Author Archives: Jonathan Melnick

Trojan Horse Partnering Strategy for Emerging Electronics Applications

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In the value chain for established electronics markets, material suppliers and manufacturing companies engage directly with the brand owners/end users, and technology developers must engage with the material suppliers and manufacturing companies to move downstream, relying on the credibility of these industry established companies. In the emerging printed, flexible, and organic electronics partnering landscape, companies throughout the value chain have struggled to innovate around undefined applications causing lofty industry expectations that failed to live up the hype. Without many success stories to point to, the best practices for forming relationships remain a mystery for most.

A survey of 73 executives active in different portions of the supply chain shows how different segments approach partnering and enables insight into how to approach their partnering strategy in the challenging arena. Based on the data from this survey, and detailed interviews with many stakeholders, a new strategy – the “Trojan Horse partnership” – is a more effective approach to this undefined space. Material suppliers and manufacturers use the technology developers to access brand owners and tap into downstream partnership networks. The appeal of the technology developer’s novel approach provides an avenue to penetrate the walls of the electronics brand owners and grow from within these relationships, while the materials and manufacturing companies offer resources and credibility to tech developers.

The shift to Trojan Horse partnering requires new approaches and tactics. Those looking to engage with early-stage technology developers should scout for technology, but as technology developers mature, technology scouting will give way to “partnership scouting” – scouting by assessing partnership networks. In addition, material suppliers can further the networks of its existing technology developer partners, through the use of its own technology scouting groups and existing relationships from other application spaces.

As this type of partnering becomes common practice, material suppliers and manufacturers will need to market themselves as attractive partner candidates to the technology developers. Companies that have the structure to move quickly and supply even small amounts of capital will have an advantage as it will lower the engagement risk for the technology developers. Material suppliers and manufacturers will also need the discipline to abandon the “sell something now” mentality that creates unrealistic expectations and timelines, and is notorious for euthanizing genuine long term growth opportunities.

Source: Lux Research report “Trojan Horse Partnering: Bringing Materials to Market for Emerging Electronics” — client registration required.

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LG Invests More in OLED TVs, but Capacity Claims Exaggerated

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LG is investing KRW 706 billion ($655 million) in a new organic light-emitting diode (OLED) TV manufacturing plant, which it expects to begin producing on gen 9 (2160 mm x 2460 mm) substrates in 2014, with a production capacity of nearly two million 55-inch TVs annually. The investment in the new OLED TV line comes as LG announced 100 preorders for its $12,000, 55-inch diagonal OLED TVs produced on its existing line. LG also set aggressive growth goals of 15% for its flat-panel display business as a whole, which includes both OLED and liquid crystal displays (LCDs).

As Samsung and LG race to be seen as the most innovative display company in the world, their announcements on OLED will play a major role. As Samsung continues to tout flexible displays (client registration required), LG is staking its claim in TVs. However, the announcements are intended to make the companies look innovative in the volatile and perception-driven world of consumer electronics, and do not reflect the current state of the technology. If LG plans to use gen 9 glass substrates, it will have to use solution processing, which may be a good fit eventually for its white-red-green-blue (WRGB) OLEDs, but the processing yields will not be sufficient for mass production. Expect less than 7,000 total OLED TVs to be shipped across the entire industry in 2014, and LG’s line to be opened later than it anticipates (see the report “Cutting Up the LCD Pie: Calculating the Billion-Dollar Slices from Display Innovation” — client registration required).

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Conductive Inks and Pastes are Set to Grow, but Incumbents, not Innovation, Dominate

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Much of the promise of printed electronics is in the potential to manufacture devices through low-cost, high-throughput manufacturing. However, in order to realize this potential, suitable materials sets must impart the technical specifications of the device while being compatible with solution processing – and without becoming too costly themselves. All told, the market for printed electronics materials will rise to $2.6 billion in 2017. While start-up companies and venture capitalists alike insist that innovative new ITO replacement and OLED materials can change the game, opaque conductive silver inks continue to lead the way as existing applications grow and new applications emerge.

Many applications such as membrane switches, medical, solar, radio frequency identification (RFID), touchscreens, printed circuit boards (PCBs), displays, and automotive either currently use or look to begin using printed conductors. The overall opaque conductor market is set to grow to $2.4 billion in 2017 from $1.4 billion in 2012, a compound annual growth rate (CAGR) of 11%. Medical and RFID applications will be amongst the fastest growing, as packaging and apparel RFID expands and medical applications such as disposable defibrillator and electrocardiography (EKG) electrodes rise.

While the recent price volatility of silver has renewed interest in replacing silver in favor of cheaper and more predictable alternatives such as silver nanoparticles, copper reduction, and silver-coated copper inks and pastes, the majority will disappoint in the near to medium term. In fact, silver nanoparticles will be the only one of these technologies to capture a meaningful share away from silver paste before 2017, since it can enable thinner silicon wafers in solar cells through non-contact printing.

While the future may open up new streams of revenue for the new solutions in labs today, savvy innovation executives should set appropriate expectations rather than inappropriate hockey sticks.

Source: Lux Research report “Inking Money: The Prospects for Materials in Printed Electronics” — client registration required.

