to become the #3 PC brand in China, with a target revenue of $2.5 billion in 2011. However, complicated legal procedures in China and prevailing patriotic sentiment of Chinese people could raise suspicions and misunderstandings about this deal.

According to the statement, Acer will be responsible for the operation of most of the Founder-branded PC business, and Founder will act as service provider for Acer’s after-sales network, so Acer can utilize Founder’s channel networks in the tier-4 to tier-6 cities, rural markets, and commercial market segments. Ideally, Founder will benefit from Acer’s large volume manufacturing and its ability to negotiate with TFT LCD makers. Under the agreement, Founder will continue to handle state-owned enterprises and government business in China.

Details of this deal have not yet been disclosed to the public, but an unconfirmed report indicated that Acer will license the Founder brand in China for seven years for a fee of CNY 6.9B ($9.44 million) However, Acer has denied this.

Why this deal is so important to Acer and Founder?

• The complexity of this agreement is greater than the typical M&A activities Acer has been conducting over the past three years, as it involves two corporate systems with different cultures and operational models.
• The Chinese government may conditionally approve this deal based on its policy to protect domestic brands. The low-profile consensus reached between Acer and Founder on this deal is believed to be related to the Chinese government approach, which avoids any potential threats to Lenovo’s #1 position in China and prevents potential resentment from Lenovo, which has strong connections to the Chinese government and the Chinese people.
• Acer has acquired brands including Gateway, eMachines, Packard Bell and ETEN recently, and has been using a multi-brand strategy to boost share in the US and Europe, enabling the company to become #2 in the worldwide notebook PC market, trailing only HP. However, Acer’s market position in China has lagged Lenovo, HP and Dell. The quickest way for Acer to gain share in China is by working with a domestic player to leverage its local brand image and strong distribution network.
• It’s also a way for Founder to transform itself from a PC maker to an value-added service provider. Otherwise, it is difficult for a local brand like Founder to survive in such a competitive PC market, where cost and volume is everything.

Even though it’s a win-win strategy for both Acer and Founder, there will still be challenges. In the short term, the two companies need to merge corporate cultures and synchronize approaches to existing channel customers. According to the announcement, parts of Founder’s organization will join Acer Group, which could be a challenge to Acer, whose sales and management team in China is only around 300 people. Managing a big team transferred from Founder will test Acer’s abilities as a top-tier PC company. During the transition, it will be important for Acer and Founder to secure current customers and synchronize their distribution network, to prevent competitors’ invasion and personnel losses.

According to PDP panel module shipment data in the Global TV Shipment and Forecast Report, PDP module shipments had 42% and 49% Y/Y growth in Q1’10 and Q2’10, respectively. Samsung SDI and LGE are squeezing more from their capacity, and COC is expected to ship its first 42” PDP modules from its own line from Q3’10. Of course Panasonic always leads PDP module volume, for both TVs and public displays.

During its Q2’10 investors meeting, Samsung SDI announced that it expects PDP module shipments to reach 18.2 million in 2010. DisplaySearch estimated PDP module shipments of 14.8 million in 2009, so SDI’s forecast would mean 27% Y/Y growth. The rapid growth in demand is supported by figures from The NPD Group’s US retail weekly tracking service, which shows year-to-date PDP TV sales in July more than 70% higher than the same period in 2009, compared to flat sales for LCD TV.

Why is PDP growing so rapidly? And is the growth sustainable, or just temporary? Some believe that 3D brings new opportunities specifically to PDP as it seems to have some distinct advantages, rebalancing the relative advantages of the two technologies. However, 3D TV is not yet a major driver for PDP module shipments. For example, LGE just launched its first 3D PDP TV this week, but its PDP TV shipments have increased significantly from the first quarter of this year. It is possible that there will be an impact in 2H’10.

Rather, we can identify four key elements of PDP’s remarkable growth against LCD in the TV market:

• Inflated LED-backlit LCD panel pricing—A limited supply of LEDs has kept LED-backlit panel pricing from falling, meaning that LCD TV retail prices have not fallen as quickly as last year, even during promotion periods, for example China’s golden weeks and the World Cup.
• LED supply and costs—The LCD industry may have scored an ‘own goal’ by launching LED-backlit sets before the supply chain was prepared. CCFL has been devalued by the new technology, and at the same time LED sets have been perceived by many consumers as too pricey.
• Similar design to LED-backlit LCD TV—To most consumers, it’s not easy to differentiate between LCD and PDP TV, and with the remaining proponents of PDP also in the LCD business, any negative image of PDP TV has substantially disappeared.
• Feature sensitivity—LED-backlit LCD TV sets are equipped with more valuable features, but large CCFL LCD TVs do not have as strong a value proposition. Consumers looking for value find a large (42” or 50”) PDP TV with similar features to smaller LCD TVs.

