Industry Asks U.S. for Help in Developing New TV Sets

WASHINGTON — Richard Elkus Jr. was a happy man 20 years ago at Ampex Corp. He ran the industrial products division, whose promising new product was Instavideo, the first home video recorder.

But Ampex, lacking the cash it needed to make a major investment in new production facilities, had to license the technology to Japanese firms. Today, Japan dominates video recorders, a $15-billion-a-year business.

But now Elkus thinks he can give the story a happy ending for America. He is leading an uphill effort by the American Electronics Assn. to revive the domestic television manufacturing business in the United States so that American-owned firms can profit from the coming boom in the next hot consumer product, the high-definition television set.

With an amazingly crisp and clear picture, the new wall-sized television sets will hit the market in the mid-1990s and are expected to generate $140 billion worth of business by the year 2000. The extra-wide picture will be more like a movie screen than a television. The sound will be as clear as on compact disc players.

From business’ point of view, perhaps even more important than the television sets themselves will be the semiconductors, or computer chips, that make them tick. American firms and their worried allies in Congress warn that foreign competitors, particularly in Japan, will perfect the new generation of chips--and in turn use them as a springboard to still newer consumer goods.

Rep. Mel Levine (D-Santa Monica) likens the struggle for control of the new television market to the challenge posed to U.S. technical and economic prowess by the Soviet launching of the Sputnik satellite in 1957.

“If these new foreign chips . . . improve the performance of products like computers and autos as well as high-definition television, our loss of television manufacturing capability could eventually create problems for our chip, computer and auto industries as well,” he warns.

Levine has joined with Rep. Donald Ritter (R-Pa.) and 21 other members of Congress to create a bipartisan TV task force that has promised a vast array of incentives to urge American industry back into television production.

The possible sweeteners include tax breaks, relaxation of antitrust laws to permit joint ventures, guaranteed government purchases of the new televisions and perhaps even government funding of up to 49% of the cost of factories and production lines.

“It is absolutely essential the U.S. not get off the ladder of development for one of the most important inventions of the 20th Century,” says Ritter. “We cannot afford to be absent from this emerging global gold mine.”

Rep. Edward J. Markey (D-Mass.), chairman of the House telecommunications subcommittee, has asked all players in the HDTV game--TV broadcasters, manufacturers and high-tech companies--to offer their recommendations to Congress by Jan. 4.

At meetings in Santa Clara, Calif., and Washington, officials from some of the nation’s high-technology giants have been struggling to devise a blueprint for reviving a dormant American industry.

The participants include American Telephone & Telegraph, International Business Machines, Hewlett-Packard, Motorola and Apple Computer, meeting at the invitation of the American Electronics Assn., which represents the manufacturers of semiconductors and other electronic components and the producers of many high-technology products.

Elkus, chairman of Prometrix Corp. in Santa Clara and co-chairman of the association’s task force on advanced television, says the effort could be “a last window of opportunity” for American firms to compete in consumer electronics.

Pat Hill Hubbard, the electronics association’s vice president for education and science, promises a specific industry plan within six months.

The model for high-definition television could be Sematech, a consortium of companies, partially funded by the Defense Department, to develop prototypes for new semiconductors. But the television effort would be more daunting yet: a full design and manufacturing operation, ultimately able to produce millions of television sets in competition with the Japanese, Koreans, French and Dutch.

American firms, will have difficulty getting back into the high-volume, low-profit field of television manufacturing. All but Zenith, which has 12.8% of U.S. sales, have abandoned the field under the relentless pounding of foreign firms.

The most popular U.S. television brands, RCA and GE, were sold to Thomson S.A., a French giant. Magnavox, Sylvania and Philco belong to Phillips, a Dutch company. And even Zenith has been courting foreign buyers for years.

Most TVs Made in U.S.

Nonetheless, most television sets bought in the United States are also made here. At least 20 firms have U.S. factories, with more than 30,000 workers, according to the Electronic Industries Assn.

That organization, which generally represents the manufacturers of consumer electronics products, fears any government effort to boost a strictly domestic high-definition television industry.

“Is this a wise use of taxpayer dollars?” asks Gary Shapiro, the association’s vice president for government affairs. “Will one company backed by the government have the exclusive use of a technology, or a guaranteed market?”

Shapiro says Americans will be employed making the new television sets no matter who owns the companies. Some American executives who promote the idea of a new domestic producer are guilty of indulging in “xenophobia and anti-Japanese rhetoric” to try to grab an assured position in the market, he says.

Frank McCann, a spokesman for the French-owned Thomson consumer electronics group, which makes RCA and GE television sets, says: “We consider ourselves very American.” The company employs 10,000 Americans, with major plants in Pennsylvania, Ohio, Indiana and North Carolina.

