Once considered an industry with a promising future in the greater Silicon Valley area, the flat-panel-display manufacturing business has died in the Silicon region. However, despite the evaporated hopes of establishing a manufacturing base here, the Valley and surrounding areas remain a vital and growing center for the flat-panel display industry, with fabless firms and technology licensors continuing to sprout up throughout the Bay area.

Although flat-panel display production has always been an Asian affair, the last two decades saw multiple attempts by U.S.-based manufacturers to build an industry that could compete with the Far East’s LCD-production dominance. During the 1990s, a number of U.S. companies fabricated Field Emission Displays (FEDs), which are an alternative to LCDs. Many of these efforts continued through the decade. However, the flat-panel display industry in Silicon Valley -- and probably throughout the United States -- was dealt a mortal blow by the 2002 closure of Candescent Display Technologies Corp. (CDT). Founded in 1991, CDT raised more than $600 million to fund its attempt to develop FED technology that could displace LCDs as the flat-panel display of choice for TVs and monitors. Unfortunately, CDT’s technology was ultimately far more complex than anticipated. When the money ran out, it became clear that it wasn’t ready for manufacturing.

CDT faced an uphill battle from the beginning. This venture was by far the largest flat-panel-display effort outside of Asia. More importantly, LCDs had built an infrastructure and supply base with momentum that a start-up could not hope to challenge successfully.

As a result, CDT will likely be remembered as the last attempt to build a high-volume, flat-panel display manufacturing plant in the Valley -- and, probably, in the United States. Other Silicon Valley display factories that have closed over the years include Opsys, a maker of Organic Light-Emitting Diode (OLED) displays; ImageQuest, a producer of TFT-LCDs; Pixtech, another FED maker and dPix, which also made TFT LCDs.

Does the end of these efforts mean the demise of the display industry in the Valley? Not at all. Display companies still exist here. However, rather than directly taking on the Asian mega-manufacturers, most of these companies are using a different business model, one that has been used successfully by numerous fast-moving companies in the semiconductor world: going fabless. These companies develop their own technology and products but outsource the actual manufacturing elsewhere, often to Asian display manufacturers.

Two companies already pursuing a fabless display strategy include SpatiaLight Inc. (Novato, CA) and Microdisplay Corp. (San Pablo, CA), which are small, fabless microdisplay developers headquartered in the San Francisco Bay area. Another company taking this approach is Iridigm Display Corp. (San Francisco), which is developing an alternative to LCDs.

The fabless model is attractive for investors, because the capital investment now needed to build even a small display fab is more than any venture-capital group will tolerate in the post-CDT world. The idea behind the fabless model is to get key components built in factories owned by other companies, add value through clever design or intellectual property, and then sell products to the worldwide market.

This model works well, provided product innovations arrive rapidly and quickly emerge on the market. Trouble arises when commoditization creeps in, or when a fabless company misses a key technology leap and others capitalize. When this occurs, the competition is likely to come from firms that have large manufacturing and research and development resources.

A group of pure-technology licensors is taking the fabless display model to the next level. Examples include Brown Boveri, which licensed its supertwist LCD technology; Jim Fergason, who licensed his basic twisted nematic technology; Motif (Deer Park, IL) which is offering its active-addressing drive technology for STN LCDs and ClairVoyante Inc. (Sebastopol, CA), which sells a novel subpixel arrangement for LCDs.

Of course there’s always tension between the desire for advanced technology and the willingness to pay a royalty in a commodity market such as displays. Despite this difficulty, there will be much more fabless and licensing activity, and few, if any production facilities built in the Silicon Valley area in the future. n

^{David E. Mentley is senior vice president at iSuppli/Stanford Resources. Kimberly Allen, Ph.D., director of technology and strategic research for iSuppli/Stanford Resources, contributed to this article. This was article was reprinted with permission from iSuppli Corp.}