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Lifetime will limit the potential for Belectric’s Konarka acquisition

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Solar project developer Belectric (client registration required) has acquired the European operation of Konarka (client registration required), the bankrupt bulk heterojunction (BHJ) organic photovoltaic (OPV) developer (see the report “Looking for a Future in Organic Photovoltaics” — client registration required). The acquisition will be part of the Belectric’s new business called Belectric OPV, which plans to further develop the technology and focus on serving automotive and building-integrated photovoltaic (BIPV) applications (see the report “Building Integrated Photovoltaics: Moving Beyond Showcase Projects” — client registration required). Belectric plans to set up manufacturing capabilities using the technology in the next few months.

As part of the trend of developers like Hanergy (client registration required) moving upstream into module production, Belectric has been an aggressive pursuer of thin-film technologies – witness its work with First Solar (client registration required) and Solar Frontier. However, the performance metrics of Konarka’s OPV technology make it poorly suited for BIPV and automotive applications. Potential automotive and BIPV customers will have a hard time overlooking the high cost per watt and low efficiency of the technology in order to take advantage of OPV’s form factor, weight, and visual properties, like its diverse color offerings. However, customers in automotive and BIPV will be particularly wary of OPV’s lifetime, which does not even make it five years. Belectric needs to focus on its R&D efforts to improve the lifetime and also work with barrier film developers, as water and oxygen contamination are a leading failure mechanism. Unless the lifetime improves, the manufacturing facilities will not be producing much of anything, much as Konarka’s (client registration required) plant. However, the challenges and long timelines ahead mean Belectric should be wary of investing significant resources in it.

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Konarka Bankruptcy a Result of Technology Performance More than Market Shifts

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Driven by the promise of cheap, printed solar modules that could be made colorful and transparent, many technically unsavvy investors continued to invest in struggling Massachusetts organic photovoltaic developer Konarka (Client registration required) to the tune of $170 million, with an additional $30 million coming from grant funding. Konarka took that investment and built what it claimed was a 1 GW manufacturing line, although the line would certainly never come close to that capacity. The math never added up for Konarka’s “Power Plastic,” which cost 10-times more and delivered 10-times less efficiency and lifetime when compared to alternative solar technologies Now, Konarka has declared bankruptcy, validating Lux Research’s history of “strong caution” ratings.

Konarka’s underlying technology was never market-ready, and its failure was no surprise to those that read Lux Research’s profiles on the troubled company dating back more than three years. While taking a chance on its OPV technology in the early days arguably made sense, Konarka continued to burn through tens of millions long after it should have been clear that the technology wasn’t poised to be competitive in the timeframe needed for it to justify the investment. Konarka finally ran out of money, and creditors are now left to sell off the pieces to recoup a fraction of their sunken investment.

Konarka blamed the collapse on an inability to raise more funding. However, raising funding, more than solar module development, was where the company excelled. Finding market success in emerging technologies takes many factors, but a viable technology underpins all of them – something that Konarka never had and didn’t have a credible path to attain. A viable market helps, as well, and with a projected organic photovoltaic market size of a meager $159 million in 2020 (See the report “Looking for a Future in Organic Photovoltaics.” Client registration required.), Konarka won’t be the last to run out of investors who must be as long on patience as they are blessed with money. Buyers and investors beware.

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Smartphone Market Will Ring Up Largest Share of the OLED Display Market Through 2017

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OLEDs have found their market in smartphones, and electrophoretic displays have found theirs in e-readers. But in what other markets can these technologies compete? In a recent Lux Research report, analysts projected market share for each display technology in several prospective application markets. This week’s graphic focuses on projected growth through 2017 in the key application markets for OLEDs. In total, these markets add up to approximately $11 billion in 2017, up from $1.9 billion in 2011, a 34% compound annual growth rate (CAGR). In addition, analysts found:

  • The already healthy market for OLED smartphones will continue to expand as the cost of small-area OLEDs decline. Samsung has grown market share with OLED enabled phones, and other smart phone developers such as Nokia, HTC, and Panasonic have or will soon follow suit. In total, over one-third of all smartphones in 2017 will have an OLED screen, corresponding to a $9.5 billion market in 2017 for OLED displays, representing a 32% CAGR over the 2011 market of $1.8 billion.
  • Smartphone functions steal wind from other small area OLED applications. Other devices that could use a small-area OLED display – music players, handheld video games, picture frames, and digital cameras – will total an approximately $453 million OLED display market in 2017, growing 62% annually from the $25 million they accounted for in 2011. OLED growth will be slow because sales of these devices will either remain static or decline, partly because many smartphones offer the same functions.
  • Industry dynamics limit tablet market. Apple’s iPad currently commands more than 75% of the tablet market. Yet Apple is unlikely to switch the iPad’s current LCD display to OLED technology before 2017, since that would grant some control of its supply chain to competitor Samsung. Also, although multimedia tablets can benefit from the display performance and light weight of OLEDs, the technology’s high cost compared to LCDs will create further headwinds. Overall, OLEDs will appear in 3% of the non-Apple tablets, reaching a $397 million market in 2017 – up from a market of less than $5 million in 2011.
  • Market for televisions will be limited due to lifetime and cost issues. The picture quality of OLED TVs made a splash at the 2012 Consumer Electronics Show and other exhibitions. But widespread commercial adoption will be slow because, unlike LCDs, increasing the size of OLED displays significantly increases their cost. New materials, such as metal oxide TFTs, and processing equipment will improve but not reverse this reality over the next five years. There are no commercial TVs using OLEDs today, and in total, the 2017 market for OLED TVs will be $325 million.

