Intel Pulls The Plug On TV Plans


Last week, Intel officially pulled the plug on its ill-fated attempt at creating a processor for the burgeoning LCD space.

After a much-ballyhooed speech by Intel President Paul Otellini in Las Vegas last January, touting its then-forthcoming LCOS processor for wide-screen TVs, the company looked at the market, the cost to produce the chip and its return on investment possibilities. An Intel spokeswoman, in an e-mail, put it this way:

In coordination with our strategic planning for 2005, we looked at the investment required for LCOS, along with the return on investment, and as a result of that, we decided to get out of the LCOS business and instead focus our resources on areas where we can get a higher return.

You probably heard us talk last week about our focus on multi-core products and the platform technologies. When weighing things like LCOS and the investment and ROI needed, it makes more sense for us to focus on these other areas of higher return. Our decision was focused on ROI
and priorities.

It's unclear how the digital home still fits into Intel's priorities. With average selling prices (ASPs) on server, desktop and notebook chips under pressure, and a commercial market that's growing but still has potential to be fickle, Intel looked at the digital home as a no-brainer. Instead of a computer in every home, the company believed a clear path to growth existed in a computer-in-every-room business model. Or two computers in every room. Or three. Every stereo would have Intel inside. Every speaker would have it. Every television would have it.

They all still may. Intel is looking at a strategy of producing dual-core and multi-core processors as its new path to growth and success. The possibility of an entertainment PC with dual-core capability--and the ability to process audio, video, graphics and more at higher performance than ever--is still realistic.

And Intel, though the giant of the industry, found itself swept up in a global oversupply of chips during the second and third quarter of 2004 that forced it to retrench. That move, while hurting Intel and other chip stocks, is beginning to be viewed positively.

This morning, Smith Barney issued a report (registration required) saying it was increasing its ratings on 15 semiconductor stocks, including Intel.

...In the semiconductor industry, chip makers have shown unusual restraint in capital spending, mitigating the risk of massive oversupply, and allowing for chip revenue to grow along the same lines as electronics. While atypical (but not unprecedented), the result is a period of revenue stability for the chip industry (we are forecasting 5 percent and 8 percent revenue growth in 2005).

So while Intel has killed its efforts at building a 4GHz Pentium 4 processor, as well as its LCOS chip for TVs, that industry's overall pullback in capital spending is actually a good thing for the market, according to Smith Barney. It may also be a good thing for legacy home integrators, who worried that an Intel slash-and-burn pricing strategy in the digital home could hurt their businesses.

How the Santa Clara, Calif.-based chip maker announced its decision on LCOS, and how it has left that impression with the market, may be another topic entirely.

Blogger B. Greenway, at HomeTheaterBlog.com, reports:

Reportedly, competition from Texas Instruments powered micro displays [were] also considered in the decision. A quick search of Intel's LCOS page returned a "page not found."