Setting priorities and managing resources wisely means there are only so many key initiatives even a giant can juggle successfully.

By Jon Peddie

The headlines said, “Intel exits Digital TV market,” but the headlines were misleading; they only scratch the surface. Intel has been in the TV industry for about ten or more years. You can find their chipsets in dozens of STBs, and in broadcast stations, and even in some TVs. The company’s Digital Home Group, recently the object of headlines, served two related markets, the retail sector and the service provider sector and over the years, Intel has developed some fine silicon for those markets.

However, as mighty as Intel is, it too must pick and choose its fights and manage its resources. Intel CEO Paul Otellini has handed down four primary objectives:

• Ultrabook and everything associated with it

• Move the data center to the cloud

• Handset devices

• Tablets and netbooks

Digital TV would have been the fifth, or maybe even sixth, item on the list. That’s two priorities too many, even for Intel.

Intel does not jump in and out of markets overnight. It isn’t ‘shuttering’ the Digital Home Group (DHG) operation as some have said. Rather they are ‘sunsetting’ it. That means they will fulfill all commitments to customers with the current generation of chips (based on the DHG’s CE4100 Atom Sodaville SoC), but they won’t introduce any new devices into that market segment. While the company did decide to stop investing in new silicon for the retail Digital TV market, Intel will stay engaged in the service provider segment.

When Google TV was announced, based on the Android 2.2 operating system and Chrome browser, there was big fanfare about it. Although MIPS did the missionary work to make Android suitable for TV products, and was actually used in some of the early prototypes, Intel won the deal to be the Google TV processor. Sony, LG, and Samsung all tried selling Smart TVs which accessed Google TV and Logitech offered set-top boxes. Sony, Intel, Google, and Logitech were the champions of Google TV. The first units that came out (and we tested them) were OK, with the usual first product annoyances. Sales were not great. But Google promised it would all be taken care of with the next OS release. And Google wouldn’t release open-source code for Google TV, so Intel had a lock on Google TV hardware with the CE4100 introduced in late September, 2009.

Google was late with the new OS, and the content developers weren’t enthusiastic about the whole thing. Some of them held back content because prices weren’t right or the protection not up their satisfaction. The net effect was underwhelming. However, those of us who stuck with it learned to appreciate the feather-light keyboard TV remote and the multiple couch-surfing options.

Intel is not the only one backing off. In one sense, the inauspicious start to Google TV was déjà vu all over again because Apple TV and others like it had a similar fate. The lingering recession caused TV makers to start piling up inventory. Rather than shut down their fabs, Intel reckoned it would incur a smaller cost to sell the TVs at a loss, and they did. In the meantime China is bringing on two new fabs, which is sure to further aggravate the situation.

Another player has seen the writing on the wall when it comes to Digital TV. Broadcom has thrown in the towel on its TV chip business and left it to the bottom dwellers. And price killer MediaTek stopped its development of an upscale TV chip, leaving Trident, Zoran, and STmicro to pick over the scraps. DisplaySearch suggests that total TV shipments will not grow from 2010 to 2011, holding at 248 million units.

Dr. Jon Peddie is president of Jon Peddie Research.