Source: Lux Research report “Cutting Up the LCD Pie: Calculating the Billion-Dollar Slices from Display Innovation.”

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Novaled Going Public with Clear Near-Term Value, but Long-Term Challenges Remain

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Novaled (Client registration required) has filed with the U.S. Security and Exchange Commission (SEC) for its proposed initial public offering (IPO). The company is a developer of dopant and transport materials for organic light-emitting diode (OLED) displays and lighting. (For more on these markets see the reports “Sorting Hype From Reality in Printed, Organic, and Flexible Display Technologies” and “Finding the End of the Tunnel for OLED Lighting.” (Client registration required)

Novaled seeks to raise $200 million in its IPO, which will be listed on the New York Stock Exchange (NYSE) or NASDAQ. The company’s financial records, which it released with its filings, indicate revenues of €6.8 million and €17.4 million in 2010 and 2011 respectively, reaching profitability in 2011. This development primarily derives from its materials, produced by BASF, being incorporated into commercial Samsung Mobile Display (SMD) smartphone displays. SMD accounted for 59% of its 2011 revenue.

The application in SMD smartphones also indicates that Novaled has a validated product for improving OLED performance through power efficiency and lifetime enhancement.

Smartphones will be the dominant application for OLED displays through 2017 (see the report “Cutting Up the LCD Pie: Calculating the Billion-Dollar Slices from Display Innovation” (Client registration required). With this application market the power savings of the material is most important to extend battery life, while the short lifecycles of smartphones minimizes the impact of lifetime enhancement.

However, while 75% of Novaled’s revenue came from Korean firms, much of its remaining revenue came from Europe – indicating that it’s not doing much work with Japanese, Taiwanese, and Chinese OLED display developers such as AUO and Sony. These players will inevitably begin to take OLED display market share from SMD and LG Display.

In addition, Novaled’s work in Europe indicates that it believes that OLED lighting remains a viable market, as it claims in the SEC filing that the OLED lighting market will be at least $3.5 billion in 2018. By contrast, we project a $58 million 2020 market for OLED lighting (Client registration required). Novaled is well poised now for near-term growth through its supply of SMD and LG Display, but faces a rockier future if it continues to rest its hopes on significant revenue from OLED lighting and static OLED display market shares.

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Lux Innovation Grid Highlights Viable Partners for Display Developers

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There’s been no shortage of investment in printed, flexible, and organic electronics aimed at driving next-generation displays, organic photovoltaics (OPV), transparent conductive films (TCFs), smart packaging, and thin-film batteries. Yet, challenged by the inherent technical hurdles and long development cycles, few firms have turned their potential into big cash returns. Those that eventually succeed will do so by building partnerships today that pool expertise in materials, equipment and device development.

This week’s graphic expressly focuses on display developers, and applies the Lux Innovation Grid to compare how potential partners compare in Technical Value and Business Execution. The field encompasses more mature technologies, like small molecule organic light-emitting diode (OLED) and electrophoretic displays, in addition to emerging technologies, including electrochromic and electrofluidic displays.

A glance at companies comprising the Dominant Quadrant clearly illustrates that OLED materials and equipment have a clear headstart over more emergent technologies like electrochromic and electrofluidic displays. OLED displays have found success thus far primarily in mobile displays, but development of larger displays like televisions is underway. Notable players include materials developers like Universal Display Corporation (UDC) and Novaled, in addition to equipment makers like Kateeva. These companies also comprise the majority of the “Positive” takes on the chart due to the strength of OLED technologies in general and the solutions that these companies can provide.

E Ink stands out for its Technical Value and Business Execution. The former derives from its high score in technology and intellectual property, the latter from its strong partnerships and management team. In addition, E Ink scores the only “Strong Positive” on our chart. This lofty position should not come as a surprise, since E Ink has a nearly 100% market share of the electrophoretic market, which is commonly found in e-readers like the Amazon Kindle.

Emerging reflective and flexible technologies are High-potential. Particularly for OLEDs, the transition to flexible displays requires new materials and substrates to protect the OLEDs from atmospheric contamination. New materials such as flexible glass from Corning Display or barrier films for plastic substrates from Tera-Barrier can enable flexible OLEDs.

Emerging reflective displays, like electrofluidic displays from Gamma Dynamics and cholesteric liquid crystal displays (LCDs) from Kent Displays, also fall into the High Potential category. Competing with electrophoretics will not be easy for the reflective technology developers, as both companies score above 3 on Technical Value, but below 3 on Business Execution – due to low scores on barriers to growth and revenue per employee.

Source: Lux Research report “Finding the Winning and Losing Companies in Printed, Flexible, and Organic Electronics.”

 

 

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