ON DISPLAY: ViewSonic Uses Intel Money to Pursue High-Definition TV
By ANDREW SIMONS
ViewSonic Corp. is counting on a high-profile partner and a low-cost computer part to better its own prospects.
Based just across the North County line in Walnut, ViewSonic is investing in new projects, even as sales remain slow in the company’s mainstay computer monitor business.
One project in particular,a chipset that promises to lower the cost of pricey high-definition TVs,has caught some notable interest.
Intel Capital, the chipmaker’s venture capital, made a second investment in View-Sonic in February. The amount is believed to be in the several-million-dollar range but less than $10 million.
ViewSonic has big plans for the money.
Among other projects, Intel and View-Sonic are researching a new chipset,a group of chips that perform a specific function in an electronic device,that can reflect light signals to a much higher intensity than today’s chipsets.
High-definition TVs have wider pictures, higher resolution and better audio quality than analog sets. Congress mandated that the TV industry be digital by 2006, though many observers doubt that the deadline will be met because of the cost for stations to convert to digital and slow sales of digital sets.
ViewSonic’s chip-set is cheaper than technology used in current high-definition TVs, according to James Chu, View-Sonic’s chief executive and founder. The result, he said, could be lower prices for digital TVs, which start at $1,200 and go as high as $6,000.
“We can make them very low cost,” Chu said. “We believe we can do it three years from now.”
It could be a lucrative market for ViewSonic, which has branched out into new areas as sales and profitability of cathode-ray monitors have eased.
“For a company like ViewSonic, one thing they’ll do is look around and see what else is out there,” said Stephen Baker, senior research analyst for Port Washington, N.Y.-based market tracker NPD Group Inc. “They’re going to see if there’s any piece of their business they can migrate to other businesses.”
For now, though, high-definition is off to a slow start. In March, more than 148,000 digital sets were sold, according to the Arlington, Va.-based Consumer Electronics Association. But digital models still make up just a silver of the some 22 million sets sold in the U.S. each year.
The number of digital TVs sold is expected to grow an average of 75% a year for the next six years, according to the Consumer Electronics Association.
“Manufacturers continue to introduce a wide variety of new products including HDTV sets retailing for under $2,000,” said Gary Shapiro, the association’s president. “We expect to see strong numbers as more consumers experience (high-definition TV).”
To its credit, ViewSonic has been able to grow sales even as the computer business has slowed.
Sales at privately held ViewSonic rose about 37% to $1.37 billion last year. Revenue was about $940 million in 1999. ViewSonic employs about 400 people in Walnut, include many from Orange County.
But competition in the display industry is tight. ViewSonic holds a mere 5.6% share of the U.S. monitor market, according to NPD Group.
ViewSonic’s share puts it in eighth place behind computer makers that resell monitors along with their machines. Those include Compaq Computer Corp., Hewlett-Packard Co. and Sony Corp., which does make its own monitors. Other rivals include Santa Ana-based Princeton Graphic Systems Inc., which, like ViewSonic, designs monitors and contracts out for production.
ViewSonic still faces hurdles before it sees its investment in high-definition rewarded.
There is the risk that high-definition TVs will not catch on as the forecasters expect. There are few programs now broadcast for digital TV. While most broadcasters have pledged to transmit shows in high-definition as well as analog signals, few have followed through yet because of cost.
The Federal Comm-unications Commis-sion said rec-ently that only a quarter of U.S. stations met a May 1 deadline to begin transmitting high-definition TV signals.
But that doesn’t discourage Chu, who believes digital TVs will sell themselves.
“It’s just like when color TVs came out,” Chu said. “When that change happened, you saw a color TV and never went back to black and white. It’s the same here. When people see high-definition TV, they’ll probably want to change.”
For now, ViewSonic is making some short-term upgrades to its current line of monitors. It’s making its displays work more efficiently, as microprocessors based on Intel designs,some of which reach 1.5 gigahertz,grow faster.
Chu says the many different uses for personal computers should keep his lucrative display business rolling in the next few years.
“Displays will be more important in the future,” Chu said. “Today, they’re used for entertainment. When resolution goes up, the picture gets very detailed and you can see things much clearer. For instance, if you are a serious game player, today’s resolutions are too low. When you have a fine resolution visually, there’s a lot of difference.”
ViewSonic’s sales pattern is a testament to how important the company’s displays are to computer users. About 80% of ViewSonic’s sales are to people looking only for a monitor, compared to 20% that are sold bundled with a computer.
“ViewSonic will be a major player,” Chu insists.
