Pixelworks (NASDAQ:PXLW) may be a way to profit from high definition (HD) flat-screen TVs. Not to be confused with beloved animation firm Pixar (NASDAQ:PIXR), Pixelworks is an unknown, unprofitable little chipmaker.
Most likely $2,000 to $4,000 for a 42" plasma TV just isn't in the family budget quite yet, but lower prices could be around the corner.
Several Chinese companies are gearing up to enter the U.S. market with lower cost HD plasma and LCD TVs. How's it done? With a production process that allows for TV assembly using a package of components (bought from companies such as Philips (NYSE:PHG), Sony (NYSE:SNE), and Motorola (NYSE:MOT)), Chinese manufactures can assemble TVs cheaper -- and heavily undercut the prices of the brand name products.
Enter Pixelworks.
Pixelworks decided, at its inception in 1997, that it would not compete for the component market with the major players. Instead, it has concentrated on a line of semiconductors and feature-rich software products for televisions only. The products are designed to reduce time to market, lower development costs, and increase product performance.
Two Chinese TV manufacturers -- Xoceco and Konka Group -- are looking to use Pixelworks' chips to reorganize the value chain of HD TVs, much the way Intel's (NASDAQ:INTC) chips influenced the production of PCs.
While Pixelworks is currently not turning a profit, it is debt- free and positioned to take advantage of the increasing demand for HD flat-screen TVs as China cranks up production and brings down the price. That should spell good news for the company, and its investors, in the future.
