Clay's Report Great Stuff
Once again we have braved the massive crowds and ridiculously long lines at the 2017 Consumer Electronics Show (CES) to get a firsthand look at this year's armada of next generation flat panel displays. In addition to checking out what the display OEM's are planning to put on shelves in 2017, we were anxious to meet up with Toshi Ando of Quantum Materials Corp. (who was in town to display the Company's new cad-free QD film to a number of
interested parties in the flat panel display industry during private meetings) and get eye's on the Company's first generation cadmium-free quantum dot film for ourselves.
Arguably one of the biggest and most anticipated trade shows in Las Vegas, this year was no exception and easily the most crowded we have seen in a long time. Just getting into any one of the major exhibition halls required queuing up in long lines to get thru security - and if you had to get somewhere quickly - forget about it! - you were out of luck with 1+ hour long lines just to get a cab that "launched" you into hopelessly gridlocked Las Vegas traffic. Lucky for us we arrived at McCarran after the bulk of the roughly 170K+ attendees had already arrived in Las Vegas and after managing a short taxi line we were barreling along Las Vegas side streets to our primary destination - the Central Hall of the main LV convention center where all of the major electronics OEM's were displaying their best and brightest production offerings (and prototypes, demos) in the flat panel display category for 2017.
The primary theme at this year's show was a continuation of both 2015 and 2016 with a high pitched technology battle between LG - and their OLED technology (which stands for Organic Light Emitting Diode) - and Samsung's quantum dot technology which they are now calling QLED TV (Samsung purchased QD Vision, a quantum dot development and production company earlier this year for ~US$70 million and the QLED trademark came along with this purchase so they have swapped last year's SUHD moniker, which was somewhat confusing as it was too similar to LG's Super UHD TM in favor of QLED, which is more or less a ramped up version of SUHD tech with ability to produce high color volume in the 1,500+ nit range).
This year LG ended up with the premier booth space (if you can call a space that could easily fit a couple of full sized hockey rinks a "booth") near the front doors of central hall, so we checked that area out first. As advertised, OLED TV's are arguably the most advanced and impressive TV technology in terms of sheer viewing quality on the planet - and LG's new fleet of OLED tv's are visually stunning. Extremely thin and devoid of boxy support frames, these TV's exude quality from every angle but just like last year, LG goes out of their way to ensure that the ambient light in the viewing area of these panels is for the most part quite dim relative to the overall lighting level of the conference hall. We believe this is done primarily to show off the inky black levels that OLED panels are known for, but also keeps these panels out of the bright lights that can wash out this high contrast advantage. The relative high historical retail cost of OLED vs. LCD panels have so far kept this format from proliferating past the 1% mark of tv's manufactured and sold each year, and we are still hearing stories of high cost to manufacture these large format panels due to low yields (read high scrap rates) keeping them from mainstream "mass consumer" status. In addition to OLED set's LG was showcasing a new technology in their UHD LCD line featuring a technology they have dubbed "nano cell" - that is engineered to increase both color gamut and enhance color purity when viewed at off angles. These panels are very good as well and LG has definitely upped their game with this new nano cell tech (1
nm particles that absorb some of the light spectrum to enhance viewing) vs. last year's UHD models.
After spending about 45 minutes in the LG booth, we made our way directly to Samsung's massive display area located roughly in the center of the main hall. There is no question that Samsung is THE standard bearer for quantum dot technology in flat panel displays. Like last year, Samsung's exhibit is off the chart impressive. They have not only embraced quantum dot technology, it has become the foundation of their flat panel display technology going forward and this was evident in just about every demonstration of their next generation QLED TV line up. For those of you reading this article that are wondering about now "hey, what the heck is a quantum dot?" here is an article on the subject from last year's CES that covers the topic quickly and succinctly. Click on the following link, read this article and then come back over to read the rest of this report and you will understand quantum dot's better than about 99.99% of the world population and you will also understand just how big this new disruptive technology could become over the next 3 to 5 years as it becomes a de facto standard in not just flat panel LCD displays, but in several other vertical markets such as general lighting, battery technology, solar energy and eventually even computers. http://www.trustedreviews.com/opinions/quantumdots-explained-what-they-are-and-why-they-reawesome ;
Samsung's QLED TV models are absolutely riveting. The quality level of these new sets is extremely high with almost all of the demonstrations in the Samsung booth highlighting the advantages of these tv's over other OEM's products as a result of utilizing quantum dot design. In fact, after viewing the QD sets for a while your eye gets tuned to the rich color and it automatically registers this difference when you then look at standard UHD panels with limited color gamut. This was evident once we left the Samsung exhibit and walked thru other booths in the show (there are many hundreds of flat panel displays at CES, even in booths that are not OEM electronics
companies) and it makes you truly appreciate these infinitesimally small crystals' ability to amplify light and greatly improve viewing quality.
