China's LCOS Opportunity

With the backing of the Chinese government, manufacturers are focusing on the development of LCOS TVs because of its relatively open technology platform and potential cost savings. This article details what the Chinese need to do in order to succeed.

by Yong-Jing Wang, Handing Zhao, and James Lupino

THE EVOLUTION of the liquid-crystal– on–silicon (LCOS) industry over the past 10 years has been much like taking a roller-coaster ride. When it was introduced, LCOS technology was believed to be very promising for low-cost high-definition big-screen TVs. Around the year 2000, when the dot-com bubble burst, there had been a few dozen companies involved in the development of LCOS technology, either at the component or systems level, including major consumer-electronics giants such as Sony, Philips, JVC, and Intel, as well as many companies.

The first two attempts to commercialize LCOS rear-projection TVs (RPTV) were made by Displaytech/Samsung and Thomson (marketed as the RCA brand in the U.S.) around this time. Considering the undeveloped state of the HDTV market and the immature technology at that time, their lack of success was not a surprise. Subsequently, Philips, JVC, and Sony all commercialized LCOS RPTV after several years of development.

However, facing the dual competitive pressures coming from flat-panel-display technologies, i.e., liquid-crystal-display (LCD) and plasma-display-panel (PDP) technologies, and Texas Instruments' DLP technology, Philips pulled the plug on its LCOS division at the end of 2004. JVC and Sony finally pushed their LCOS RPTV to the mainstream consumer market and received very high appraisals with respect to display performance. Nevertheless, due to brutal competition from LCD TVs, the market share of LCOS RPTV has not reached industry expectations. Microdisplay Corp., a single-panel LCOS developer, was forced to close its doors in July 2007.

China Prioritizes LCOS

Despite all these unfavorable factors, LCOS projection systems still attract significant attention due to their excellent display performance and potential low price. This is especially true in China, where the optical-component manufacturing infrastructure is strong and the domestic market is huge and unique. Under continued promotion by the government, the development of LCOS technology in China is still substantial, as evidenced on April 4, 2007, when Chinese President Hu Jingtao visited Sino-Brillian Display Technology Corp., a joint venture incorporated in April 2006 between IT Optics Group, Ltd., China, and Syntax-Brillian, USA. President Hu visited the company's manufacturing line of LCOS light engines and discussed the market, technology, and mass production of LCOS TVs. He displayed a firm understanding of the overall HDTV industry and related technologies, which is understandable because China is a leading TV manufacturer, and, therefore, the display industry hence is crucial to the country's economy.

President Hu made several points in his talk:

• The technology and manufacture of LCDs are dominated by Japan, South Korea, and Taiwan.

• Mainland China does not possess key intellectual property (IP) in the LCD sector.

• LCOS is a relatively open technology platform. Its required investment is also much lower than that for LCDs. Therefore, Chinese companies should pay more attention to LCOS technology.

• The state will support the development of LCOS technology, such as light engines and microdisplay chips.

• Chinese companies should focus on the development of the supply chain, expedite the development of LCOS TV, and mass-produce LCOS TVs for its massive consumer market.

Fig. 1: LCOS components manufactured by Chinese companies.

Three months later, on August 20, a summit of the Chinese LCOS industry was held in Nanyan, Heinan, China. At the summit, Lou Qingjian, Vice-Minister of the Ministry of the Information Industry of China (MII), stated: "MII will continually develop the full industry supply chain of LCOS, from components to systems. MII will utilize the industry's strength from all directions to build up new display-industry groups, enforce the cooperation between big projects, and help relative departments and companies to mass-produce LCOS TVs." Figures 1–3 show the LCOS components, light engine, and RPTV manufactured by Chinese companies.

Of course, the recommended direction of President Hu is from a viewpoint of how to independently develop China's own technology and hence transfer China from a manufacturing-based country to a technology-based country. LCOS is only one example he used. The remaining tasks for the engineers and scientists in the Chinese LCOS industry are to evaluate the technology, market, and development status in China, and to come up with a solution and roadmap for China's HDTV industry. In our opinion, the development of LCOS in China is dependent on the following four factors.

