Monitor maker digs into Net appliance market

As previously reported, Proview International Holding today will unveil the iPad, an all-in-one Internet terminal with a built-in 15-inch color monitor.

Hong Kong-based Proview's move follows that of monitor rival ViewSonic, which earlier this month showed off 21 prototypes for Web-surfing devices. Like ViewSonic, Proview is betting that its experience manufacturing one of the most costly parts of computer systems will enable it to cut manufacturing costs for Internet appliances.

Other companies are grappling with mixed success in making these devices cheap enough to grab consumer attention.

The iPad, which connects directly to a keyboard and mouse, was jointly developed by Proview and National Semiconductor, whose Geode chip is at the heart of the device.

National Semi, which has been pushing the information appliance idea for years, has been taking an active role in trying to bring new products to market, designing prototypes and working with peripheral makers such as Proview to expand their businesses. National Semi also has been bringing together service providers that want to offer new products with hardware makers that are looking for channels where they can sell their products.

"We're like a matchmaker," said Mike Polacek, a National Semi vice president and head of the company's Internet appliance division.

Polacek said the company has been looking at trying to make the traditional cathode-ray tube monitor the center of an Internet appliance for about a year. Although flat-panel devices may be more stylish, the prices just aren't coming down fast enough to be part of an ultra-low-end device, Polacek said.

"We keep saying that a year out, (flat-panel) prices are going to come down," Polacek said. "I personally have been saying that for two years."

Displays are central to the cost of a Web-surfing appliance. Many of the simplest devices can be built for about $200 without a hard drive, but they still need some way of displaying the information. As a result, the price tag of even the cheapest Internet appliances such as the New Internet Computer is close to $350 including the display.

Monitor makers would appear to have some advantages both in integration and in sheer volume in selling low-cost devices. Proview, for example, is already cranking out products to the tune of about 1 million units a month.

Putting a basic Internet appliance into a traditional CRT monitor appears to shave about $50 off the cost of making a low-end Web-surfing box.

"The entire bill of materials is in the $200 range, $250 maybe," Polacek said.

International Data Corp. analyst Bryan Ma said that although a monitor maker could theoretically get a higher margin on such a device, it would face the challenge of either building its own brand or lining up strong partners. In addition, although a traditional CRT monitor is cheaper than a flat screen, such a device may not fit in as many places in the home.

"It's not quite as sleek (or) as elegant and might not fit into a kitchen," Ma said. "It may very well go into the den where the PC usually goes."

As a whole, Ma estimates that by 2004 there will be 5.5 million desktop Web devices sold annually, compared with an overall appliance market of 89 million units including items such as game consoles, set-top boxes and handhelds.

Although Polacek believes that tethered Web-surfing devices will be the first appliances to hit it big, National Semi has not given up its vision of the portable Web pad, a tablet-shaped product that can surf the Internet through a wireless connection.

In a meeting yesterday, Polacek pulled out a prototype being developed with wireless Internet service provider Metricom that would allow mobile surfing beyond the home.

Such a device could generate more revenue--in both hardware sales and services--than a device aimed at the home, Polacek said. "The business models get more interesting," he added.

Proview chairman Rowell Yang Long San said the company has already received more than $20 million in orders for the iPad.

"So far we have seen overwhelming market response to our iPad products from the U.S., Europe, China and Japan," Yang said in a statement. "We are confident that we will be one of the major players in the new 'post-PC era.'"