At the DisplaySearch USFPD conference, the sun-drenched beachfront of San Diego was an appropriate setting for my panel that included representatives from two companies working on energy-efficient displays that excel at outdoor readability.

Sri Peruvemba, VP of Marketing at E Ink, cited the accuracy of DisplaySearch forecasts for e-paper as he told a compelling story about the wide array of e-readers we’ve seen introduced since the debut of the Sony Reader, particularly outside the US.

During the Q&A session, one attendee acknowledged the potential for these products to enable “a library in your pocket” as transformative for developing nations. Sri also noted that the arrival of textbooks for e-readers is coming sooner rather than later, which are seen by many as the key to driving strong growth beyond leisure readers.

On the other hand, he was nonplussed about the iPad, falling back on the superior readability and battery life of e-paper. He also noted that the forthcoming Apple slate would be much heavier than a typical e-reader-a factor that consumers would feel as they tried to hold the device in one hand for extended sessions.

As noted in NPD’s A Look Into e-Readers: A Snapshot Report last year, consumers interested in e-readers want content such as newspapers and magazines. These publications’ need for color, interactive multimedia and video were cited as opportunities by Brian Gally, Senior Product Director for Qualcomm MEMS Technologies, which has developed the mirasol display.

While a mirasol device prototype I saw at the show was certainly impressive, what was even more impressive was the best-in-class battery life improvements the company claims we will see for these devices. These claims will be put to the test soon, as Qualcomm notes that we’ll see products using mirasol displays launch before the end of the year. For E Ink’s part, Sri countered that it would offer color e-paper products before the end of the year, and that it had video working in the labs.

In my questions following the presentations, panelists addressed how cash-strapped publishers would be able to afford investing in reinventing their magazines developing expensive video and multimedia assets, and how the greater content consumption demands would affect the free cellular access that has helped to enable the Kindle’s success.

There were no clear answers, but both men expressed great confidence that a wide array of display opportunities ranging from power-hungry high-volume handsets to large flexible digital signage would provide plenty of room to maneuver around the LCD juggernaut. Indeed, in their words, the future is so bright one will need a reflective display.

A magnitude 6.4 earthquake struck Kaohsiung in the south of Taiwan at 8:14 AM local time on March 3, causing some factories to shut down temporarily. The initial impacts on TFT-LCD fabs are as follows:

• All of CMO’s LCD factories are in southern Taiwan (mostly in Tainan; Gen 8 is in Kaohsiung). The TFT LCD fabs have been shut down temporarily for damage evaluation. The last time CMO’s fabs were shut down by an earthquake, it took 2-3 days to re-start all the factories.
• HannStar’s Gen 5 in Tainan was also shut down for damage evaluation. HannStar took 3-5 days to re-start the fab after the last earthquake.
• Other TFT LCD makers seem not to have been affected.

The earthquake also affected glass substrate production:

• AvanStrate has five tanks in southern Taiwan, and one of the Gen 5 tanks was damaged by the earthquake. However, AvanStrate was planning to shut down the tank for repair, so AvanStrate’s output of glass substrates will not be affected. AvanStrate is checking the status of its other tanks; CMO and HannStar are their main clients in Taiwan.
• Corning has eight tanks in southern Taiwan, and all appear to be unaffected. But some glass substrates in the production process had to be discarded, so the output volume will be slightly impacted. Corning’s other tanks in Taiwan are OK.
• AGC has a polishing line for glass substrates in southern Taiwan, which is unaffected. The company’s other tanks in Taiwan were not impacted by the earthquake.
• NEG also has a polishing line for LCD glass substrates in central Taiwan, which is OK.

Other components are also affected:

• Most of Toppan CFI’s color filter fabs are in southern Taiwan; it is believed that these fabs have been shut down temporarily for evaluation.
• TSMC and UMC have foundries in southern Taiwan, which have been shut down for checks after the earthquake. These fabs all are 12″; most driver ICs are produced on 8″ lines, which have not been impacted by the earthquake.

We will monitor the status of these factories. While it is too early to gauge the impact of supply and pricing of TFT LCD panels, we can assume that any downward pressure on panel pricing has been eliminated. In fact, there are some indications that there will be another panel price increase in March due to the earthquake’s impact on the supply chain.

The budget released by the Indian government on February 26 includes various measures affecting economic incentives. The mean excise duty on manufactured goods will be increased from 8% to 10%. This signaled the government’s intention to begin to roll back the stimulus package introduced in response to the global financial crisis in late 2008.

