‘Challenged’ CE Revenue Expected to Persist at Silicon Image

The CE business, including digital TV and home theater, will be down in 2012 at Silicon Image, but at a slower rate than in 2011, CEO Camillo Martino said Thursday in the company’s Q4 earnings call. The company’s CE revenue was “challenged in 2011, and we expect to see these trends continue in 2012,” Martino said, but the company is banking on market trends, new technologies and its investment in Sibeam for 60-GHz wireless technology last year to drive CE revenue in 2013, Martino said.

Among the new technologies fueling optimism is InstaPrevue, shown at CES, which gives consumers a live picture-in-picture preview of HDMI devices connected to a TV that’s designed to simplify switching between HDMI sources. Silicon Image is also expecting MHL (Mobile High-Definition Link) to advance into the DTV market, and Martino cited recent investments in home theater, which include 60 GHz wireless and WiSA (Wireless Speaker & Audio). The company also expects 4K displays to “start gaining traction” in 2013, which should help prop up the high end of the TV market, he said.

Echoing the theme of the times, Silicon Image said mobile technology was the primary catalyst for the company in 2011. In Q4, mobile revenue was $21.1 million, compared with $4.6 million in 2010, growing from 11 percent of total product revenue to 47 percent, and representing the largest category share for the company. Silicon Image estimates the number of smartphones shipped with MHL transmitters in 2011 at 50 million. For 2012, the company is forecasting at least 100 million additional smartphones will ship with MHL, and Martino predicted the ecosystem will “expand significantly” with TVs, monitors, adapters and cables tossed into the mix. Q4 set a new record for MHL product shipments, he said, and the number will grow based on introductions of MHL-enabled devices at CES including PCs from Samsung, TVs from LG and BenQ, smartphones from Huawei and AV receivers from Onkyo.

While the ecosystem for MHL is starting to build out, attach rate is relatively low at less than 10 percent, Martino said, so marketing will be a push area for the MHL Consortium this year. Silicon Image will bump up marketing expenses “and promote the use case” to drive the attach rate higher for 2013, with results expected to bear fruit in late 2013, he said. As the number of MHL-enabled smartphones and monitors expands, it’s Silicon Image’s hope that more TV manufacturers will be willing to deploy MHL in 2013. MHL’s success in smartphones “is going to feed into the TV growth next year,” Martino said.

Despite the rise in mobile and the decrease in CE business, Silicon Image remains committed to both ends of the connection, whether wired or wireless, Martino said. The only way a wireless or a wired standard is going to deploy is to do so “across the board,” which is why it’s “important for us as a company to invest in technologies that are not only on the mobile side or on the PC side but also on the displays,” he said. “They connect together,” which is what will drive company success, he said: “We expect that CE business to continue to grow, no question."

Wireless was an important addition to the company’s connectivity strategy in 2011, Martino said, after the company added 60 GHz technology through its purchase of Sibeam in May. The technology is in the market today in an Epson 3D home projector and Dell Alienware PCs for the gaming market. Silicon Image will begin sampling its Gen3 60 GHz products “soon” and they'll be targeted to the CE, PC and tablet markets, Martino said. The company cut power consumption and size, going from the second to the third generation to make the technology applicable to the mobile market, where “even lower power consumption,” lower price and a smaller form factor are required, he said.

The next step is “to launch a product to address this market,” Martino said. The company will deliver samples to key mobile customers later this year, and the company expects to realize revenue from 60 GHz mobile products in the second half of 2013. The company demoed 60 GHz products at its display at CES, including a Blu-ray player, smartphones and tablets “all without latency or without interference from the many surrounding Wi-Fi networks,” he said. One application showed mirroring and dual-view scenarios in which gamers can use the tablet screen for one view and the TV screen for another, he said.

In HDMI, the company reported 45 HDMI Forum members and 1,166 adopters at the end of 2011. According to Martino, roughly 22 products using the HDMI interface sold every second last year at retail. Silicon Image projects an installed user base of nearly 3 billion products incorporating HDMI by the end of this year. Martino reiterated the company’s goal to have its HD connectivity technology “in every consumer mobile and PC device shipped” whether in semiconductors or intellectual property.

Silicon Image executives wouldn’t comment on whether MHL will be a feature on Windows Phone handsets due out on the market later this year. The current crop of MHL phones are on the Android platform. As the MHL ecosystem grows there will be “more and more companies and more and more technology partners like Windows Phone … that will endorse MHL in the coming months,” Martino said.

Silicon Image also has its sights on the automotive market, which Martino called “appropriate” for MHL deployment. He noted that Pioneer announced automotive-related applications based on the MHL standard at CES. The design cycle for automotive is “shall we say, long,” he said, “but once the production starts, you are obviously in there for a long time.” The earliest the company could count on MHL revenue from automotive would be “2014-ish,” he said. Between now and then “it’s very very important” to be sure the standard is locked down, he said. “A lot of technology work” needs to happen between now and then, he said.

For Q4 2011, Silicon Image revenue dipped to $58.7 million sequentially from $59.7 million in Q3 and was up from $52 million in Q4 2010. For the year, revenue was $221 million, compared with $191.3 million for fiscal year 2010. Profit for Q4 2011 was $4.8 million compared with $5 million for Q3 2011 and $5.3 million for Q4 2010, it said.