Is LCOS Dead or Alive?

by Chris Chinnock

With liquid crystal on silicon (LCOS), the upstart microdisplay technology, it seems to be "same story, different year." We have been following the technology for six or seven years now, watching as it moved through cycles of depression and euphoria. Right now, there is more gloom and doom because of some recent high-profile problems; despite this, we think the technology still has legs.

On the "bummer" side of the equation have been changes at Intel, Philips, and Brillian. Intel, for example, retrenched from its high-profile announcement at CES '04 in January to offer 1280 x 720-pixel LCOS panels to rear-projection-television (RPTV) system integrators. In August 2004, the company said it would skip 720p and go right to a 1920 x 1080-pixel LCOS solution, explaining that the value proposition for LCOS has moved beyond 720p to 1080p.

Then, in late October 2004, Intel confirmed the rumors that the company will officially close down its LCOS-development efforts. After reviewing the project, Intel management decided that the opportunity for LCOS microdisplays is not large enough to justify the continued investment necessary to fully commercialize the technology.

This theme of an ever-changing window of opportunity and value proposition is not new to LCOS players. Many have already ridden through efforts to offer LCOS rear-projection monitors, front data projectors, 4:3 aspect-ratio RPTVs, and 16:9 RPTVs with 720presolution. Same story, different year.

Intel's August news was followed by Brillian's announcement that it needed to temporarily halt production of its LCOS RPTV products due to engine-manufacturing problems at partner JDS Uniphase. These RPTVs, which offer exceedingly good performance, were slated to top a new line of high-end TVs to be marketed by Sears. But when trouble loomed and the Christmas selling season was in jeopardy, Sears cancelled the order.

Didn't Brillian in a previous life as Three-Five Systems go through a similar scenario with a Thomson RPTV? Same story, different year – but only to a degree. Brillian's current problems are much more easily solved, so we expect them to be back in the game.

Perhaps the biggest blow came most recently when Philips decided to close its entire LCOS operation, stopping production of LCOS panels, RPTV engines, and RPTV sets. Why? Apparently, the LCOS panels were too costly to produce, the performance was in the middle of the pack, and the sets were not selling that well at retail. After 12–13 years of development and maybe $200 million in expense, the prospects of more investment and red ink were just too much for senior management.

This will give the industry some pause because Philips was one of the more committed players and their exit will have people wondering if LCOS can survive. But in reality, Philips was chasing a technical approach that was not likely to succeed. Too bad they did not see the writing on the wall sooner and change course to capitalize on many of the recent advances.

It is worth noting that the failures at both Philips and Intel are, in our opinion, more about specific miscalculations by these companies than the technology itself. Philips committed itself to a large and expensive LCOS imager; there were concerns about the TN-mode imager's average contrast and lifetime; the projection architecture was unique, complex, and expensive; and there were reliability problems with sets in the field. At Intel, the silicon design was too complex and the imagers were oversized, resulting in higher cost and lower yield. In addition, the facilities earmarked for manufacturing the imagers use state-of-the-art instead of trailing-edge silicon design rules. As with Philips, the TN-mode imagers presented problems with average-contrast and lifetime concerns. Finally, Intel figured it could dominate the market by just selling chipsets with high margins, but that was a long shot.

We do not think the party is over yet because many positive activities remain. For one, LCOS performance has improved considerably over the last year or two and can now offer some of the best images of any display technology. Second, much of the component-supply-chain, panel-manufacturing, and system-manufacturing problems have been solved. And third, the cost of systems is competitive with other microdisplay solutions.

Helping to move the industry toward optimism about LCOS, Sony dazzled audiences at CEDIA with its 1080p RPTV, as did Brillian with its 1080p demonstrators at InfoComm. LCOS will offer a compelling 1080p solution.

In addition, JVC has shifted gears to partner with Aurora Systems and is being successful with its new line of LCOS RPTVs; and there remains much activity in LCOS panel, engine, and TV-set development and pre-production. SpatiaLight is shipping TVs to the Chinese market, and, most recently, Canon announced it would enter the data-projector market with an LCOS-based unit priced well below the competition.

Watch recent product introductions carefully to see how they fare in the market. If they do not do well, then the LCOS game might be over. But even if successful, it does not mean that LCOS technology will rule the microdisplay roost. It will win some market share, but not enough to sustain all the companies playing in the space today. Just do not ask us to choose the winners and losers. •