Originally, quantum dots were tasked with increasing the range of color gamut in an LCD TV to more closely match the full range of colors recognized by the human eye. Traditional phosphors that have provided the RGB color spectrum in LCD designs prior to quantum dot technology were limited in color gamut leaving LCD panels a bit lifeless and dull in terms of color purity, especially when trying to render bright red or green coloring. Quantum dots have bridged that gap and provided OEM's that utilize this technology an efficient tool to move materially up the color gamut scale and provide a much broader, lifelike set of colors to work with. This ability was the first great differentiator for quantum dots - but the story got even better as quantum dots worked their way into the market at the perfect time when UHD technology was on boarding (4,096 pixels across x 2,160 pixels vertically yielding ~4X the pixel density vs. 1080 tech) and it just happens that quantum dots also allow OEM's to work magic with the new HDR (high dynamic range) technology providing the ability to create brightly lit details in dark background settings utilizing local dimming LED backlights. Without quantum dots, the OEM's are not able to efficiently create the stunning images they now can with UHD panel sharpness and HDR light rendering to make these panels absolutely sparkle and create a truly "next generation" viewing quality that is on par with (and some folks even argue better in several key categories than) OLED panels, especially when one considers the pricing delta between these two tech's.
One of the demo's at the Samsung display area highlighted this ability extremely well with a standard UHD panel positioned right next to one of the new QLED panels with room brightness automated to go from very dim to very bright. With the ambient lights low, the QLED showed much higher color purity over the standard UHD but the difference wasn't huge. Once the lights came up to very bright ambient light, the difference between the two panels was absolutely striking. The UHD panel was so washed out it was barely recognizable, with the QLED retaining 100% of its color purity - almost as if it wasn't a TV but more like a backlit high gloss acrylic painting on glass. Absolutely stunning in its ability to create this image against very bright ambient light (and this feature will also be key in allowing QD technology to move into commercial signage panels that need to show high brightness in outdoor lighted settings). This ability is attributed to the efficiency of quantum dots and their ability to "down convert" or transfer photonic light vs. filtering it as phosphors do. In fact, we
reckon the new math over at Samsung looks something like: QD + HDR + UHD = $$$ - and we have seen plenty of evidence that a large number of OEM's that manufacture flat panel displays are looking to move in this direction and capitalize on this new LCD algebra by utilizing quantum dot technology to match (or even just get close to) the performance levels of Samsung's QLED TV line. Like last yearn several other TV makers have built and were displaying QD driven UHD sets (both commercially available and proto-type) with impressive HDR capabilities such as Hisense, TCL and Phillips - and another key take away from the conference was the fact that Samsung has now pushed quantum dot tech into their line of gaming monitors (as has ASUS and Nvidia), so in comparison to last year, quantum dot technology is proliferating quickly and is expected to grow at healthy double digit growth rates over the next couple of years to reach up to 20 million QD panels by as early as 2019-2020 according to several technology forecasting groups. The question remains then, where will these OEM's source high quality, cadmium free quantum dot enfused film to accomplish these directives. That is where Quantum Materials Corp. comes into play and where they are looking to position themselves at or near the top of a very short list of quantum dot manufacturing groups with cadmium free processing capability in this major technology shift in flat panel display technology (unlike OLED tech, which requires massive new capex capital to be spent on dedicated new fabrication facilities, QD technology can be placed into existing LCD designs by simply adding a sheet of QD film and adjusting the color of the backlight LED's to blue). With no new additional capex outlay, anyone that is currently building LCD tv's can adapt those lines to build QD tv's with the addition and change of just a few simple components. In what represents a major milestone for the Company, Quantum Materials Corp. came to CES this year to demonstrate their first generation cadmium free, quantum dot film component, manufactured by one of their collaboration partners that makes opto-electronic films for the flat panel display industry.
In a recent press release Quantum Materials Corp founder and CEO, Stephen Squires talked about the debut of this film at CES: “We are excited to present our QD display film to leading display manufacturers at CES seeking to incorporate advanced quantum dot technology into their TV, monitor and mobile device offerings. Our heavy metal-free display film affords display designers the ability to create brighter and more vivid wider color-gamut devices, while fulfilling environmental mandates to restrict the use of heavy metals in consumer and professional electronics.” In this same release, Toshi Ando, Quantum Materials Corp Senior Director of Business Development further stated: “Due to relatively high cost, implementation of quantum dot display film has been heavily weighted to the highend display market. We believe Quantum Materials Corp’s low-cost high-volume quantum dot manufacturing approach will enable the enhanced viewing experience made possible with quantum dots to be enjoyed by consumers along a much broader range of price points."