Along with increases in the cost of petroleum products (which will lead to higher costs for plastic and logistics), this will lead to an increase in the cost of TVs. Branded vendors that had been holding back price increases will now pass on the additional costs to customers. So prices of TVs in India are likely to increase, probably up to 4%.

The government also announced incentives for companies promoting renewable energy and energy efficiency. Equipment for photovoltaic and solar energy products will now be subject to a 5% import duty, down from 10%, and they will be exempted from excise duties that are levied on manufactured goods. Also, LED lighting will cost less, as excise duties will be reduced to 4% from 8%.

Mobile phone manufacturing in India will also get a boost, with reductions in duties and special packages for domestic manufacturers. These new measures should make mobile handsets made in India cheaper by 10%.

There are also incentives for innovating in India, as the establishment of innovation centers in India will be encouraged through fiscal incentives. This would make India an attractive destination for innovation. Look out for more Indian patents in the future.

Finally, the government reduced personal income taxes, which should boost private consumption; this could be expected to lead to more TV purchases, thus negating to some extent the expected price increases.

For the last 18 months, the Indian economy has survived on government spending; these changes anticipate the return of private spending to power the economy.

Based on data from the Chinese government, as well as channel checks with retailers and TV brands, DisplaySearch’s preliminary estimate of FPD TV sell-through during the Chinese New Year holiday is less than 3.5 million units. Many in the industry were expecting sales to be 4 million, based on the assumption that Chinese New Year accounts for 10% of the annual market total; however, some local TV makers estimated the number would be less than 3 million.

Leading up to the long holiday (February 14-19), sales of FPD TVs had strong momentum, which significantly enhanced major TV makers’ sales expectations for the holiday. Skyworth reported that they shipped 850 thousand LCD TVs in January, and their China TV business achieved 97% growth in FPD TV (mostly LCD TV). TCL continued rapid growth in shipments of LCD TVs during the period, 760 thousand units, up 86% Y/Y. Other TV makers, such as Hisense, Changhong, Konka and Haier have not officially disclosed monthly FPD TV shipments, but based on our preliminary checks, we estimate that their LCD TV shipments in January and February will show more than 75% Y/Y growth.

Along with May Day and National Day, the Chinese New Year holiday is one of the most important “golden weeks” for FPD TV sales in China. Mainstream channels and major TV makers all have actively preparing for. It was interesting that the 3S brands and other major foreign brands were more aggressive on pricing than local brands this year. Local TV brands did not put much emphasis on FPD TV sales during the holiday, partly due to high panel costs and cold whether. But the other issue is that there have been many subsidy programs from government and TV makers over the past year, such as the 13% Home Appliances to Rural Area program, the 10% pilot Swapping Old for New program, and the 3% Green Subsidy program launched by TV makers as a promotion. So local TV makers only promoted high-end products such as LED-backlit LCD TVs, internet TV, and Kala OK TV; while these products were of great interest, high-end models did not contribute much to sales volume.

Set makers and retailers built up inventory in anticipation of strong holiday sales, and the slower sell-through seems to have resulted in 2-3 weeks more inventory for most of local TV makers, which may further affect panel supply and demand in the coming 1-2 months.

A labor shortage in China? It seems unbelievable, but it is true, and it is becoming the biggest bottleneck for LCD products such as notebook PCs, LCD monitors and LCD TVs. Before the Chinese New Year holidays, some component makers and consumer electronics assembly houses in China mentioned labor shortages. Many of them are working through the holidays in order to meet the strong demand for export and domestic goods. This week, the labor shortage problem erupted. Reportedly, labor shortages of 15-20% are being seen by assemblers. Labor shortages in the assembly lines have many causes:

• Strong economic growth has raised the cost of living in many cities in southern and eastern China where most of the LCD module lines and LCD end-products assembly lines are located. It is difficult to live in these cities on the base salary, so many workers are choosing to go back to their hometowns.
• Many workers go to their hometowns, mostly in the countryside, for holidays and family gatherings. Some found that they can get jobs back home, with lower pay than in the cities but balanced by the lower cost of living, so they decided not to return to their previous jobs in the cities.
• To stimulate economic growth, the Chinese government has launched many infrastructure and construction programs, such as high speed railways, all across China. These programs have created demand for labor in rural areas as well as cities.
• Increasing prosperity has attracted many young people, who have been the main source of assembly workers, to shift to service industries. A waitress working in a fancy restaurant is better paid and has more fun than line workers staring at LCD modules and PCBs for more than 12 hours per day.
• The birth control policy started decades ago has created many one-child families. This one-child generation has a negative attitude toward working in assembly lines and would rather choose something more interesting. If they are college graduates, they don’t want to be a worker either.