1. Can one technology be developed and marketed in only one or a limited number of countries? In this globalized world, this question is not trivial. LCOS has reached a saturation stage worldwide – it will continually exist in the high-end TV and projector markets. LCDs will continue to dominate the market for most consumer applications. Can LCOS be developed only in China and capture the local consumer market? To answer this question, one must consider if it is possible for one technology or product to be developed only for one country. The history of technology proves that the answer is a resounding yes. One clear example is that of the Video Compact Disk (VCD). VCD, as a video media technology, has a significant overlap with video cassette recorders (VCR) in image performance and market. Therefore, its market has never been developed outside China, where the VCR had already dominated the market. However, for historic reasons, the VCR and VCD entered the Chinese market at about the same time. Due to the advantages of VCDs in price and media size, VCDs captured the Chinese market. The continued efforts on VCDs not only rewarded Chinese companies with a multi-billion-dollar market in VCDs, but they also helped build up the industry infrastructure for DVDs in China. After DVDs entered the world market, Chinese companies quickly took over the leading position of DVD manufacturing from Japanese companies. Consumers throughout the world enjoy DVD movies on players made in China for less than $50 instead of Sony- or Philips-branded players costing several-hundred dollars. Most consumers do not realize that this is possible due to the independent development of VCDs in China.

Fig. 2: LCOS projection light engine manufactured by a Chinese company.

2. Is the Chinese manufacturing infrastructure unique and large enough to support the independent development of LCOS TV in China? Of course it is large enough. LCD and PDP technologies are dominated by Japan, Korea, and Taiwan. The cost of the panel for these technologies represents more than 80% of the systems cost. The same is true for DLP technology. This makes it virtually impossible for Chinese companies manufacturing and distributing end-user products featuring these technologies to be profitable. This situation will not change anytime soon; therefore, Chinese companies should seek a totally different approach to participate in the HDTV industry. This approach may very well be LCOS technology.

3. Can the price of LCOS TVs be significantly lower than that of LCD TVs with an equivalent screen size? Most imaging experts agree that the three-panel LCOS projection TVs produce the best picture quality. The limiting factors for LCOS TVs are their size/thickness compared with LCD TV and cost compared with DLP projection TVs. Of course, if the cost of LCOS TVs is significantly lower than LCD TVs, thickness may not even be an issue. Manufacturing the light engine and TV system in China will dramatically lower the cost for the optical components of the light engine and the system. The microdisplay panel, however, is still the limiting factor. Reducing the cost of microdisplays is an important issue, which can only be solved by moving the manufacture of microdisplays locally into China.

4. Will the improvement in brightness and reduction of price of LEDs or laser light sources be fast enough to support projection TVs?The new light-source technologies will dramatically increase the lifetime of the lamp, which is still an issue for traditional projection lamps.

As projection system developers and close observers of the display market for a long time, our suggestion to the Chinese government and companies are:

1. Emphasize the vertical integration of the industry supply chain, for the time being, i.e., to develop the technology for LCOS microdisplay chips. The only successful players in LCOS – Sony and JVC – both adopted the vertical-integration mode. One developer or several closely related companies should have the capability to manufacture most of the components in an LCOS system, including LCOS chips, key optical components, light engines, and the final system. This is the only way to maximize profits and to enable the business to sustain profitability under brutal price pressure.

2. Make the application of LCOS versatile. To manage the development risk, the LCOS developers should make their products adaptable to more applications. For example, developers should also offer solutions for the high-end front projectors for big venues or digital-movie theaters. This is a strength of LCOS technology where flat-panel displays can never compete. LCOS projectors have been widely accepted as the technology with the best display performance. Its only competitor in this application is three-panel DLP projectors. LCOS projectors have the advantages on cost and super-high definition, such as 4K (4096 ´ 2160) or higher-resolution projectors.

3. Pay attention to micro-projectors (i.e., pico-projectors), ultraportable projectors, etc. Micro-projectors are beginning to be integrated with cellular phones, PDAs, and other portable consumer devices. This is also a new application where flat-panel displays cannot compete, and its potential market volume could be even greater than that of RPTVs. Of course, three-panel LCOS systems are limited in size, so single-panel LCOS systems may be the only option within the pico-projector market, especially those non-conventional single-panel structures.

Fig. 3: LCOS rear-projection TV manufactured by a Chinese company.

Virtually all LCOS companies have worked with mainland Chinese companies in one way or another, except Sony and JVC who may have their own captive manufacturing plants in China. For those companies working on LCOS chips, light engines, systems, and other key components, our suggestion is that China may be the only chance for LCOS to enter the mass consumer market. All related companies should treasure this opportunity and play an active role in this progress. The corporate strategy should be flexible and have the perspective to adapt to this changing environment. If companies do not adapt, they will surely not survive. •