Microtune Sees Its Converter Box Tuner Revenue Dying By Q1
Silicon TV tuner supplier Microtune expects to reap no “meaningful revenue” from DTV converter box sales after the first of the year, Chief Financial Officer Jeffrey Kupp said Tuesday at the Sidoti & Co. investor conference in New York. While the industry is on track to hit sales of 30 million converter boxes by February, any market beyond then will be slow to emerge, if it does at all, Kupp told us.
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Microtune’s view contrasts with that of decoder chip supplier Zoran, which forecasts DTV converter box sales continuing for 18 to 24 months after the $40 federal government coupon program ends in July (CED Aug 27 p1). The difference may stem from the belief that a market will develop for converter boxes with more features that don’t qualify for a coupon sale, Kupp said. That market hasn’t materialized yet, he said.
Sales of Microtune’s MT2131 TV silicon tuners to converter box makers surged in Q3, hitting $5.8 million and surpassing an earlier forecast for $2 million, company officials said. The silicon tuner is now projected to post $8 million in revenue for the fiscal year ending Dec. 31. That’s up from a $5 million forecast in July (CED May 30 p1), but down from the $10 million that appeared possible in late summer, Kupp said. The shortfall may have resulted from a tightening of credit that limited Taiwanese and Chinese converter box manufacturers’ ability to get export financing, Kupp said. Microtune is forecasting $2 million in Q4 sales of converter box silicon tuners, Kupp said.
The MT2131, which sells for $1.50, has 10 to 12 design wins in the converter box program, including the EchoStar DTVPal, Kupp said. Microtune’s market share has increased in recent months to between 10 and 15 percent from less than 10 percent in May as DTV converter box sales increased, he said. The market is about halfway toward selling 30 million boxes by the February cutoff, Kupp said. Microtune’s DTV converter box tuners carry a 40 percent gross margin, versus a 49 percent company-wide average.
“It’s been a wild ride and the curve on this market has been surprising,” Kupp said. “There’s a lot left to go and there are a lot of coupons that have been issued that haven’t been redeemed. There appears to be a lot of people waiting until the last minute to buy a unit.”
Microtune hopes to negate lost converter box revenue by stepping up sales of its silicon tuners for DTVs, Kupp said. While Microtune got a design win for Samsung DTVs in 2005, it hasn’t signed on any new customers since, Kupp said. While Microtune weighed some low-end business, it is focusing on a new silicon TV tuner it expects to start sampling late next year, Kupp said. The new model will add features and carry a lower price, said Kupp, who declined to release details.
Microtune thinks it has been unable to gain DTV design wins because many Japanese and Korean companies have internal TV tuner module design teams, Kupp said. “These are very difficult to displace,” Kupp said. “We're talking to customers and working with them,” CEO James Fontaine said Monday in a quarterly earnings call. “We're optimistic we can gain something, but we don’t have a lot in our plan” for 2009, he said.
Microtune will start converting its automotive customers from RF tuner modules to silicon-based devices over the next “handful of years,” Kupp said. It supplies automotive RF tuners to Delphi, Lear Corp. and others for use in AM/FM radios and in-car TVs for BMW, Land Rover, Audi and other vehicles sold in Europe, Kupp said. While the current automotive RF tuner modules have 40 percent margins, silicon- based versions command about 49 percent, Kupp said. Microtune also supplies RF tuners for DOCSIS 3.0 modems and expects to ship a million units this year, he said. Its customers include Motorola and Arris.