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One Trick Pony, Kopin, Adds Capability and Market Potential with OLEDs
For years, Kopin was the leader in LCD micro displays, a small market that catered to the military and annual suffered from single digit losses. But the company discovered OLED and has used Double Stack (Duo) and ColorMax, which improves the controls the color mixing. Their new OLED products have caught the attention of some big CE players, including Panasonic for the high bandwidth, low power consumption, excellent color fidelity and high luminance. The 720p OLED micro-display, 7,000 nits of brightness with much lower power that was previously to achieve this level of pricing. Is targeted to achieve brightness as high as 30,000 nits. ColorMax enables a much wider color fidelity up to 115% of sRGB, opening up the market for AR/VR. ColorMax is manufacturable and is already getting into sampling from customers. The company is leveraging much of the knowledge developed for military research and production programs in the two other segments. These segments are likely to be substantially bigger (although slower to develop) but the company can use its know-how, experience, and military revenue to gear up for these, and some of this is already materializing, speaking about the enterprise market. Kopin is already benefiting from the defense enterprise adoption. And we are ideally positioned to meet those demands of this market with a broad lineup of micro debate products and module solutions, including both LCD and RM micro-displays. Their differentiating technologies like double stack and ColorMax are relevant in all three segments. But most of the immediate growth prospects still come from the military. Growth is coming roughly in three waves from three market segments:
Starting with the FWS-I (Family of Weapon Sight) program, the company has roughly $33M in orders including the above mentioned one from DWS awarded in September, from the Q3CC:
The company has a backlog stretching into Q2 2021. The enterprise market is also coming to life, from the Q3CC. AR remains a work-in-progress with a concentration in the low volume enterprise market, as RealWear, Lenovo, Magic Leap, Apple, Google and Intoware target the segment. ABI Research, says consumer AR software and content is expected to grow at over 100% CAGR between 2021 and 2025, to reach $20 billion in total revenue in 2025. The total AR Media and Entertainment market will see similar growth at 90%.
In the consumer market, “2021 will be an important one for AR consumer hardware,” analyst Abbruzzese said. “nReal will ship its first headsets to consumers, while Mad Gaze will also look to expand. Also, Facebook is expected to roll out its AR smart glasses out of its Reality Labs initiative; Google may join as well after the acquisition of North, and with pressure from Facebook and others. Some of the main wins for Kopin include:
For years, Kopin was the leader in LCD micro displays, a small market that catered to the military and annual suffered from single digit losses. But the company discovered OLED and has used Double Stack (Duo) and ColorMax, which improves the controls the color mixing. Their new OLED products have caught the attention of some big CE players, including Panasonic for the high bandwidth, low power consumption, excellent color fidelity and high luminance. The 720p OLED micro-display, 7,000 nits of brightness with much lower power that was previously to achieve this level of pricing. Is targeted to achieve brightness as high as 30,000 nits. ColorMax enables a much wider color fidelity up to 115% of sRGB, opening up the market for AR/VR. ColorMax is manufacturable and is already getting into sampling from customers. The company is leveraging much of the knowledge developed for military research and production programs in the two other segments. These segments are likely to be substantially bigger (although slower to develop) but the company can use its know-how, experience, and military revenue to gear up for these, and some of this is already materializing, speaking about the enterprise market. Kopin is already benefiting from the defense enterprise adoption. And we are ideally positioned to meet those demands of this market with a broad lineup of micro debate products and module solutions, including both LCD and RM micro-displays. Their differentiating technologies like double stack and ColorMax are relevant in all three segments. But most of the immediate growth prospects still come from the military. Growth is coming roughly in three waves from three market segments:
- Military
- Corporate
- Consumer
- F-35 fighter jet helmet
- FWS-I program
Starting with the FWS-I (Family of Weapon Sight) program, the company has roughly $33M in orders including the above mentioned one from DWS awarded in September, from the Q3CC:
- The FWS-I program is a clip-on thermal weapon sight that provides users with the ability to identify targets in the most extreme circumstances. Kopin is the sole source on that contract as it is in F-35.
- The F-35 fighter jet helmet is an existing program that has been around for years and the company received an additional $2.7M order in April. Much of the functionality is enabled through the augmented reality (AR) helmet, which provides the pilot with vast quantities of flight, tactical, and sensor information for advanced situational awareness, precision and safety. The extensive functionality and extreme conditions require unique display technology and Kopin is the sole supplier to this production program.
