Just What The Doctor Ordered For T Vs: Plasma

Last summer, Plasmaco Inc. of Highland, N.Y., was at death's door. Some $10 million dollars in the red and months from a commercial prototype, the small designer of flat TV screens got snapped up for just $1 million by a group of investors led by Atlantic Venture Group Inc., a venture-capital company in New York City.

A year later, Plasmaco's screens are rolling off its Highland production line, and the future suddenly looks brighter. Its so-called plasma displays, which create sharp images from a glowing gaslike substance, are attracting big-time interest. Next month, Chief Executive Officer John J. Antretter says he'll announce a manufacturing alliance worth "several hundred million dollars."

WALL-HANGING SETS. What makes plasma so hot? TV makers sense strong demand for large, flat televisions that don't dominate the room or weigh as much as a piano. Some of these manufacturers have reaped millions in profits from the explosion of color liquid-crystal displays (LCDs) for notebook computers. Now, they want to bring that same trend into the living room. "The whole display industry is shifting," says Yoichi Morishita, president of Matsushita Electric Industrial Co. "Large, wall-hanging TVs will be a key part of multimedia."

The trouble for Matsushita and a half-dozen other Japanese makers who have sunk billions into LCDs: The brilliant notebook computer panels are too small to hang on a wall. And manufacturing flaws proliferate when screen sizes exceed 13 inches. Plasma displays should eventually be easier to make than LCDs. The first color 21-inch panels are already on sale. They cost a steep $8,000 a pop. But most of that is for control chips, which are plummeting in price, says Michihiro Ohta, NEC Corp.'s general manager in charge of plasma. Over time, plasma screen sizes could go as high as 80 inches.

That's why Japanese display makers are pumping money into plasma (table)--a technology that was invented 30 years ago at the University of Illinois. In June, NEC announced plans to spend $1 billion over five years to boost plasma-screen production. Fujitsu Ltd. will spend upwards of $300 million. Sony Corp. is designing large hybrid displays that combine plasma and liquid-crystal elements, working with Tektronix Inc. in Wilsonville, Ore. And Japan's national broadcaster, NHK, is leading a 25-company consortium to make large screens for high-definition television.

While plasma is trendy, no one is sneering at the huge investment Japan has sunk into LCDs. David Mentley, director of display research at Stanford Resources Inc. in Palo Alto, Calif., thinks these smaller computer screens will be mainstream for many years. LCDs will account for 87% of the world's $11.5 billion flat-panel market this year, compared with less than 3% for plasma. And the ratio won't change much in the year 2001, by which time the overall market will have doubled.

Still, consumer appetite for larger screens is enormous. Sales of projection TVs with screens up to 60 inches are growing nearly 30% a year--the fastest in the whole television sector. Japanese producers have also found a gold mine in "wide screen" TVs, which mimic the panoramic look of movies. Makers shipped 800,000 units in the first five months of this year.

UNEXPECTED CHANCES. What role will America's innovative plasma startups play in the new flat-panel hierarchy? The prognosis is mixed. On the one hand, companies such as Photonics Imaging in Northwood, Ohio, have created unique high-resolution plasma prototypes. What's more, notes Michael Ciesinski, head of the U.S. Display Consortium in San Jose, Calif., the whole display market is diversifying. That creates opportunities for small companies in unexpected places. Nobody knows, for example, whether a television circa 2001 will be a wall-hanging monster, a tiny screen that flips down in front of the eye, or a projection directly onto the retina. "Americans can compete in many of these areas," he says.

But the thought of Japanese giants thundering down the fragile trails that Plasmaco and other Americans blazed raises troubling questions. None of these companies has enough money to undertake large-scale production. And even Plasmaco's fortuitous comeback is tinged with irony: Virtually all its giant suitors are located in the Far East, says Antretter. Whichever one gets the nod from Plasmaco will also receive a major equity stake. The new flat-panel sweepstakes may be a big opportunity. But the roster of winners will probably bear a lot of familiar Japanese names.

The Major Players in Plasma Technology

FUJITSU Expects to spend $300 million or more for new production lines for large displays

NEC Plans $1 billion investment over five years in plasma screens

TEKTRONIX & SONY Collaborating on a new type of screen that combines plasma and LCD technology

JAPAN BROADCASTING Leads a 25-company consortium to develop high-definition plasma displays


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