Microtune Sees TV Tuner Chip Sales Reaching 3 Million Units in 2011

The chip, which will be priced at $2 in volume, is nearing the end of engineering evaluation with customers and will be in prototype flat-panel TVs in the second half, Chapman said. Finished TVs could ship in 2011, he said. Microtune hasn’t identified potential customers, but Samsung this year built its silicon tuners into LCD TVs, Chapman said. “It’s a big transition from can tuner to silicon tuners and its going to be several years before silicon tuners make significant penetration,” Chapman said. It took three years for silicon tuners to achieve a 50 percent install base in cable set-tops, he said.

The ICs will be built by IBM and assembled by Amkor. The chips have a 35-cent bill-of-materials cost, 50 cents less than a pairing of an analog demodulator with a silicon tuner, Chapman said. Microtune also is developing a digital demodulator as it benefits from last year’s acquisition of Auvitek. It kept Auvitek’s engineering design center in Shanghai that has 60 employees, he said. The total market for digital TVs will increase to 352 million units by 2013, up from 224 million this year, he said. Microtune claims a 24 percent share of silicon tuner market, followed by Broadcom (18 percent), STMicroelectronics (12 percent) and NXP (11 percent).

Microtune also expects to start volume production in 2011 of its MT3511 for the automotive entertainment market. The chip features a 16-bit analog to digital convertor that digitizes the RF signal and provides an interface for software defined radio architectures. Microtune is working with two DSP suppliers, whose chips work with the MT3511 to demodulate supported radio standards including HD Radio, Digital Radio Modiale and analog AM and FM. Chapman declined to identify the partners. The MT3511 is targeting 2012 vehicles, Chapman said. Microtune already supplies RF tuners to Delphi, Audi and others.

Chip sales in China are expected to grow to about 20 percent of Microtune’s annual revenue over the next three years as it gains design wins in DTVs and cable set-top boxes, Chapman said. Microtune developed demodulators compliant with China’s CTTB DTV standard and is supplying cable TV tuners to set-top box makers Coship Electronics and Shanghai Digivision. Microtune’s MT1119 antenna amplifier also is used in Chinese car manufacturer BYD’s sedans and electric vehicles, Chapman said. Sales in China, including Hong Kong accounted for 33 percent of Microtune’s $22.3 million Q1 revenue, up from 23 percent of $17.8 million a year earlier. Cisco was Microtune’s largest Q1 customer, representing 28 percent of revenue, down from 36 percent a year earlier. Cisco uses Microtune’s products in cable set-top boxes and other products, including DOCSIS 3.0 modems. Sales to cable market accounted for 76 percent of Microtune’s Q1 revenue, down from 80 percent a year earlier as DTV grew to seven percent from one percent, Chapman said.

Microtune added three new board members as part of an agreement it struck with investor Ramius Group, which bought 9.2 percent of the company in late 2009. In December, Ramius proposed putting up four nominees to replace board members at the company’s annual meeting in May. In effort to head off a proxy battle Microtune board members Walter Ciciora, Michael Schueppert and William Tai didn’t seek reelection and were replaced by Ramius nominees Drew Peck, Robert Rast and Raghavandra Rau. Peck and Rast haven’t purchased Microtune stock yet, but Rau owns 3,300 shares, Microtune said in an SEC filing. While Ramius has a reputation of pushing for management changes, the investor so far hasn’t taken any action, Chapman said. “They had a lot of questions about our DTV product and where we were with that,” Chapman told us.

Microtune also expects its spending on legal costs, which have been running $2-$3 million per quarter, will slow, Chapman said. Discovery is complete in a lawsuit the SEC filed against former Microtune CEO Douglas Bartek and CFO Nancy Richardson, which should help reduce quarterly legal expenses, he said. Bartek and Richardson were sued for violating federal law governing stock option grants. Microtune voluntarily contacted the SEC in 2006 and settled two years later. Microtune has liability insurance that covers Bartek’s and Richardson’s legal expenses. It has gone through $13.9 million of a $20 million liability insurance plan, the company said in its 10Q. A trial date hasn’t been set, Chapman said.

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EMagin will spend $3.5-$4 million on a new production line that will increase annual capacity for OLED microdisplays to “millions of units,” Chief Financial Officer Paul Campbell said. EMagin is negotiating a purchase order with an unidentified Asian equipment vendor with a goal of having the new line start production in late 2011 at its plant in East Fishkill, N.Y., CEO Andrew Sculley said. Ulvac supplies eMagin’s existing manufacturing equipment, but isn’t providing the new gear, Campbell told us. The manufacturing line will take seven months to build and three months to install, Sculley said. On its current production line, eMagin carves 116, 0.59-inch microdisplays with 800x600 resolution from an eight-inch wafer, Campbell said. EMagin previously weighed seeking partners to help pay for new line (CED June 3/09 p3), but now will use internal operating cash, Campbell said. EMagin had $5.9 million cash and cash equivalents as of March 31, he said. EMagin, which paid down $6 million in debt last year, also has an untapped $3 million credit line with Access Business Finance that is up for renewal Sept. 1, it said. The new line will arrive as the company moves to increase capacity for a 0.77-inch microdisplay with 1,280x1,024 resolution and 400 nits that’s sold for night vision goggles and thermal weapons sites. EMagin also expects to start production “in a couple months” of a new 0.44-inch display with 800x600 resolution and an 11.1 micron pixel pitch, company officials said. On the high-end, eMagin is developing a 0.9-inch display with 1,920x1,200 resolution that will start sampling in 2011, Campbell said. The 0.9-inch device is being designed for telemedicine applications under a two-year $6 million contract with the U.S. Army, Sculley said. Meanwhile, eMagin reached a settlement with former Chief Business Officer Susan Jones. Jones, who left the company May 12, will get $473,000 salary and one percent of the company’s revenue over an 18-month period, eMagin said. EMagin’s net Q1 net income improved to $880,000 from $394,000 a year earlier as revenue rose to $5.9 million from $5.1 million. Contract revenue jumped to $1.4 million from $788,000, while that from products increased to $4.48 million from $4.35 million. With the change in management, eMagin shifted focus to only selling microdisplays. But eMagin continues to market Z800 3D Visor glasses, which contain 0.61-inch microdisplays, for training and simulation applications at $1,499.