Last Friday, Toshiba announced an agreement by which Canon will purchase from Toshiba all of Toshiba’s outstanding shares of SED Inc. On completion of the purchase, SED Inc. will become a wholly owned subsidiary of Canon, effective January 29. The DigiTimes headline on Friday screamed, "Toshiba Bails on SED," but the situation is a bit more complicated than that.

Ken Werner
Senior Analyst and Editor

In its latest version, Surface-conduction Electron-emitter Display (SED) technology produces beautiful video images. But as a business, SED Inc. - the joint development and manufacturing venture formed by Canon and Toshiba in October 2004 - is in trouble.

The problem, as Insight Media has frequently reported, is cost. SED delayed its original introduction schedule for SED-TVs to redesign the panel for reduced cost, and Toshiba recently stated that initial production would be for professional studio monitors because SED could not compete in the consumer market.

But SED Inc. was not being bashful about promoting their handsome displays, and significant promotional events were mounted at CEATEC Japan and Flat Panel Display International in Japan. An "SED Theater" and a full schedule of appointments with editors and analysts were also set for CES, but then Toshiba and Canon cancelled all SED-related activities.

The issue, as reported in this space, was that licenses to use FED technology owned by Nano-Proprietary Inc. (Austin, TX; www.nanoproprietary.net), had been sold to Canon, who was free to assign them to Canon subsidiaries. However, Nano-Proprietary maintained, and a U.S. judge agreed, that SED Inc. was a joint venture, not a Canon subsidiary, and therefore not free to use the Nano-Proprietary licenses. The purchase makes SED Inc. a Canon subsidiary, presumably with full access to the Nano-Proprietary licenses.

The decision that Canon would take over SED Inc. was reached following discussions between Canon and Toshiba based on the assumption of prolonged litigation with Nano-Proprietary if the original structure was retained. As a result of the discussions, it was decided that Canon will carry out the SED panel business independently in order to facilitate the earliest possible launch of a commercial SED-TV business.

SED-TV sets are to be introduced in Japan in the fourth quarter of this year as originally scheduled, Toshiba said, although Canon will reassess its future mass-production plans for SED panels.

While the decision announced today represents a major change in the relationship between Canon and Toshiba, each company is expected to make every effort to facilitate the smooth launch of its television business, the companies said. Mr. Kazunori Fukuma, the current president of SED Inc. appointed from Toshiba, will resign from Toshiba, after which he will be hired by Canon and continue to serve as SED Inc. president. In addition, plans call for Toshiba engineers on loan to SED Inc. to continue their assignments for the transition period, during which Canon will independently establish the SED panel business.

Despite the protestations of cheerful cooperation between the two companies during the transition, one has the feeling that Toshiba is relieved to be rid of its SED albatross. Canon was probably not the easiest of partners, particularly for a TV-maker like Toshiba who knows the tough realities of the consumer electronics business.