SILICON IMAGE OPENS UP --
TOO MUCH
By Georgie Raik-Allen
Red Herring Online
October 15, 1998
Silicon Image is trying to create a market advantage by
giving away its technology.
The semiconductor company is offering its technology as
an open standard in an attempt to accelerate the growth
of the digital flat-panel display market, where Silicon
Image hopes to make its fortune.
The three-year-old startup today announced a $9.6
million fourth round of funding from new investors
InveStar Capital and Velocity Capital as well as August
Capital, a previous investor. The company's total funding
to date is $18 million.
Silicon Image wants to use the financing to "build the
company's position in the digital flat-panel display
market." And yet its business strategy seems to be to
help its competitors build their market space.
Think differentiated
Analysts say that supporting open standards runs against
the basic objective of most businesses -- differentiating
themselves from their competitors.
But a spokesperson from Silicon Image said the
company was focused on the "long-term business goal"
of helping build up the digital display market, which was
expected to reach $34 billion by the year 2003.
"We'd rather be a leading provider in a large market than
the only provider in a small market."
The market has been stymied to date by high costs and
poor quality.
Cathode Ray Tube (CRT) monitors and other display
devices are currently all analog, so the data transmitted
from a personal computer has to be converted by a
graphics card, which is very expensive and can lead to a
loss of image quality.
Silicon Image has developed PanelLink, a high-speed,
all-digital bus that is fast becoming the defacto standard
for digital flat panels.
The biggest winners will be major computer companies
that stand to prosper when the prices for high-quality
digital flat panels and consumer devices start dropping
and become popular with consumers.
Compaq (CPQ), Dell (DELL), Hewlett-Packard
(HWP), IBM (IBM), Intel (INTC), and Microsoft
(MSFT) joined forces last month to accelerate the
adoption of an industrywide standard for digital flat
panels.
The group calls itself the Digital Display Working Group
and is currently defining specifications for the standard.
Get on the Rambus
The chip technology company Rambus (RMBS) took
the opposite approach to Silicon Image by licensing its
proprietary technology. The company, which went public
last year in a rocketing public offering, took the view that
it needed to protect its technology from competitors; by
winning over Intel as a customer, the company
nonetheless made its memory-bus technology standard in
the industry.
The spokesperson for Silicon Image said the company
was hoping that by opening up its technology it was
boosting the growth of a market that would lead to
"many additional opportunities" for the startup to make
its money.
But they are not the only company waiting to take up
those opportunities, and by giving away its popular
technology, Silicon Image may also have surrendered its
best advantage. |
