Meet the DLP Chip's Biggest Booster

Texas Instruments CEO Rich Templeton is pretty excited about what the chip will mean for HDTV -- and his company's bottom line

A chip with a 2 million tiny mirrors is shaking up the TV business. It's the Digital Light Processor, from chipmaker Texas Instruments (TXN). After only about three years on the market, the chip is now found in sets from all the major manufacturers, including Panasonic (MC), RCA, LG Electronics, Hewlett-Packard (HPQ), Samsung, and Toshiba.

While the percentage of DLP sets is small when compared to the rest of the overall TV market -- research firm iSuppli says DLP chips were in less than 1% of TVs sold in 2005, and it expects that figure to rise only to 1.4% by 2010 -- you can't help but notice that the technology is getting recognition. Consumers will snap up some 1.7 million DLP sets this year, iSuppli reckons.

That's great news for TI. While the company doesn't break out results from the DLP business unit, Lehman Brothers analyst Tim Luke estimates sales of the chip contributed $750 million in revenue to TI's top line in 2005, and could approach $1 billion this year. That would make it the fastest-growing product in TI's lineup.

Recently BusinessWeek Online technology writer Arik Hesseldahl quizzed TI CEO Rich Templeton on where DLP technology is headed and its importance to TI's overall business. Edited excerpts from their conversation follow.

We know DLP technology is having an impact on the TV industry, and that it's turning out to be pretty successful for you. But where does DLP fit in the overall TV picture?

We still believe high-definition TV is really a long-term, very important trend. It's here and it's real today in the U.S. As witness to that, look at the content that's showing up. Prime-time TV, sporting events. What makes HDTV great is the content you can put on it. So that's really growing well in the U.S., and the U.S. is really out ahead of the rest of the world with the content.

Has HDTV really penetrated that far in the market? I tend to think of it as something a lot of people wish they had, but most haven't upgraded their sets yet.

I think it's really taking off. If you look at the market for 40-in. sets and larger in North America, the fastest-growing portion of that market is what's called Micro Display, really targeted at HDTV. And within that, DLP is the fastest-growing technology. It does HDTV the best as far as we're concerned. And I think what you're finding is that people can go from big conventional sets to big HDTV sets. And so the total category of 40-in. sets is growing O.K. But if you look at HDTV sets within that category, they're growing very well.

And within that, how popular is the DLP technology turning out to be?

At the end of 2003, we had had 18 different models that used DLP-based technology. At the end of 2005, we were up to 125. It really has done pretty well for a pretty young technology in the consumer-electronics world. We've really only been working on this in the consumer space for about three years now, and to see that growth is really quite encouraging.

So where's DLP technology going?

The good news is that we're going to take it up in performance and down in cost to consumers. And the form factors of these DLP sets will be more and more appealing. Now let's go back to the first of those three. Going up in performance means more than 1080p [progressive scan picture -- a measure of resolution]. We talked at the Consumer Electronics Show about a new source of illumination using a solid-state LED [light-emitting diode] instead of a bulb. Without going into the technical details, the colors are richer, the resolution is better. It makes for a spectacular picture.

And I would imagine the power consumption is better.

Well, there are side benefits. First off, the LED is a more reliable light source. Second, a solid-state device turns on instantly. If you use a light bulb there's a warm-up period before it comes on. There are people talking -- and this is a little over the horizon -- about using lasers to illuminate the picture. So you can imagine what the brightness will look like when we can do that. I think Samsung has LED-based DLP sets coming out here very soon.

If you really want to stay tuned, there's going to be some interesting effects like 3D. Since these DLPs are millions of mirrors moving, we can switch them at a very high rate of speed, and that lets the creative producers do some really stunning effects. We're working on 3D in the cinema right now. But it doesn't take much to figure out that we could do this on small handheld projectors, and there's a certain class of user called a teenage male gamer, and you can imagine what they might do with 3D gaming.

Would you need special 3D glasses for that or would it just be an in-picture effect?

We've got people working on both. The other thing we're pushing on DLP is to get the sets flatter and thinner. And we'll have some sets out this summer that will be down to less than 10 inches in thickness. Right now, they could be about 18 in., and they're still thin compared to big CRT sets.

Also, if you look at plasma or other LCD sets, you'll typically see a border, about an inch-and-a-half or two in. And that border usually has to be there because there's electronics there to drive that flat panel. We've got some form factors that will be out this summer that will allow us to take the picture right to the edge of the screen.

Do DLP chips march to their own version of Moore's Law by getting smaller and cheaper every few years?

You've just hit it square on the head. The fact is that this technology is a semiconductor technology, and it does follow Moore's Law. That means we can make these chips smaller. And when we make them smaller, things are cheaper. And when we make them smaller we can also make them better at the same time, which has always been the secret of our industry. You can choose to put more mirrors on a chip and have better resolution. Or you can also take the same resolution, and then build more chips per wafer, which drives down the cost.

We're working with all our manufacturers to the point where we'll see DLP TVs with new features and new capabilities, but we're also driving [the cost] down to where it can be the most affordable TV technology available.

How affordable?

Already you can find 50-inch sets coming in under $1,500. I believe by fall of this year we'll have some models coming in under $1,200, and I don't believe it's unrealistic to expect them to be under $1,000 over time.

How is the DLP business coming along for cinemas? I think we've got four times the number of screens that we had a year ago. This whole thing with digital cinema wasn't an "if" question but a "when" question. We're really seeing it start to take off. We've had some announcements with some theater chains like Landmark... and they're going with DLP across the board for their projection cinema.

The other part of the business that gets left out of the story sometimes is the front projectors. We've got some that can fit in the palm of your hand and can be driven off a battery. We think we can take those down. Today, they're probably at $500, and we think we can get them down to half that. You can start talking about having these things as appliances for game stations and game cubes. You might even be able to dock your video iPod or video cell phone into one of these projectors and show the video on the wall for your friends.

How much does DLP account for your overall sales?

We don't break it out specifically. We give an estimate to the financial-analyst community, that it's a little more than 5% of revenues. But I would say that being in the DLP business has changed the way we do some things here at TI. We're advertising with the National Football League in the fall, we're sponsoring a NASCAR team, and if you would have told me just two or three years that we would be doing these types of things I don't think I would have taken the bet.

But it really is about us taking the DLP message to the end consumer, so that when they come through the front door of a consumer-electronics retailer, they're asking for a DLP-based TV. So you're seeing a very different profile in terms of how we're raising our marketing profile.
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