The labor shortage has tightened the supply chain and will cause labor costs to go up. This is definitely not a short-term phenomenon, but a big long-term challenge for companies that with labor-intensive jobs in China. China is changing from a world factory to a world market, and now workers consider assembling notebook PCs all day a boring and low-paid job.

Another result of the labor shortage is that it makes inventory control difficult. LCD monitor brands are giving the same demand forecast in the Q2 slow season as in Q1 because they cannot get enough supply right now. The labor shortage is diffusing the panel shortage issue and adding more risk by building panel inventories. When PC and TV demand in China is strong enough to reshape the LCD industry, the unprecedented transformation from cheap labor to higher cost will have a deep impact worldwide.

In the display industry, it is hard to escape the hype associated with 3D. While all eyes are focused on the future of bringing 3D TV to every home, 3D infrastructure and content must be developed before 3D in the home becomes a reality.

Hollywood is leading the charge (with sports media not far behind) to increase the amount of 3D content available. With movies like “Avatar” carrying a high profile, consumers are being exposed to 3D every day. But what about those who base their opinions of 3D on movies made in the 1950s and 1980s, or the red/cyan anaglyphic presentations like the 2010 Grammy Awards? How do advertisers promote 3D to users who do not yet have the ability to view the latest implementations of 3D in their homes (think chicken-and-egg)? Here is where the worlds of digital signage-digital out-of-home (DOOH) advertising is a sub-set-and 3D start to converge.

Over the years, many different types of digital advertising displays with a variety of auto-stereoscopic 3D displays (the kind that does not require special glasses) have been used to grab the attention of passersby. However, the newly published DisplaySearch 3D Display Technology and Market Forecast Report confirms that those 3D public displays have not yet shipped in high volumes due to technology limitations. The “sweet spot” for viewing the 3D effect is limited with auto-stereoscopic displays, and the resolution and the overall quality of auto-stereoscopic 3D effects do not match the movie theatre experience, where stereoscopic 3D using active or passive glasses to generate a stunning 3D experience. But people seeing digital advertisements for those movies at bus shelters, in malls or in other public venues are clearly not going to be wearing 3D glasses, so OOH advertising companies like Clear Channel Outdoor and JC Decaux who want to use 3D must use auto-stereoscopic displays.

So the question is whether showcasing 3D movies (and TV) in an OOH environment with a 3D technology that does not do justice to what consumers would see in 3D theaters or on 3D-enabled TVs really helps to push the technology forward in consumers’ minds.

One example is Clear Channel Outdoor’s ad campaign in the UK to promote the 20th Century Fox movie “Percy Jackson & The Lightning Thief” (which is not a 3D movie). The 3D ads are running in at least four high-profile bus shelters in London. The displays come from 3D Exposure, and the description of the LCD panel used in this implementation (a 42″ FHD commercial-grade panel) suggests LG Display as the source. 3D Exposure claims that 3D public displays have “four times the stopping power of standard 2D advertisements, up to 10 times the average dwell time [and an] increased brand recall rate.” No one doubts the stopping power that a 3D image has in a public display environment, but now that the display is intended to promote the very thing that it is demonstrating, there is a new dynamic at play.

Since the technology being used to showcase 3D to the masses (auto-stereoscopic) is different than what they will see in the theatre or at home (stereoscopic), it will be interesting to see if the hype surrounding 3D will help increase the sales of 3D stereoscopic public displays (for digital movie posters and the like), or whether this type of 3D technology try to disassociate itself from the movie theater or home TV 3D video experience and simply remain an eye-catching technology.

The Chinese New Year is a time when people in both China and Taiwan feel the need to buy something new. Right before the kickoff of the 10-day festival, the Taiwanese government announced a “gift” to Taiwanese TFT LCD makers.

On February 10, a Taiwanese Economic Administration official indicated that they will lift the ban on building TFT LCD and semiconductor fabs in China. This ban has been in effect for many years due to cross-strait political confrontation, but according to the government official “Many things have changed these years, especially the relationships between Taiwan and China, as well as the market potential in China.”

In December 2009, the Korean government made an announcement allowing Samsung and LG Display to build TFT LCD fabs in China, which is the fastest growing LCD TV market. Consequently, Taiwanese panel makers had been lobbying their government to open the door for them as well.

