Not your sports bar's rear-projection TV

A start-up is betting that new technology and low prices can breath life into the niche market for king-size sets. Photos: Liquid crystal TVs

An unorthodox start-up is betting that consumers want to pay less money for big televisions, even if they're not flat panels.

MicroDisplay, a Fremont, Calif.-based company, will begin manufacturing a 56-inch liquid crystal on silicon (LCOS) television this summer that will sell a few months later for between $1,300 and $1,500.

A type of so-called microdisplay technology, LCOS is a silicon chip covered in liquid crystals. Light is reflected off the chip and through a projector to produce an image on a TV screen. MicroDisplay plans to use its own proprietary liquid crystal-covered chip, which it has dubbed "Liquid Fidelity," in rear-projection televisions that it will sell to mass-market brands, such as Akai and Memorex.

MicroDisplay's chip was developed by researchers from the Massachusetts Institute of Technology in the late 1990s with the original intent of selling the technology to the military for use in virtual-reality goggles. When virtual reality didn't pan out, the company decided in 2001 to tackle the television business.

Some may find the company's entrance into the rear-projection TV industry a belated and curious choice. The hottest TV sector is high-definition flat-panel displays: 17.2 million flat panels shipped to North American retailers in 2006, representing a 136 percent jump over the prior year. Shipments of projection TVs in North America, on the other hand, peaked last year at 2.4 million units and are expected to decline to 1.9 million units in 2007, according to DisplaySearch.

So why now and why this industry? MicroDisplay executives say they are keenly aware of the limitations of entering a mature market, but equally confident because of a couple of factors. They've garnered three rounds of venture capital funding, and although they won't disclose how much, will say they are looking for $20 million to $30 million more in the next round to ramp up production. They're betting that their proprietary LCOS chip, the surprising svelte look of their TVs, the cost effectiveness of their 45-employee company, and the practice of buying components in China and assembling the TVs in Mexico will allow them to beat the established brands' pricing.

It's a challenging market to begin with. "The overall market of rear-projection TVs is kind of under assault from flat panels, plasma and LCD, as the sizes of the flat panels have increased and prices have dropped," said Paul Semenza, vice president of display research at iSuppli. "The main advantage in some ways of RPTV (rear-projection TV) is it's cheaper to get to a larger-size TV set. But what's been happening is, as these new flat panel factories have come online, flat panels have gotten cheaper too."

But by selling a 56-inch set for about $1,500 beginning in the third quarter, MicroDisplay's prices would beat the average price of a similar-size LCD ($5,496) or plasma ($3,298) by a long shot.

MicroDisplay execs believe that no matter how inexpensive flat panels become, rear-projection sets will "forever" be cheaper. "We know what we're getting ourselves into," said Marty Zanfino, MicroDisplay's vice president of marketing.

What they're getting themselves into is a situation dependent entirely on numbers, not glossy brand names or fashion statements. Since they will be selling to mass-market brands, MicroDisplay's goals are quite modest: Zanfino said the company is looking to gain a "high single-digit" share of the LCOS market, a sector projected to produce $1 billion in sales this year.

"If they execute it right, if technologically they're able to do what they say, there's a small, legitimate market for 55 (inches) and above," said Edward Taylor, vice president of TV market research for DisplaySearch. Though, he added, he doesn't see MicroDisplay ever being larger than a $100 million-a-year company.

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