Japan Poised for New Jump in Electronics : Technology: The government is helping industry develop large liquid crystal displays to use in TVs and other consumer products.
Japan’s electronics industry, with government help, is pouring huge sums into liquid crystal displays, the flat screens that are used in digital watches and laptop computers.
The companies are betting that they can overcome formidable technical barriers to develop large displays with high picture quality, allowing LCDs to be incorporated in full-size televisions, desktop computers and other products.
“Technically, 40-inch LCDs with quality comparable to today’s TVs will be realized in six or seven years. We’re hopeful they can be commercialized in 10,” said Eiji Kaneko, director of the giant Electronics Research Laboratory, a government-sponsored consortium of 17 companies.
Sharp, Hitachi, Hosiden and other Japanese firms will this year invest $1 billion to research, develop and set up plants to make LCDs. Sharp, considered leader of the pack, plans to invest $650 million in the next three years.
The only foreign group that is even close to the Japanese in LCD development is International Business Machines Corp., which makes LCDs in a joint venture with Toshiba.
“This is a ‘Japan-supplies-the-world’ market,” said Steve Myers, an industry analyst with Jardine Fleming Securities.
Born in the United States and commercialized in digital watches in the mid-1970s, LCDs have come a long way.
State-of-the-art production models deliver 16 colors on a laptop display. Samples of 14-inch displays with better picture quality and color, comparable to TV, are due out later this year but will cost $3,900.
In the next year or two they are expected to fall in price, and the displays eventually will be combined with new integrated circuit memory cards to make lightweight laptops with long battery life and good graphic displays.
LCDs, which operate by passing electricity through liquid crystal sandwiched between pieces of glass, use less energy than conventional cathode ray tubes and have flatter screens, making them attractive in portable devices.
In addition, LCDs may gain in popularity because they appear to emit less electromagnetic radiation, which is seen as potentially hazardous, than cathode ray tubes.
Prototypes of 20-inch LCD screens are expected next year, though commercialization is still three to four years off. Scaling up LCDs beyond 25 inches will require technical breakthroughs that many people doubt are possible.
Though researching LCDs is costly, brisk demand is helping to offset the investments. Demand is growing rapidly for smaller LCD panels for portable TVs and VCRs, video telephones, electronic pocket notebooks, laptop personal computers and automobile dashboards.
By the middle of this decade, LCDs should eclipse cathode ray tubes as the most valuable display technology. By 2000, the LCD business will have grown 10 times to $13 billion, analysts say.
The investment blitz is reminiscent of one that gave Japan control of the global market for memory chips in the mid-1980s.
But that effort had a hidden cost. When prices of memory chips fell in the mid-1980s, Japanese firms, having overestimated demand and built up excess capacity, were forced to sell chips below cost.
Today, although excess capacity is not foreseen, few companies make money on LCDs because of the low percentage of panels produced without defects.
Japan’s LCD development also carries political risks, because its dominance over the market for another important electronic product may irritate trading partners such as the United States.
“It’s going to be another recipe for trade friction down the road,” said Virginia Kouyoumdjian, an industry analyst at Baring Securities in Japan.
But to Japanese companies facing high labor costs and hungry Asian competitors, LCDs are a strategic imperative. Japanese companies can use LCDs to stay ahead in consumer electronics and further penetrate markets for computers.
More broadly, Japan’s focus on LCDs is a bonanza for its semiconductor production equipment makers, the companies that make the tools for producing microchips. Making active-matrix LCDs--the most common type and the one Japanese companies are betting on--is similar to manufacturing chips.
Despite the Japanese blitz, the game is far from over. Active-matrix LCDs may never be scaled up to large sizes at affordable prices. And Japanese firms, along with many in the United States and Europe, are exploring alternative flat-panel technologies.
But even if other approaches to LCDs turn out to be the screen technology of the future, Japanese firms are likely to dominate.
“Whichever way the market moves, they’ll have a product,” Myers said.