After spending several hours in the Central Hall, I made my way over to the Venetian to meet with Toshi Ando of QMC (he had private meetings at the Venetian which is where many of the private exhibits and corporate suites are located) and got a demo of QMC's new QD film. Simply put, the demo was impressive. Quantum Materials demonstration placed their first generation cadmium free film (the upper square in the diagram below) next to "a major manufacturer QD display film" (the lower square in the diagram, which we can only assume based on this description is a Samsung QD film) and the two were indistinguishable from each other. Toshi explained that the two characteristics to look for in this comparison were overall brightness and "white" coloration of the light. Given these two categories both films looked to be very evenly matched. The picture to the right was taken with no ambient light, but when viewing the demo with bright ambient light both films displayed extremely high brightness and vivid white coloration in equal amounts (the combination of red, green and blue light makes a pure white light). So where does that leave Quantum Materials Corp in their mission to enter the supply chain of what is ramping up to be a high demand environment for superior performance level, cadmium free quantum dot enfused film? If you take a close look at the two quotes above from Squires and Ando, it's relatively easy to look down the road from here and see what they are looking to accomplish - which is simply the ability to provide these materials at a cost to the end user that allows them to place this superior film technology across their mid-range (or possibly their entire line) of flat panel displays, not just the premium end of a line. How will they accomplish this goal? Well Quantum Materials looks to have a good answer to that question as well. First - Quantum Materials Corp utilizes a proprietary "continuous flow" processing method to make highly consistent quantum dot products with low capex and operating expense relative to some of the other "batch" methods of quantum dot processing. Second - Quantum Materials Corp has aligned itself with large, well positioned partners in the optoelectronic component space such as Uniglobe Kisco, which will be representing the Company on the sales side (here is a link to extensive materials information for QMC's QD products http://uniglobekisco.com/products/quantum-dots) and has worked ; with (and we suspect they are likely still working with) Nitto Denko, one of the world's largest and most respected manufacturers of opto-electronic film products (QMC was engaged with Nitto Denko for an extensive joint development program in 2015 and 2016) and thirdly - the performace spec of QMC's cadmium free quantum dots was recently validated by a third party when Uniglobe Kisco, Inc. President Kenji Shimada commented, “It’s exciting to be partnering with Quantum Materials in this revolutionary display material technology. Our own rigorous
testing has shown product specifications for their cadmium-free quantum dots to be at or beyond what is currently available in the market today, and their innovative high-volume production technology gives us confidence in the company’s ability to fulfill demand as the market for quantum dot-enabled films for displays grows.”
When you step back from the market for a moment, it's fairly easy to conclude that the two limiting factors in the (even faster) proliferation of quantum dot technology has been the availability of high performance spec, cadmium-free film - and the wholesale price point to an OEM for that film. Let's face it, these are extremely tough materials to make and so far the price points for these materials has remained relatively high in comparison to overall BOM schedules for all but the higher end retail price point panels. After discussing these points with Toshi we came away with the impression that there are currently very few, if any suppliers in the market that are capable of making high performance level, cadmium free QD film that is priced in a range that makes if affordable to utilize in the mid range of flat panel displays. QMC's now stated mission is to fill that void in the market and be THAT COMPANY with their film products. The fact that they were at CES meeting with OEM representatives and VAR groups with what we witnessed to be an extremely bright, pure white colored, 100% cadmium free film component puts them one step closer to that goal. The other key input in this equation is capacity (and speed to scale up capacity). QMC currently has capacity to produce over 2 metric tons of QD materials per year (1 metric ton is 1,000,000 grams or enough for 1 to possibly 2 million 55" flat panel displays), and with low capex can rapidly push that number up, giving them the flexibility to move quickly enough to satisfy even the largest demands for materials by a flat panel display maker looking to move this format into a large number of panels over a short time frame.
The consumer electronics industry is a demanding and rapidly shifting market space that rewards quality and competitive pricing and can be punishing to groups unable to satisfy these two requirements. Based on the two most recent press releases and our meeting with Toshi in Las Vegas at this year's CES, we believe that QMC is now positioned to deliver on both of these fronts and will start accelerating towards their stated goals in the flat panel market space over the next couple of months. With two major industry trade shows coming up - the Quantum Dot Forum in San Diego - March 15-17, 2017 and SID Display Week in Los Angeles - May 21-26, 2017, we expect that we will have plenty to report over the next 60-120 days on the QMC front and look forward with great anticipation as this Company makes their mark in the quantum dot industry going forward.
If QMC is successful in moving their quantum dot materials/film components into the opto-electronic supply chain with one or more of the OEM groups looking to enter the quantum dot panel business, the financial reward they could realize (and subsequent shareholder appreciation) could be substantial based on the overall market size and projected growth rate of the industry.
On a final note, as we approached Las Vegas, our jet made a fairly low approach over several very large solar energy facilities and it reminded us why we originally got interested in the Company in the first place - and that is the potential for quantum dots to enhance the yield and lower the cost of solar photovoltaic cells. This is still a major future opportunity for QMC, especially given their low cost, high volume processing methods/capabilities and we fully expect that once they are successful in cracking the elusive code of entering the flat panel display industry - will refocus their efforts back into the solar industry, which holds the promise for even bigger rewards for the Company and its shareholders.
To learn more about Quantum Materials Corp. be sure to check out their website at http://www.qmcdots.com ; Clay Chase - Torrey Hills Capital email@example.com
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