The WAVE Report
Issue #0905------------------6/2/09

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0905  Display Search FPD Conference 2009

0905.1  Netbooks Mini Notes

0905.1.1  Current Trends

0905.1.2  Opening Markets

0905.1.3  Developments by Sony

0905.2  The New Normal

0905.3  Emerging Markets and Applications

0905.3.1  Role of Emerging Markets

0903.3.2  Environmental Concerns

0903.3.3  Emerging Applications

0903.3.4  Industry Growth

0905.3.5  Display-Based Interaction

0905.4  WAVE Comments


0905  DisplaySearch FPD Conference 2009
By John Latta

San Diego, CA
March 3-4, 2009


The DisplaySearch FPD Conference is smaller this year but it is still an outstanding event. As we have come to expect, the presentations are dense with data and the speakers of high quality. This year the economic climate is topic A because of the impact on all aspects of the display industry. A few hints that some positive signs have surfaced in retail sales in Q1 2009 but DisplaySearch warns that these may not be sustainable. The theme of the conference is “New World” to reflect the changed business environment. As part of this theme the conference will explore the emerging category in these areas applications, market, trends and technology.


0905.1  Netbook Mini Notes

0905.1.1  Current Trends

John Jacobs, Director, Notebook Market Research, DisplaySearch, gave an overview of the current trends in the Notebook and Min-Note PC market. Some of his observations included:

     The mini-note (aka netbook) went from 2% market share in June 2008 to 14% share in November 2008.

     One of the disappointing aspects of the Mini-Note is that it has drawn down the prices of the Notebook PC category.
     By November 2008 this had dropped to $850.

     Given the newness of the category there have been changes in market share. The leader, ASUS with its Eee PC, held
     49.7% share in 2008 but by the Q4 2008 this had dropped to 39.9% with Acer picking up to 40% share that same quarter.

     The EMEA market is playing an important role in the Mini-note market. MSI has gone after this market and in Q4 2008
     it sold 461,000 units in EMEA.

     DisplaySearch expects that 2010 will be a pivotal year. They expect the growth to subside this year while at the
     same time the NB market will bounce back from its down state. By 2013 DisplaySearch predicts that 60m mini-notes
     will ship. This same year the growth will moderate to 12%.

     DisplaySearch also believes that Win 7 will play an important role in the B2B adoption of Mini-notes. If this
     OS works well it could help satisfy the pent up demand from those holding off from purchasing Vista.


0905.1.2  Opening Markets

John New, Senior Product Line Manager, Dell asked the question – “Cannibal or Market Creator?” He addressed these topics.

     The mini category is important in that it opens new strategic partnership opportunities. Included are: mobile
     carriers, cable companies, classrooms, transportation and clubs.

     Dell feels strongly that it communicate where the Mini fits in the market and what consumers should expect. The iPhone
     was characterized as the 3 min web experience, the mini as the 30 min experience and the notebook as the 3 hour

     Another important element of the market is personalization – the ability to personalize the Mini. Dell offers colors,
     patterns and configurations for the buyers.

     Dell has developed 10 scenarios around personal usage which include email, social networking and listening to music. It does      not include video.

     To support its market research Dell did a survey of Mini buyers, something which John stated Dell does not normally
     do. When asked what to the users like least about the Mini this was the ranking:

          Keyboard, touchpad, mouse and screen
          Hard Drive/ Disk Space
          CD/DVD drive

     When asked what they liked the most the response was:


     Dell has moved aggressively into the category with 3 products in 4 months. They will continue to invest in this
     product space.


0905.1.3  Developments by Sony

Mike Abary, SVP, VAIO Marketing, Sony Electronics gave an interesting perspective on the Mini-Note category which he described as one Sony has been in for 10 years already.

     The first ultra-portable, Sony 505 was introduced in 1998. This was followed by the Z505 in 2000, the SRX in 2001, the
     V505 in 2003 and the TT in 2008 Each of these products brought innovation to the market but they were largely a
     failure. Either by design or accident we have the Eee PC from ASUS which has spurred the category. Given our
     experience, having the first product in a category does not necessarily mean it will lead to a sustained market
     success. We wonder if this category of Sub-Notes will persist.

     A concern we have at Sony is that the Mini-notes have created a market which has created steep growth. But there
     is also a concern that this maybe just a short term phenomenon and the category may not survive. A significant
     impact has been on pricing – this has caused downward pressure on notebooks. But these machines are really moving
     technology backwards – which in the long run may not be good for the industry.