From now, Taiwanese panel makers AUO, CMO, CPT, InnoLux, HannStar, PrimeView, TPO, and Wintek can invest in Gen 6 and higher fabs in China as long as the following conditions are met:

• Taiwanese TFT makers can build Gen 6 and higher in China, but are limited to three fabs.
• N-1 rule: The fab generation has to be to one generation behind the highest generation in Taiwan. For example, AUO currently has a Gen 8 in Taiwan, so it can build a Gen 7 (1950 × 2250 mm) fab in China. CMO will ramp up its Gen 8 in April, after that, CMO or the new merged ChiMei InnoLux (CMI) can build a Gen 7 fab in China.
• Companies who want to invest Gen 6+ in China have to submit a plan for new investment or technology improvement in Taiwan.
• Taiwanese firms are not allowed to merge with or buy shares in Chinese companies, but they can enter into joint ventures with Chinese companies or venture capital firms.

We believe that AUO will be the first to build a Gen 7 in China, as it will promptly apply for this investment project. We believe that CMO will wait until the official merger forming ChiMei InnoLux (around April) to apply; their first priority is to ramp up their Gen 8 in Taiwan.

Interestingly, both the Korean and Taiwanese governments attached strings, but they are not quite the same. The Korean government did not regulate the generation as Taiwan did. The Taiwan government did not mandate usage of domestic equipment, but Korea has. What both governments have said is “You can invest in China, but please also make the next investment and technology improvement in the homeland.”

However, this announcement raises more questions:

Is Gen 7 what China really needs? Aren’t Chinese companies BOE and ChinaStar building Gen 8 fabs right now? 32″, 40″/42″, 46″/47″ are popular in the Chinese market, and these sizes are also economic for Gen 7, so in this case Gen 7 seems to be a safer and quicker ramp.

The Taiwanese government said three fabs are approved, but besides AUO and CMI (ChiMei InnoLux), panel makers in Taiwan do not seem to have plans to build Gen 6+ in China. So who is the third? Will AUO or CMI try to build two fabs?

How will Korean panel makers react? Are they really delayed because the Chinese government prefers Taiwanese investments due to the threat of Korean brands?

The story is just beginning!

On February 5, top-tier LCD makers Sharp Corporation and Samsung Electronics “signed a settlement agreement to end ongoing patent infringement disputes over LCD panels and modules,” according to a press release dated February 8 on Sharp’s web site. The two companies had been suing and countersuing each other since 2007 over intellectual properly claims related to LCD manufacturing.

Cross-licensing deals are frequently used to resolve patent infringement controversies. Companies may file patent applications or sue as part of a business strategy with the specific goal of achieving a cross licensing agreement.

Cross-licensing deals often make big news, but the terms and conditions often remain undisclosed. From the outside, it may be nearly impossible to tell what patents and technologies are covered, time limits or financial provisions of the contract. Unfortunately, the terms of the February 5 agreement were not disclosed.

Although the contract was under negotiation for months, DisplaySearch was not exactly sure how it would all play out. Because we think Sharp holds some of the key patents related to the production of PSA (Polymer Sustained Alignment) and Optical Alignment (what Sharp calls UV²A)-critical technologies for improving LCD transmission and contrast-we thought Sharp held a very strong negotiating position and might even opt to continue the legal battle.

We do not really know what patents were included in the deal. The Sharp press release only makes the vague statement that “This settlement will allow the two companies to mutually utilize the disputed patents relating to LCD panels and modules, owned worldwide by each company.” But since we recently began hearing that Samsung finally started commercial PSA panel shipments (what Samsung calls S-VA) after months of delays, we infer that at least PSA patents are covered.

Why would Sharp cross license its crown jewels? Sure, Samsung has a huge and valuable patent portfolio, and Sharp was probably tired of the protracted legal conflict. But the short answer likely comes down to money. Frankly, this is speculation, but we assume Samsung made a one-time cash payment in the range of $500 million to Sharp to facilitate the agreement.

The announcement of the cross license between Sharp and Samsung leaves us with many unanswered questions. But one thing is for sure. Now that the world’s largest LCD maker has a green light to at least mass-produce PSA-based LCDs, the standards for high contrast and high transmission panels will continue to rise. This will enable faster adoption of LED backlights and improve image quality. And LCD panel makers that don’t have access to high contrast/high transmission technologies will be scrambling to play catch up.

One of the big surprises for me while reflecting on the hysteria at CES was the total absence of 3D still cameras. Digital still cameras have been a runaway success, even if the change in consumer behavior (no more printing) has led to the reshaping of the industry more than expected.

