HONG KONG (FORTUNE) - Canon is betting billions that a new technology called surface-conduction electron-emitter display, or SED, will enable the company to muscle into the flat-screen-TV market. SED technology, developed in conjunction with Toshiba, yields images of superior quality to liquid-crystal or plasma screens while consuming far less power.

The company has invested $1.8 billion in developing the technology for the screens and building the factories to produce them. It plans to roll out the first 55-inch screens for consumers in Japan later this year. Canon CEO Fujio Mitarai says he wants to offer the screens for about the same price as LCD and plasma TVs of comparable size. He hopes to expand capacity to three million panels a year and capture at least 20 percent of the global market for flat-screen TVs by 2010.

Canon CEO Fujio Mitarai has increased Canon's earnings sixfold since 1995.

Mitarai's next bet: surface-conduction electron emitter displays.

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"We have big plans for the digital television business," Mitarai announced at a Canon exhibition late last year.

With SED screens, Mitarai is thinking big in more ways than one. The common TV, he predicts, is destined to morph into something far more useful -- what he calls a "multifunction information device" -- with potential applications in other areas where Canon has patents and expertise.

"In the near future," says Mitarai, "SED displays will serve as an image and information window in living rooms, linked through a wireless connection with digital cameras, digital video camcorders, printers, and other imaging devices."

SED displays operate on the same principle as cathode-ray television, emitting light by shooting electrons into a phosphor-coated screen. But where cathode-ray TVs use a single large electron gun that has to be set back from the glass screen (meaning they're usually as deep as they are wide), SED screens are illuminated with millions of tiny electron guns known as emitters that can be aimed at point-blank range, enabling images to be projected across wide screens only a few centimeters deep.

A prototype at the headquarters of the Canon-Toshiba joint venture demonstrated images that are almost palpable, rich colors, and clarity even with rapid movement. It also got a good reception at the Consumer Electronics Show in Las Vegas last month. "Five minutes with this sleek puppy, and plasma and LCD were but a memory," raved a technology writer for the Atlanta Constitution. "Daddy wants one."

The question is whether costs can be lowered far enough and fast enough to turn a profit. Goldman Sachs analyst Shin Horie has his doubts, but he remains bullish on Canon. If the SED falls behind projections, he reasons, Canon's pragmatic Mitarai won't hesitate to close it down.

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