What makes the stakes so high is that high-definition television is the “most significant development in the state of the television art since the advent of color,” according to a Federal Communications Commission advisory committee.

The television picture in current American sets is produced by 525 horizontal lines of electronic dots streaming across the face of the screen. The new HDTV picture could have as many as 1,125 lines, depending on the final standard approved by the FCC. The result will be a picture with the sharpness of a high-quality 35-millimeter photograph.

A recent display of several prototype HDTV systems in a congressional office building dazzled viewers with a big-screen, almost three-dimensional impact.

On one set, a dune buggy bounced along the desert, seemingly ready to jump out of the screen. On another, a speedboat raced across the sea surface, rising and falling with the swells, a scene so realistic that viewers found themselves rocking on their heels, shifting their weight as if on the deck of the speeding vessel.

High-definition sets are likely to reach the retail market in 1993 or 1994, with sizes of 35 or 42 inches and more and prices of $2,500 or $3,000.

At first, as with color televisions and then video recorders, only the affluent will buy. New products typically take four or five years to reach the crucial 1% of market penetration, a stage at which word-of-mouth publicity generates a massive leap in sales. The takeoff should come at about the turn of the century, when HDTV will be in 1 million homes.

At least six systems for transmitting high-definition television are under development, with the FCC yet to approve a final standard.

The FCC ruled in September that the system should be compatible with the nation’s current broadcasting standard to protect the value of the 160 million sets already in use. Programs broadcast for HDTV must also be picked up by regular television sets, just as color programs can be viewed--without color--on black-and-white sets. The FCC wanted to avoid dividing viewers along class lines, with the affluent able to watch new programming on their expensive sets while owners of older sets were shut out.

U.S. broadcasters will have the option, although not the obligation, to transmit their programs in the super-clear and crisp HDTV format. “We want to preserve the ability of broadcasters to respond to a competitive threat,” says William Hassinger, assistant chief of engineering in the mass media department at the FCC. “They should have the ability to do it. We have plowed the ground, leveled it and fertilized it. If the broadcasters want to put down seeds, it’s up to them.”

Although the FCC has protected American broadcasters and television owners from disruption, the prospects are much more uncertain that American semiconductor makers and other domestic firms will be able to reap some profits from the revolution in television quality.

The effort by domestic firms, working through the American Electronics Assn., could be “a symbol for all the new industries and technologies of the 1990s,” says Fred Branfman, director of Rebuild America, a lobby group supported by individuals and foundations. “Industry will take the lead and cooperate, where no individual company can afford the risk.”

Pat Hubbard of the AEA denies any desire to drive foreign firms out of the U.S. market.

“It’s great to have (foreign) companies here making televisions, and we’re enthusiastic about the jobs they bring,” she says. “We’re not trying to squeeze others out of the television business, we just want to squeeze ourselves in.”

She says a strong American television industry, bringing progress in semiconductors and computers, has implications ranging far beyond consumer electronics.

“It’s vital to have a strong American economy, both for the United States and for the security interest of Europe and Japan,” Hubbard declares. “If we are less competitive and become a second-class power, then Europe and Japan will be left alone to keep the peace.”

Today’s television manufacturers and markets view the AEA rather differently.

“They want government help in a very competitive business,” says Frank McCann of Thomson, whose GE and RCA brands will take a whopping 22.2% of the 20 million TV sets sold this year. “Well, we could use some government help, too.”

HOW TV TECHNOLOGIES COMPARE

ORDINARY TELEVISION HIGH-DEFINITION TELEVISION Picture composed of 525 Picture composed of up to 1,125 horizontal lines lines, for greater clarity Regular screen sizes up to 35 Screens of 46 inches, 52 inches inches (diagonal length) and larger Nearly square screen; ratio of Wider screen, more like a movie width to height of 4 to 3 theater; ratio of width to height of 5.3 to 3 Stereo sound Sound quality equal to that of compact disc players

THE TOP 10 COLOR TELEVISION BRANDS

Brands Market ShareOwner Home Country RCA 22.2% Thomson S.A. France GE Zenith 12.8 Zenith U.S. Magnavox 10.2 Phillips Netherlands Philco Sylvania Phillips Sony 6.5 Sony Japan Panasonic 6.3 Matsushita Japan Quasar Sears 5.5 Manufactured by Sanyo of Japan and others Sharp 4.4 Sharp Japan Mitsubishi 3.5 Mitsubishi Japan Emerson 3.3 Emerson Radio U.S. Toshiba 3.0 Toshiba Japan

Source: Television Digest and Electronic Industries Assn.