Mainstream TV Helps Silicon Image Beat Q2 Revenue Projections

Silicon Image reported second-quarter earnings of $2 million, $0.03 a share, on revenue of $44.6 million that beat projections for the quarter despite an “industrywide supply-chain constraint,” CEO Camillo Martino said Tuesday on a conference call. The company credited the results to an increase in production of digital TVs, citing DisplaySearch forecasts of a 28 percent increase in 2010 DTV shipments, to 204 million units. Silicon Image said its market share has increased from expansion into the mainstream TV business and from sales of audio/video receivers and Blu-ray players, especially in Japan. A Japanese government incentive program to promote energy-efficient products has increased demand for ICs, Martino said.

Silicon Image is starting to gain momentum with 3D, said Martino, adding that 3D is expected to drive 10 percent of the TV market this year. “It’s showing some strong momentum, but it’s not the overall material number for our revenue. Next year, we'll see more significant impact from 3D."

Silicon Image supplies the smartphone market with low-power HDMI transmitters, but Martino said the company expects to switch to MHL, which represents “the next strategic opportunity for us” with the adoption of the MHL 1.0 specification by Nokia, Samsung, Sony, Toshiba and Silicon Image in June (CED July 7). “Over time, MHL will expand into a broader array of mobile devices due to its key advantages,” Martino said, pointing to its need for fewer connectors, the capacity to provide power to the device, and the ability to charge the battery while simultaneously transmitting high-definition content. Cameras, camcorders and even monitors and notebook PCs are on the radar for MHL connectivity, he said, and “we would expect pretty broad-based adoption over time.” The company expects to provide key customers with MHL samples “within a few months,” he said, and it remains on course with projections that MHL-compliant products will increase company revenue in early 2011 and make a more substantial contribution in the second half. Martino envisions an adoption curve of MHL that’s “a little bit faster than HDMI,” mainly thanks to HDMI’s paving the way in the market. “When HDMI took off, there were a number of things that had to happen in the ecosystem for HDMI to take off,” he said. “MHL leverages a lot of the hard work that HDMI did, and it just got some more compelling features.” MHL won’t mean a “blanket replacement of HDMI,” he said, mentioning the camcorder as a mobile device that will likely stick with HDMI. “They are going to, in some places, co-exist. But clearly for a smartphone, the value proposition is very strong as to why a consumer would like MHL in particular."

On the TV side, Martino said Silicon Image is working with the HDMI consortium members to advance the standard beyond HDMI 1.4a. The company is shipping its InstaPort technology in eight of the top 10 brands today. That excludes LG and Panasonic, which has its own semiconductor group. “If you do business with Samsung, it does place some constraints on you relative to other companies that you can do business with in Korea,” he said. Overall in HDMI, he cited recent data saying the technology has nearly 1,000 adopters and an installed base of more than 1.5 billion products. Despite the emergence of alternative technologies, Martino said, successive improvements and innovations indicate that “HDMI will remain the global standard for high-definition video connectivity for a very long time."

Concerning long-term strategy, “there is a significant global shift underway in how video content is distributed to consumers,” Martino said, discussing the movement from traditional broadcast TV to over-the-top, Internet-based programming for TV that “is creating significant opportunities for technology innovators.” He said consumer-driven enhancements and connectivity, interoperability and picture quality for video over the Internet are driving increasing rates of technology change, and the company’s goal is to improve and simplify the consumer’s connected HD experience, by TV or mobile device.