Abstract
Driven by government initiatives and market forces, the global TV market has entered the digital TV era. iDTV (Integrated Digital Television) products that are capable of receiving ATSC (the US digital TV standard), ISDB-T (Japanese) or DVB-T (European) digital TV signals have gradually become the market mainstream.
Recognizing the potential of the iDTV market, TV IC suppliers such as NXP, Broadcom, AMD/ATI, Micronas, and Zoran have been developing new IC products for use in iDTVs. Leading audiovisual IC vendor STMicroelectronics is also expanding into the iDTV IC market through its acquisition of Genesis Microchip, a leading supplier of TV and video processing ICs. This report will examine the reasons for STM's acquisition of Genesis, and will explore the key trends in the development of the iDTV IC industry.
ST Gains TV Processing Technology and Customer Portfolio from Genesis Acquisition
In the past, Genesis was able to leverage its strength in video decoder, scaler, and de-interlacer ICs and in analog TV reception and TV signal processing technology to establish a dominant position in the LCD display IC market. The company has also built strong relationships with leading international brands such as Philips, Sony, Toshiba, and LG. Today, the general trend in the global TV market is towards integrating digital TV reception function into the TV itself in the form of an iDTV solution. Lacking demodulator (8VSB, VSB, and QAM) and MPEG decoder IC technology, Genesis has fallen behind its competitors in the development of integrated IC solutions for iDTV products.
Having spun off its flash memory division, STMicroelectronics is now working actively to develop the iDTV, HDTV, and mobile communications IC markets. In the iDTV IC segment, STMicroelectronics has already built up extensive experience in demodulator and MPEG decoder IC technology for use in STB (Set Top Box) and DVD players. However, this advantage was offset by STMicroelectronics' weakness in analog TV signal and processing technology, including video decoder, scaler, and de-interlacer IC technology.
The acquisition of Genesis has helped to strengthen STMicroelectronics in areas where it was previously weak, while also making it possible to STMicroelectronics to rapidly build supplier relationships with leading international TV brands. STMicroelectronics is now in a position to mount a serious challenge to leading iDTV IC suppliers such as NXP, AMD/ATI, MStar, and MTK.
Cost and Performance Considerations Pushing iDTV Chips Towards SoC
As a result of aggressive promotion by the leading TV brands, iDTV is gradually emerging as the mainstream digital TV product type. As with analog TVs and LCD monitors, intense price competition (particularly among the Taiwanese IC suppliers) and the desire to improve performance are pushing iDTV IC products in the direction of SoC.
Having already developed TV processing SoC solutions that integrate video decoder, scaler, and de-interlacer functions, IC suppliers are now beginning to integrate MPEG decoders into their SoCs. Some companies are starting to incorporate 8VSB, VSB, or QAM demodulator function into their SoC devices in order to meet the needs of different standards and different regional markets.
Mergers Leading to Increased Concentration in the iDTV IC Industry
Impressed by the growth potential of the iDTV market, IC suppliers are working actively to develop iDTV IC solutions. To create integrated iDTV IC solutions, IC suppliers need to possess digital and analog TV signal reception, compression/decompression, and display control and adjustment technologies. With the ongoing trend towards acceleration of the product development cycle, individual IC suppliers are finding it increasingly difficult to cultivate the necessary talent and develop all of the necessary skills in-house.
Acquisitions constitute one way of acquiring new technical capabilities. Besides giving a company access to products and technologies that it previously lacked, acquisitions also enable the company to exploit the customer relationships that the acquisition target had built up; this has been a major factor in both STMicroelectronics' purchase of Genesis and Novatek's acquisition of Cheertek. The iDTV IC industry still includes several IC suppliers that have impressive customer portfolios but do not possess a comprehensive range of iDTV IC technologies, along with other companies that have first-rate technology but which have failed to build relationships with leading international brands. It can therefore be anticipated that the recent wave of M&A activity in the iDTV IC industry will continue for some time to come.
Looking ahead to the future, cost, performance, and price considerations will continue to push iDTV ICs in the direction of SoC solutions. As iDTV ICs and iDTVs become standardized, price competition will intensify, creating intense cost-down pressure. No-brand and regional iDTV vendors will find themselves facing the same kind of vicious price competition that has developed in the past in the DVD player and mobile phone handset markets. This intense price competition among iDTV makers will reinforce the trend towards an iDTV IC market that is dominated by a handful of large suppliers.