However, bearing in mind that consumers are clearly very happy to view their pictures electronically, I would have expected that stereoscopic cameras would have appeared. So far, I can find only one, the Fuji FinePix W1.

Figure 1: Fuji FinePix W1 Stereoscopic Camera

 I was unable to find any other products launched, although a slide by Sony appears to hint at some 3D DSC’s in 2010, as reported by Engadget at the end of last year in “Sony working on 3D Alpha DSLR cameras?”

3D home photos are a wonderful way to bring memories back to life and should have real emotional impact and value. However, it’s another example of how TVs are still significantly ahead of available content.

It will be an interesting question in the coming months: Will the upcoming 3D TVs and Blu-ray players with USB or card slots decode the .JPS Stereo JPEG format?

Nearly a year ago, we at DisplaySearch blogged about what Apple’s rumored (now launched) tablet would be, including what features it might have and what the display technology would be used. We hypothesized such a device would use a ~10″ LED-backlit TFT LCD display, have high color saturation, and “…a wide viewing angle both horizontally and vertically.” We also ruled out OLED and sunlight readability as possibilities. In November, we commented publicly on these eventualities. So how did things turn out?

Apple’s iPad was officially launched today and features a 9.7″ 1024 × 768 LED-backlit, IPS (In-Plane Switching) TFT LCD display. It is quite apparent that the display technology was of paramount concern to Apple, who noted that they chose it “because it uses a display technology called IPS (in-plane switching), [and] it has a wide, 178° viewing angle. So you can hold it almost any way you want, and still get a brilliant picture, with excellent color and contrast.” In addition to highlighting the display technology, Apple claimed that they have the largest capacitive multi-touch display, with “thousands of sensors” to provide the same touch sensing accuracy that the iPod Touch and iPhone have.

What was not noted in the Apple presentation is that the display is not a wide aspect ratio. It is neither 16:10 nor 16:9, but rather 4:3. In a display world that has “gone wide,” this is unique. More than 99% of notebook PCs use wide displays; you would have a difficult time finding an LCD TV with anything other than a 16:9 display, and more than 80% of desktop monitor displays are wide aspect ratio. So why did Apple choose not to use a wide aspect ratio display? Perhaps they were trying to find a middle ground between the requirements for books, magazines and newspapers and the requirements for video and gaming.

Apple also notes that the iPad uses “arsenic-free display glass” (which is now standard from Corning) and a “mercury-free LCD display” (which is one of the benefits of LED backlights). The front surface of the display is coated with a “fingerprint-resistant oleophobic coating,” which was introduced in the iPhone 3G S.

In his presentation, Steve Jobs highlighted a product gap between smart phones and notebook PCs, stating that netbooks are slow, have low-quality displays and PC software, and that the iPad was designed to fill this gap. The iPad will run a version of iWork (Apple’s equivalent to Microsoft’s Office Suite) specifically designed for the iPad, as well as running the hundreds of thousands of apps from the Apple App Store, including games and something called iBooks. The device functions as an e-reader for books, newspapers and magazines. Jobs noted that, “Amazon has done a great job of pioneering this (the e-reader market)… We’re going to stand on their shoulders.” Like the iPhone (a handheld computer that also allows makes phone calls), the iPad is a platform that runs a multitude of applications. It is an expansion of Apple’s portable computing platform, not a single-function device like most e-readers.

The average price for 10″ mini-notes based on the Intel Atom architecture and Windows XP or Windows 7 Starter Edition is $300-350. (Some telecom providers offer subsidized models for much less.) Pricing for the iPad starts at $499 and increases to $829 depending upon the amount of storage and whether it has built-in 3G connectivity. Entry-level iPads will have 16 GB of flash storage and Wi-Fi, while the $829 model will have 64 GB of flash and built in 3G connectivity. All of the 3G-equipped models “…are unlocked, and they use the new GSM microSIMs.” Apple has also worked out a deal with AT&T for no contract data plans at $14.99 per month for 250 MB of data or $29.99 per month for unlimited data.

Much as Apple’s notebook PCs are more expensive than products with similar specifications, it should come as no surprise that the iPad is priced significantly higher than the average mini-note. But Apple positioned the iPad as combining the features of mini-notes, e-readers and handheld gaming devices into one package (platform). What market segment does the iPad fit into? Is it an e-reader? A mini-note? A tablet PC? A handheld gaming device? All the above? Or, is this a brand new device category?