Sony said on Tuesday that it would stop the production of its XEL-1 OLED TVs, claiming that the new panel did not conform to a new Japanese law. Sony said that its XEL-1 OLED TVs did not offer appropriate internet-blocking software that would protect young Internet users from pornography, complying with a Japanese law. The new regulatory meant Sony would have to redesign the XEL-1 in order to keep selling it in Japan after April. However, at current prices the market was too small to make that worthwhile.

Sony added that it would still make the XEL-1 for sale outside Japan and press ahead with OLED development.

The 11in XEL-1 was the first OLED TV to market in 2007. Stopping sales of the XEL-1 in Japan without launching a long-promised 27in successor suggests that OLED will not rescue Sony?s struggling TV business.

OLED displays use organic, or carbon-containing compounds that emit light when electricity is applied. They produce crisp images and do not need backlighting, making them slimmer and more energy-efficient than LCDs, the most popular type of flat TV.

Sony had also reportedly problems with mass production of OLEDs. The company was struggling to control the thickness of the layer of chemicals on the glass panel and the resulting high defect rate means low yield from the production line and high costs.

OLED displays are used widely in mobile gadgets such as cell phone screens, and the top makers of those panels, which include Samsung Mobile Display, will likely have some advantage in applying the technology to TVs. LG is also working on OLEDs. Last year, the company launched a 15in OLED television.

However, OLED TVs are not expected to take off until 2012.