What if LED-backlit LCD TV prices fall to what we think is in line with consumers’ expectations? Would PDP TV be able to compete? It will be very difficult. Of course the LED supply shortage may prevent a sharp drop in LED-backlit LCD TV street prices by the end of this year, but panel prices will likely begin falling this month. When such cuts are reflected in retail set prices, we will have a real test of the durability of the PDP TV sales surge.

Applied Materials has more experience depositing high quality silicon thin films on large glass substrates than any other company in the world, based on its PECVD tools for the production of TFT LCDs. So it seemed to offer a credible solution to the desire to add solar cell capacity despite the silicon shortage over the past few years: the SunFab™ turn-key Thin Film Si (TF Si) line, which could produce the biggest solar modules in the world. But Applied Materials struggled to sign up customers, and on July 21, announced it was discontinuing sales of its SunFab lines to new customers.

Certainly, the rapid drop in c-Si module prices in the past two years significantly eroded the competitiveness of TF Si, but there probably were other contributing factors as well:

• Regardless of module costs, the competitiveness of TF Si at less than 10% conversion efficiency is severely compromised by high Balance of Systems (BOS) costs. And although some customers were using a tandem junction process, module efficiencies were probably 8.5% at best. Movement up the efficiency curve was too slow to keep up with rapidly changing end market dynamics.
• Typically, AMAT LCD CVD users are able to start up a new fab in 4-7 months, but according to the Quarterly PV Cell Capacity Database & Trends Report, the fastest SunFab early adopter to reach mass production was 17 months. And by that time, it was already into the 2H’08. If the product had been more mature when sales began, there may have been room to both start generating cash flow and work costs down.
• The most successful solar cell makers develop their technology in conjunction with their product portfolio and target markets. They work with equipment makers to help them fulfill their roadmap. That is one way they can differentiate their business. Most of the SunFab customers were not top-tier solar cell manufacturers. AMAT was driving the roadmap on technology, and customers were left with little flexibility in their business strategy as the market has shifted.

Are these issues an indictment for the rest of thin TF Si? The continuous price declines in c-Si modules are surely a challenge for all TF Si producers. But we still believe some producers have viable high efficiency multi-junction TF Si roadmaps that may keep them competitive. Oerlikon Solar continues to present impressive $0.70/W costs for turn-key lines that will ship by the end of 2010. And all TF Si companies continue to emphasize the potential for higher energy output in hot and low light operating environments; potentially making the technology more productive than c-Si in some applications.

Applied is exiting the turn-key business, but still has strong ambitions to make its Environmental Solutions division, including solar, a pillar of its future growth strategy. The company will continue to offer its c-Si equipment as well as individual TF tools and support existing customers. The top 20 solar cell manufacturers don’t typically buy off the shelf turn-key solutions anyway and we see a growing trend for all makers to pick and choose individual tools for their specific needs. Although the scale may be smaller compared to big turn-key orders, AMAT is expected to do just fine selling individual PV process tools, like its industry leading Baccini screen-printers, which are seeing renewed market demand within emerging c-Si high-efficiency and selective emitter concepts for back-end metallization pattern alignment.

On June 29, Solarbuzz revised its 2010 demand forecast up nearly 40% to 15.2 GW. The worldwide PV market is now expected to more than double in size this year! The solar industry is in the midst of yet another tremendous up cycle. Excitement about end market demand was clearly evident on the floor of PVJapan 2010, held in Yokohama from June 30 through July 2. But optimistic PV supply chain companies are anything but complacent.

With severe competition in all segments, PVJapan exhibitors were eagerly touting the improvements they are continuously making to their products. Solar cell manufacturing equipment is one area where makers continue to dramatically increase productivity. Crystalline silicon diffusion furnaces and turn-key a-Si thin film fabs are two examples from PVJapan that illustrated this trend.

Koyo Thermo Systems introduced its new in-line diffusion furnace that offers substantially increased productivity over its batch tool. Having worked closely with Sharp for many years, Koyo has more than 30 years of experience in manufacturing diffusion furnaces. The diffusion furnace market is cycling around $200 million per year, and with its new in-line high productivity tool, Koyo hopes to increase its share, particularly in the high capacity growth regions of Taiwan and China.

Even though silicon prices haven fallen significantly in the past two years and interest in new a-Si fabs has waned, Tokyo Electron (TEL)—Oerlikon Solar’s exclusive sales representative in parts of Asia—provided a very upbeat outlook for the future prospects of thin film Si during the Manufacturing Equipment Technical Seminar.

TEL’s optimism is based on their belief that a-Si TF offers more energy yield than other PV cell technologies in some applications. Oerlikon has also increased throughput by 50%, reduced module costs by 50% and doubled their capacity output in just the past two years.

 As exhibited at PVJapan, equipment makers are constantly pushing the productivity envelope to make continuous and substantial improvements. This increases competitiveness, but at the same time, it means that solar cell manufacturers are able to produce more with fewer machines and smaller investments, which is one important reason why solar module costs and prices continue to fall. Thankfully, lower prices make PV generated electricity cheaper and that pushes demand. Greater demand will require more and more manufacturing facilities to be built.