     An example of the pricing situation was shown from recent newspaper ads. This showed how notebook PC prices are
     tracking the downward trends of Mini-notes. One ad had a Mini note at $249 and a full functioned notebook at $349.

     Sony probed the future by discussing the potential of non-traditional IT channels, such as the carriers, 4G
     integration, the use of touch and gesture, these devices may open the prospect of the could being useful and there
     may be a whole new category of PC emerge.

     It is Sony’s view that the mini-notes will peak out at 35% market share in the US in the next 2 years. Also Sony is
     concerned that the low ASPs could make it impossible for the overall PC market to have sustainable profits on
     hardware alone.

     With the significant price pressures in this category, and the mobile PC market, Sony questions how it will be
     possible to differentiate between products.

Questions posed after the presentations. The WAVE asked – what has been the trend in OS use between Windows XP and Linux in the Netbook category?

     The reason that Windows XP is winning in the Netbook market today is that consumers want the full XP experience. One
     report is that the Linux netbooks have a 60% return rate. It is very difficult to find a Linux Netbook at retail
     because of this.


0905.2  The New Normal

Paul Kedrosky, Kauffman, The Foundation for Entrepreneurship, provided a view of the important shifts taking place in the US economy which will have lasting implications and making the upturn not what many hope for.

     A sign of the unusual times is the high value of the US dollar. When there should be inflationary pressures which
     would drive the dollar lower, we are seeing just the opposite.

     We are in an experience deficit. That is, the leading analysts of the economic condition have no experience in
     sever downturns, and none from the depression. We are in new territory.

     A significant shift has taken place in the US. Approximately 18.2% of the world’s GDP is based on US
     consumer spending. This is the engine which drives much of the world’s economy. Yet, as a result of the downturn US
     consumers have become savers. This has resulted in a dramatic drop in consumer spending.

     A recent survey of consumers show that there has been a dramatic drop in the intent to purchase. In the case of
     laptops 12% of the consumers surveyed intended to buy a laptop in June 2007 and in February 2009 this dropped to
     6%, and desktops were only 4%.

     Consumer spending will not shift back to the US but be driven by the developing middle class in other parts of the
     world – especially Asia. In 2006 Asia held 60% of the world’s middle class on the West had only 20%.

As consumer spending shifts from the US, its role as the society which defines the production needs for the world will also change. We are entering an era of the The New Normal.


0905.3  Emerging Markets and Applications

0905.3.1  Role of Emerging Markets

David Barnes, VP, DisplaySearch gave an overview of the role which emerging markets will play.

     BRIC – Brazil, Russia, India and China – have emerged as the source of new consumers and new competitor. There are
     2.8B people and 42% of the world’s population in these 4 countries. 25% of the BRIC population is under 15 years

     The BRIC markets are also under economic stress but the problems are less structural than in the US. This makes
     BRIC more attractive and will put them in place to be disruptive to existing markets.

     For example, there are 2B TV sets in BRIC but only 15% are LCD TV. This is a significant replacement market. It is
     expected that the DTV infrastructure in these countries will be funded by the governments and there could be
     subsidies for television purchases, such as China.

     Brazil, already has an $8,480 per capital GDP and 27% of the population is <15. The market has the distribution
     advantage of WalMart and Carrefour. The costs of 32” LCD TV ASP is already competitive. The Internet penetration is at
     25% per captia with 3.9m notebooks and 8.5m desktops.

     India has 1.148B individuals and growing at 1.6%/year. 32% of the population is <16. There are major changes in
     society including high expectation consumers and urbanization. The infrastructure is weak and roadways
     jammed. A handset costs only $48. Distribution is based on small shops and bazaars but brand stores are expanding.

     Russia has a TV culture with the sets on 5 – 14 hours/day. The GDP per capita is $12,487 and there are 30m households
     with annual income >$10,000. However, the population is aging with >14% >64 and declining fertility. The Internet
     penetration is at 21% and 7.1M notebooks and 17.5m desktops.

     China, has 1.33B people and a young population, 20% <15. There is an emphasis on infrastructure expansion and also
     rapid growth in urbanization. The largest Internet base is here. It is a very competitive business environment. The
     per capita GDP is $3,174. The installed base of notebooks is 15.5m and 32.2 monitor (assumed desktops).


0903.3.2  Environmental Concerns

Charles Annis, VP DisplaySearch provided an overview of the Green Tactics of the LCD FPD companies.

     The green attributes of the display industry include:

          Green components, including glass, LEDs and halogen free.

