On All Those Flat Screens, a Map of the Japanese Islands : Technology: For computers, television and who knows what else, the future is flat. And Japan has the franchise.


They don't look very complicated, those little flip-up screens that double as dust covers on the new notebook-sized personal computers. Just a couple of panes of glass, really, with some special substances and fancy electronics in between.

But it's the technology of the screen--more than the tiny chips and miniature disk drives and lightweight power systems--that is driving the development of the portable PC. Generically known as flat-panel displays, these ingenious and highly complex devices are also destined to govern the design of high-definition television systems, military electronics systems and a host of other new technologies.

Though few will mourn the demise of the bulky, radiation-emitting cathode ray tube--long the dominant means of displaying images--the rapid development of flat-screen technology is a mixed blessing for the U.S. electronics industry. That's because the big Japanese electronics firms, which perceived the importance of screen technology early on, have invested billions of dollars and are now the dominant players in the flat-panel display market.

Screens could thus become the centerpiece of the next electronics trade war between the United States and Japan, depending on how U.S. policy-makers choose between two unpleasant alternatives: ceding the market to the Japanese, or protecting the struggling domestic industry on the grounds that flat screens are so critical to so many future products that the country can't afford not to make them.

Domestic manufacturers of flat-panel displays--mostly small, privately held firms with names such as Planar Systems and Plasmaco--know what they want. They claim that Japanese manufacturers are selling screens in the United States at a loss, and last July seven small companies joined to file an anti-dumping petition against 12 Japanese firms. The International Trade Commission has already found that U.S. companies have been injured, and when it issues a final ruling early next year, it could impose tariffs as high as 318% on some Japanese screens.

But as in the notorious U.S.-Japan computer chip dispute, the American computer companies that buy screens for their products have lined up alongside their Japanese suppliers rather than their U.S. compatriots. Compaq Computer Chief Executive Joseph R. Canion calls the anti-dumping petition an "unfortunate" action that "tries to play on a (nationalist) sentiment."

Canion says the U.S. companies "have never been able to supply the high-resolution flat panels we needed. If (the United States) reacts to a dumping case like this, the only result will be to further injure American companies."

Compaq, like many U.S. companies, buys the screens for its laptop PCs from Japan's Sharp Electronics, widely regarded as the world leader in flat-panel displays.

The flat-panel display controversy is similar to the chip dispute in several other respects. Both technologies require large capital investments and superior manufacturing capabilities. Both can be viewed as "core" technologies that are critical to a variety of products. And both have been "targeted" by Japanese companies as major areas of interest.

But there are critical differences as well. American firms invented the computer chip and dominated the market for most types of chips for years, while the Japanese firms bootstrapped their way into the business via technology-sharing agreements with U.S. companies.

In flat-panel displays, by contrast, the basic technologies--though mostly invented in the United States--essentially sat around untouched in the public domain for decades. In the late 1960s and 1970s, Japanese companies recognized the potential significance of flat screens and invested the money and engineering talent in turning the scientific concepts into workable products.

"Most people don't like to think the Japanese are ahead of us in technology," says Larry Tannas, an Orange-based electronic display consultant. "But it takes a lot of money and time and technological expertise (to turn the basic technologies into products). A lot more money and time than the inventing."

Still, some believe that the Japanese lead in flat-panel displays is now being extended not by superior technology but by the "brute force" of massive investment, in the words of Dataquest display products analyst Jack Roberts. Specifically, Japanese companies--including Sharp, Toshiba, Hitachi, Matsushita and Seiko Epson--have in the past year announced plans to spend some $2 billion on new flat-panel display factories.

These plants represent a massive bet on a technology called active-matrix liquid crystal display, one of the three competing techniques for making flat screens. American companies have mostly focused their efforts on two other technologies, plasma and electroluminescent. While these types of displays boast better visual quality than LCDs, they generally use more power and have one fundamental drawback: They have yet to convincingly demonstrate color capability.

LCDs hold about 60% of the $2-billion worldwide market for "high information content" flat panels, according to Stanford Resources Inc., a San Jose market research firm. Plasma screens account for 30%, while electroluminescent, though growing fast, has just 2%.

Computer users familiar with earlier generations of LCD technology might be surprised at the brightness and clarity of the latest portable computer screens. Monochrome LCD displays using backlighting and "supertwist" technology show complex graphics clearly, and the bright orange plasma screens have even better brightness and contrast and can be made in large sizes.

Electroluminescent technology is still used primarily for specialty applications such as industrial computers and medical instruments but provides some of the best looking monochrome screens of all. "Each of these technologies will come in and find some headroom," says James M. Hurd, president of Planar Systems, a Beaverton, Ore., spinoff of defense electronics firm Tektronix that makes electroluminescent displays.

All flat screens use a matrix of electrical circuits that allows power to be applied to a specific point, or pixel, on the screen. Hundreds of rows and columns of pixels produce the words or images, just as they do on a traditional cathode ray tube.

