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Is the sky really falling? Chips for the TV market

Posted: 02.21.08
ST Microelectronics just completed the Genesis Microchip acquisition, Trident’s stock has dropped like a rock, and Pixelworks still can’t get itself sold. Who could have predicted all this three years ago? Actually, we did. Jon Peddie Research published the ATV Report in 2005 and it addressed the difficulty of a video processor company being successful in the new integrated digital processor market. So, I guess the question now is, what have you done lately? What does the future hold? It’s not as bad as many people may think. Most people seem to think that: 1. Integration is only game in town. 2. The worldwide analog to digital rollover will be like the US and therefore the same assumptions are used for the rest of the world. 3. ASP’s are dropping like a rock with nothing slowing it down. JPR is about to launch a new Quarterly ATV Semiconductor report that has some interesting findings to contradict the items above. Contradiction #1 – Integration is a very important segment but it’s not the only segment. Trident’s UX/WX has not taken the world by storm with its frame rate control. Sony and Samsung both used their internal solution for their 120Hz TV’s. The quality of Trident’s solution cannot beat the performance of stand alone solutions. LG has chosen Micronas’ FRC chip for use inside their panel. AMD with its Xilleon panel processor product has found a home inside a few panels from Samsung’s SDI group. It now appears everyone is either offering or included in their roadmap an integrated version of FRC. The performance of some of the IDP’s are good enough to be used in 42-inch and below bargain TV’s. Don’t expect to see them in a 40-inch Sony Bravia line just yet. Sony continues to use a merchant two-chip solution in many of their ATSC TV’s in the US. Integration is also not the right path in other parts of the world. See contradiction #2. Contradiction #2 – The US’s tuner mandate is unique; other regions don’t have a tuner mandate. The inclusion of a digital tuner is mostly market- and not government-driven. In the European Union, the DVB-T market started with set top boxes. The integration of the DVB-T tuner didn’t happen until set top boxes dropped well below 100 Euros. The inclusion of an integrated digital processor (IDP) shipping in volume for the DVB-T market will be in 2008. That’s several years after the ATSC market. Also, the EU rollover is only for standard definition TV and NOT (I repeat NOT) high definition. That’s where H.264 and DVB-T2 will come into play for the EU. DVB-T2 more affectionately known as “T2” spec won’t be out until the 1H 2008. There are enough changes in the EU technology requirements that it makes less sense to have a US ATSC type architecture. Integrating demodulation does not make sense if it will change with T2. Integrating H.264 decoding capabilities adds to the complexity of the design and increased silicon area. Contradiction #3 –The price drop for the exact same part after one year can range from 12 to 16% in the video processor or IDP’s. New products that include new features and performance will be priced higher. New competitors from Taiwan are targeting the lower end and pricing aggressively. Pressure from customers also pushes prices down. So what is the overall effect is in the blended ASP’s? It certainly falling but not as fast as many assume. The new ATV report shows that the blended ASP drop in 2008 from 2007 will be only 11%.