          Lower power consumption – decrease the power for the same panel size.

          Comply with environment regulations such as RoHS, Energy Star and EuP, as examples.

          Lower the energy to manufacture and reduction of manufacturing emissions.

          Fewer process steps.

          Reduce the weight and packaging of the end product.

          Lower the cost of the product.

     Of these Green efforts the highest value is the reduction in energy consumption.

     Increasing the transmissivity of the panels is a major priority which also increases brightness and will allow for
     lower overall power consumption. For example the backlight is the most expensive component of the panel and consumers
     90% of the power. For example, at typical 400 nit panel with only 5% transmissivity has 8000nits of luminance in
     the backlight. If the transmissivity is increased 5% to 10% there is a significant gain.

     There are many techniques being developed to accomplish this increase in transmissivity. These include the array
     design, cell design and CF processes to increase the aperture ratio.

     One technique is called Polymer Sustain Alignment (PSA) which uses an in cell process polymer alignment layer.

     DisplaySearch estimates that by 2012 70% of all the FPD panels will have some of the green components.


0903.3.3  Emerging Applications

Chris Crotty, Director, Small and Medium Displays Research, DisplaySearch examined emerging applications.

     In the short term digital picture frames will have 29.3% growth and Mini-Note PCs 102.5% growth while the overall
     small to medium panel business will have only .2% growth.

     Important factors which will impact these application areas are: consumer buying patterns, lack of product
     differentiation and substitution – zero sum game in product purchases.

     The e-book market is expected to have a 60% unit and revenue growth to 2015.

     Another market targeted for growth are the Pocket and Pico Projectors. It is expected that the embedded projector
     market will begin in 2009 but technology breakthrough is needed for further growth. A key challenge remains the low
     light level – 10 – 15 lumens and short battery life, 30 – 50 minutes.

     It is expected that a major move in display technology application will come as displays go from Out-of-Home to
     Outdoors. In this transition LCD and PDP technologies are not suited for Outdoors but LED is.

     The market forecast for Large Format FPD Public Displays rises from $2.289B in 2009 to $6B in 2015.


0903.3.4  Industry Growth

Jennifer Colegrove, Director, Display Technologies, reviewed the technologies which will lead industry growth.

     DisplaySearch is bullish on long term OLED, they show the market growing to over $6B in 2015 with the sales driven by
     OLED TV and mobile phone main displays.

     They estimate the OLED display market at <1% in 2008 but growing to 5% in 2015.

     The OLED lighting market will take off in 2011 and reach $6.2B by 2018.

     Touch screens will rapidly grow to 765m units by 2015.

     Important trends to watch include:

          Resistive touch price wars.
          A tripling of projective capacitive shipments.
          Dual touch and pen will gain market presence.
          In-cell technologies will begin commercialization.


0905.3.5  Display-Based Interaction

Andrew Hsu, Strategic and Technical Marketing, Handheld Devices, Synaptics gave an overview of the display-based interaction.

     One of the major challenges of touch only interaction is that one has to look at the display to interact.

     The future direction of touch interaction will continue to optimize the user experience, develop a unified usage
     model, inclusion of gesture based interaction and richer and more responsive graphics including 3D.

     It will be increasingly important to have multi-modal device interaction which includes grip sensing, proximity,
     force and haptics. There will also develop touch beyond the display with gesture zones, for example. Many of these
     technologies will allow touch without seeing the display.


0905.4  WAVE Comments

As evidenced in the presentations, the Netbook category is of significant interest – it is where the growth is, it is creating markets in emerging countries and a disruptive force for the whole PC industry. At the same time, being so new, the industry has not learned how to deal with the growth it brings. As Sony said – we have been there and seen the market. But in spite of Sony’s concerns it recognizes it has to deal with the changes. The discussion which ensued on the OS issues illustrate the same dynamics – how to cope with unrelenting price pressures. It is clear new rules in the PC market are being written as both hardware and software companies seek to secure profit in a disruptive market.

Also here at DisplaySearch FPD we got more hints about Apple’s display directions. Apple could well be laying the foundation for the use of LTPS technology in a broad array of new products. This is not the only time we have heard that Apple is looking at the Netbook space. Its entry using a similar model to the iPhone could be one more disruption to the PC market space which would change the game but again.

We note one bright spot – the dissatisfaction of the Netbook buyers with the current keyboard, touchpad, mouse and screen. This represents a prime opportunity for the PC accessory companies to expand their markets into the growth of the Netbooks.

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