LCD screens rely on the refractive characteristics of liquid crystals--they allow light to pass through when they are turned in one direction, but block it when they are lined up in a different direction. Electrical pulses rotate the crystals at each pixel and produce an image.

Plasma screens use a phosphorous material between the glass sheets of the screen rather than the crystal substance; it glows when power is applied. Similarly, electroluminescent screens use an inert gas that glows when heated, the same principle used in fluorescent lamps.

The Japanese, though they are continuing to invest in all three technologies, seem convinced that LCD is the most important, primarily because LCDs can now produce color with a technology called active-matrix thin-film transistor. International Business Machines is also going this route, spinning off its own plasma display operations into a private company called Plasmaco in favor of an LCD joint venture with Toshiba.

In an active-matrix LCD screen, a thin film of silicon is applied to the glass, and thousands of transistors are etched into the film. Three tiny transistors, one for each color, are located at each pixel, and they can be controlled very precisely to open the crystal "light shutters" and show a certain color.

The main problem with this technology is that the screens are essentially giant computer chips, and are thus very difficult to manufacture. Using the same type of photolithography process that's used to make chips, the circuits are etched onto the coated glass, and it must come out without any imperfections for the screen to work properly.

That becomes more and more difficult as the screens get larger, and thus only small, 5 to 6-inch color flat screens are now available. Joseph A. Castellano, president of Stanford Resources, believes that it will be the year 2000 before even a 13-inch screen can be made using this technology. And active-matrix LCDs cannot be back-lit, rendering them dim in poor lighting environments.

Castellano cautions that this limitation means the traditional CRT will be around for a while, especially for television sets, and it could be two decades before a flat-panel display can be made large enough for an application such as high-definition television.

He also believes that the LCD has won the battle for the computer screen, leaving the other technologies to chase fast-growing, but far smaller, niche markets in areas such as medical instrumentation and automotive electronics.

Since no American companies are investing the hundreds of millions of dollars necessary to make thin-film transistor LCDs, Castellano says, the best U.S. industry can hope for is that the Japanese will begin producing some of the screens in this country. Especially because big firms such as American Telephone & Telegraph, IBM and Xerox are not pursuing the technology, a true domestic flat-panel display industry is simply not on the horizon.

The danger of that, according to Michael Borrus, co-director of the Berkeley Roundtable on the International Economy, is that the display is playing an ever-larger role in the design of the entire computer.

"As the electronics is integrated, you have to ask whether loss of control over the display technology translates into vulnerability in the system itself," says Borrus. He agrees that domestic manufacturing--as opposed to domestic ownership of the technology--is the most that can be achieved at this late stage.

The fact that Japanese screen vendors are also systems vendors--and thus could potentially keep the best screen technology for their own PCs--doesn't seem to worry U.S. manufacturers. "That's really never been a concern," said D. Bruce Walters, senior vice president at Grid Systems, a portable computer vendor.

Canion of Compaq said Sharp wouldn't dare withhold screens, because to do so would be an act of "economic war." But for the struggling U.S. screen vendors, that war has already begun.

"There's nothing fundamental that should stop our products from competing," says James L. Kehoe, president of Highland, N.Y.-based Plasmaco, "as long as (competitor's) prices are related to manufacturing costs."

In the short term, those costs may go up as the new Japanese factories are built. But once they are on line, costs and prices should plummet. By 1997, estimates Stanford Resources, flat-panel displays for computers and televisions will be an $8.4-billion-a-year industry. And the growth will only have just begun.

U.S. PRODUCERS EXIT THE MARKET Experiences of U.S. producers of flat panel displays in the 1980s.

Company Screen type Outcome Alphasil liquid crystal display Closed 1988 AT&T; plasma display panel Closed 1987 Control Data plasma display panel Closed 1980 Crystal Vision liquid crystal display Closed 1984 Epid/Exxon other? Closed 1986 Kylex/Exxon liquid crystal display Sold 1983 General Electric liquid crystal display Sold 1989 GTE electroluminescent Closed 1987 IBM plasma display panel Sold 1987 LC Systems liquid crystal display Closed 1988 NCR plasma display panel Closed 1984 Panelvision liquid crystal display Sold 1986 Plasma Graphics liquid crystal display Closed 1985 Sigmatron Nova electroluminescent Closed 1988 Texas Instruments plasma display panel Closed 1983

Source: Office of Technology Assessment AMBITIOUS PLANS Japanese companies' investment plans for flat panel displays

Company Investment plan Sharp $700 million from 1990-93 Hitachi $210 million in 1991 Toshiba (with IBM) $140 million NEC $70 million in 1990 Mitsubishi $70 million Hosiden $140 million by 1992 Matsushita $350 million by 1992 Sanyo $560 million by 1992

Source: Nikkei Sangyo Newspaper survey (Feb., 1990)

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