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for video. Then you see the new delivery methods of bringing content to the home like IP set-top boxes.
In the past, consumer products were always designed as fixed boxes, and you could do a hard wired chip. But in the world of connected products, standards are not as stable as in the good old-fashioned CE world, so everybody has to learn new tricks and that means upgradability and interoperability. That's where the benefits of Nexperia come in, because we can upgrade the product afterwards when it is already in the market. If later on there is a new codec, you will need to upgrade your products.
The studios, however, have been skittish about IP TV because of content control and piracy.
Van Houten: From the content point of view in the U.S., there is still a big debate going on. But look in Asia, Korea and maybe China and some other markets. IP delivery of content is developing very rapidly. In Europe you already have some customers that are rolling out all our IP set-top box technology. Not every market has the same fish, right? The U.S. is leading in digital HDTV. Some other markets in the world are leading in IP delivery of content.
How about in developing nations like India?
Van Houten: It's not yet happening, we expect it to happen, because you can deliver a wide range of content in a very cost-effective way. In China, a lot of kids have PCs, whereas the good old-fashioned TV delivery is actually bad quality. Making the jump from good old-fashioned TV to IP delivery jibes well with the installed base.
That's interesting, because most people in this country tend to wonder why anyone would want a TV tuner in their PC. But that's because everyone has both. If you had to choose between a PC and a TV, it's a different matter.
Van Houten: Yeah, and it is a breakaway from traditional delivery where you had five channels. Suddenly you can have a lot of channels. And it's a generational thing as well. Youngsters will find it normal to look at all these content things on a PC.
Another incarnation of entertainment is entertainment on the go. For TV-on-mobile devices, we have a system-on-package (a group of chips housed in a single package) that's the size of my fingernail. It's for cell phone builders to bring digital terrestrial television into the mobile phone.
Is there a lot of interest in mobile-phone TV?
Van Houten: There was a trial in Berlin last year, and the market research that we've done shows that 80 percent, or actually 78 percent, of consumers are very interested in having television in their mobile phone. Many then tell me, 'Yeah, but the screen is so small.' Well, but that has to do with the viewing distance. In a short viewing distance, the phone, for short videos, is quite attractive. Our TV-on-mobile solution that is shipping later this year will go in products from three brands, both European and Asian.
When you say later this year, does that mean it will be delivered to the cell phone makers or come out in phones that individuals can buy?
Van Houten: We have of course already done the work with the OEMs (original equipment manufacturers) to do the design of the systems, so the final silicon is shipping in the fourth quarter. Then the OEMs will build their products and start shipping in early 2006.
What volume they do--I can't control that, unfortunately. The parallel that we can go on is that FM radio in mobile phones is a huge success, and we are, by the way, the leader in FM on mobile phones. The added cost of PC on mobile is actually not that big because a lot of the elements are already there. You have the screen. The battery is there. You can easily watch 10 hours on your battery, so it will not drain it.
The cost of bringing the PC-on-mobile feature would not make the phone hugely more expensive. Think about $50 or so.
Is that the additional price at retail or the additional total to the BOM (bill of materials)?
Van Houten: The BOM is even lower than that, so it is entirely possible to make this an affordable feature. The prediction is that we will reach 10 percent penetration before the year 2009, and that means 100 million phones, because by that time the market is a billion phones a year.
Turning back to cars for a second, it seems like the greatest interest in in-car entertainment comes from the U.S.
Van Houten: I wouldn't say that. In Japan every car has entertainment, every car has navigation. In the U.S., the rear seat, backseat entertainment is very big. There are just slight differences in the application, depending on the market. But there's an interesting industry challenge again. Because of the fast-changing standards in the entertainment world, the automotive world now has to learn to have shorter design cycles. It is part of our strategy to not (make) the customers figure out everything on their own, but rather, we help with production and design, including the software.
Looking back on your old job running the consumer division, one question that comes up with Philips quite a bit is how come the company isn't bigger? For years, Sony dominated consumer electronics. A few years ago, Samsung came out of nowhere to become a serious player. Philips hasn't capitalized as well as they could have, it seems.
Van Houten: I wouldn't want to compare myself with Sony right now because I'm not sure if they're exactly the shining example anymore, but I agree with you that culture change is important. I tried to bring that to all our people, that the world is moving very fast and that you can have great technology, but you need to run fast, you need to support your customers 24 hours a day, seven days a week.
We tried to help Dell with the design (of a product) and we worked with them in Austin. We also need to work with them simultaneously in Singapore and in Taiwan because some of their work is done in Singapore and manufactured maybe in Taiwan. So it's a 24-hour economy, and some of our competitors are maybe more predatory traditionally than we are. I'm trying to change that. I think we owe it to ourselves to cash in on our birthright to lead in entertainment, and I think we have the IP. We just need to run fast and do it.
One last thing. How much time do you spend on the road?
Van Houten: I find it extremely energizing to be on the road. On Tuesday afternoon after a day's work (in the Netherlands), I left and arrived in Austin late night. Wednesday morning was with Dell, Wednesday in the evening I was here in Cupertino (Calif.).
Yesterday, we had our first Industry Advisory Council. One of the things that I tried to do is make my division more market oriented, and so rather than conceive all of the products in our creepy holes back in our labs, I take the people into it. The Advisory Council we have had six respected analysts, and we shared our road maps and said, "Please critique these road maps." And so we had a very interactive 12-hour session yesterday, going through the road maps, understanding the U.S. market better, getting feedback.
By the way, they also told us that we need to be proud of some of the technologies that we have, because they think they are actually pretty good.
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"Resurrection of the name of Philips"
By the way, what does Philips sell?
It is part of Royal Philips Electronics of the Netherlands, one of the worlds biggest electronics companies, with 159,709 employees in over 60 countries and sales in 2004 of Eur 30.3 billion. Philips is a Healthcare, Lifestyle and Technology company where simplicity is the goal of technology.
I bought this set for my next door neighbor and it has not been serviced (Due to its size and weight and our location in the mountains of Colorado.) For a component to go bad this soon on such a excellent tv I thought you would like to know about this just incase it is a more general problem with the set.