The company has a backlog stretching into Q2 2021. The enterprise market is also coming to life, from the Q3CC. AR remains a work-in-progress with a concentration in the low volume enterprise market, as RealWear, Lenovo, Magic Leap, Apple, Google and Intoware target the segment. ABI Research, says consumer AR software and content is expected to grow at over 100% CAGR between 2021 and 2025, to reach $20 billion in total revenue in 2025. The total AR Media and Entertainment market will see similar growth at 90%.
In the consumer market, “2021 will be an important one for AR consumer hardware,” analyst Abbruzzese said. “nReal will ship its first headsets to consumers, while Mad Gaze will also look to expand. Also, Facebook is expected to roll out its AR smart glasses out of its Reality Labs initiative; Google may join as well after the acquisition of North, and with pressure from Facebook and others. Some of the main wins for Kopin include:
- RealWear -- RealWear, the producer of MR glasses for the industry. Kopin sold its Golden I platform to privately held RealWear in August 2019. RealWear HMT-1 is the latest iteration of Kopin's Golden-I platform launched by an experienced executive team including former Daqri and Sonim leaders. Kopin provides display, optics, Whisper chip, OS and licensable intellectual property to RealWear and will realize revenue for each unit sold. Kopin's Revenue could be as high as $100.00 per HMT-1 device including license revenue. I assume a 35% gross margin for Kopin on HMT-1 revenue.
- Source: 2019 10-K -- We licensed certain intellectual property to RealWear, Inc. ("RealWear") and received a warrant to exercise 15% of the equity in RealWear's next equity offering. We exercised the warrant in the second quarter of 2018 and received 15% of the shares in the equity offering. In 2019 we made an additional equity investment in RealWear of $2.5 million as part of an equity raise by the company. In the fourth quarter of 2019 Kopin reviewed the financial condition and other factors of RealWear and as a result, in the fourth quarter of 2019, we recorded an impairment charge of $5.2 million to reduce our investment in RealWear to zero as of December 28, 2019.
- Zierler listed the following Kopin technologies and components that are included in the HMT-1 device:
- WVGA AMLCD micro display module with optics
- Industry-leading 4 microphone noise cancellation silicon
- Software license revenue: embedded within the HMT-1 is a proprietary OS layer that enables virtually any existing Android application to become voice and head gesture-enabled on the HMT-1
- Possible reference design license revenue. Kopin sold its Golden I platform to privately held RealWear in August 2019.
- Lenovo -- Kopin owns 15% of Lenovo's AR division which was started in 2017. Lenovo produces AR headsets like the Explorer and the Mirage for the consumer market. There is the AR Headset prototype for business travelers (and again this year), but the latter hasn't made it into production, at least not yet. The company has of course their AR/VR software platform ThinkReality and the ThinkReality A6 AR headset.
- Intoware -- Kopin owns 11% of Intoware, a SaaS workflow solutions provider for the oil and gas industry. And they are accelerating the move towards digitization and wearable computing as a result of the pandemic. Note the following (PR): WorkfloPlus developed by Intoware is a workflow automation platform using mobile and AR technology from our partner RealWear which aims to digitize audit, compliance and manufacturing processes. As by switching to digital instructions manufacturers can build a huge bank of data for machine audits and they can also predict when failures in manufacturing or assembly processes may occur... A manufacturer that is taking advantage of these innovative technologies is Bayer Pharmaceutical.
- HMDmd -- HMDmd, Inc. is a collaboration between Kopin and an experienced medical device management team that commercialized the first FDA cleared head-mounted display. and their second-generation product is also developed in cooperation with Kopin; development has commenced of the next generation of high performance, wearable displays for medical applications, supported by the proprietary technology, engineering and manufacturing resources of Kopin Corporation
- Google--Kopin’s near-eye micro display is being utilized by Google in its new Glass Enterprise Edition 2. Kopin was also the micro display supplier to Google's first-generation Glass Enterprise Edition.
- Panasonic just introduced the world's first HDR-capable UHD VR glasses at CES 2021 and these contain a Lightning 2.6K x 2.6K OLED display on a chip.
- Solos -- Kopin received a 20% equity stake in Solos in exchange for selling/licensing certain assets of its Solos product line and Whisper Audio technology. Kopin also received a four-year single-digit royalty on Solos products for a period of four years after the beginning of commercial production.
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