The Pentagon Ponies Up For Flat Panels

The Pentagon took a big step in early July to nurture a domestic flat-panel-display industry. The brass-hat gang will pick up half the cost of a $100 million factory to make so-called active-matrix liquid-crystal displays (LCDs)--the most common type of flat screen. At typical prices of $1,000 or so, they are the most expensive component in laptop computers. The $50 million will go into a plant to be built by AT&T, Xerox, and Standish Industries, a Lake Mills (Wis.) manufacturer of LCDs.

Because Japanese suppliers control 95% of the fast-growing flat-panel business--now about $5 billion worldwide and heading for $40 billion by 2000--the Pentagon in April announced plans to seed a U.S. industry with $580 million over the next five years. Industrial-policy critics jumped on the scheme, but market researcher O'Mara & Associates in Palo Alto, Calif., says that U.S. companies are outspending the government 3 to 1, after belatedly recognizing the market potential of flat screens. Eight startups have raised more than $200 million since 1990, O'Mara says, while established companies have invested nearly $500 million.

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