Samsung to Use SRS Labs’ Chips in Cell Phones

SRS Labs Inc. has long been known for making inexpensive speakers sound rich and full. But the Santa Ana audio technology firm is expanding into new markets, thanks to a multiyear deal it recently signed with consumer electronics giant Samsung Electronics Co.

The licensing agreement calls for SRS Labs’ voice technology--known as VIP--to be incorporated into all of Samsung’s cellular phones. Financial details were not disclosed, but SRS officials say it is one of the largest deals the company has signed in the last year.

The VIP technology is based on a device used for in-flight communication sound systems and products developed by Hughes Aircraft Co. that allowed passengers to better understand what the pilot was saying in the plane’s overhead speakers.

SRS acquired the technology for about $1.5 million last January. The only problem, SRS staff say, was this technology required a circuit board as big as a traditional home computer.

“It was way too big to put into a portable consumer device, like a phone or a computer speaker,” said Tom Yuen, president and chief executive of SRS. “So we took it apart, improved it and made it into a tiny chip.”

Yuen expects Samsung to roll out phones with the VIP chip, which should make the cell phones sound clearer, by the middle of this year.

The Samsung deal is part of SRS Labs’ ongoing effort to modify aerospace technology and develop uses for it in the consumer electronics market. Until recently, the company’s focus has been on its Sound Retrieval System, which tweaks audio recordings to create a surround-sound feeling from a two-speaker stereo.

Last year’s acquisition of Hong Kong-based Valence Technology Inc. gave SRS the ability to build the hardware and computer chips needed to show off its technology and expand its product line.

Sensing that its stock price was undervalued, the company announced plans in December to repurchase up to 500,000 shares of its common stock throughout 1999. The company’s stock hit a 52-week low of $2.38 a share on Dec. 23. On Friday, the shares closed at $3.75, down 19 cents.

P.J. Huffstutter covers high technology for The Times. She can be reached at (714) 966-7830 and at p.j.huffstutter@latimes.com.