In previous articles, we have explored the strength of Kopin's licensable intellectual property beyond their component display business. In this summary, we will review their core product line of transmissive LCD microdisplays in the context of enabling head worn wearable products. We will also touch on some advances in ergonomics that Kopin has demonstrated publicly and in patent filings.
Relentless Pursuit of the Perfect Micro-Display: CyberDisplay
Long before the wearable technology market emerged as "the next big thing" Kopin (NASDAQ:KOPN) was working on shrinking LCD panels to a size small enough that could deliver information discretely near-to-eye. You see, if you combine a low power miniaturized display with a magnifying optical lens, you can create an effective laptop size screen for the user. The advantages of this have become obvious in the past two years with various head worn prototypes being shown, including Google's Glass product. However, back in the early 1990's other key technologies were missing which could pair with Kopin's displays to create head worn wearable devices.
While awaiting improvements in key areas such as wireless networking and battery life, Kopin targeted markets where their technology would be adopted quickly and support further development of their displays: consumer camcorders (remember those?) and DSLR cameras. In the end, Kopin successfully supplied over 20 million displays for camcorder electronic viewfinders (EVFs) and also penetrated the DSLR market in later years.
Success in these two areas as well as in the military arena have proved that Kopin's transmissive CyberDisplay LCD products:
- Deliver high quality images with low power requirements
- Are producible in large quantities without yield issues resulting in low unit cost to vendors
- Are extremely durable and rugged across a wide operating range
One of the reasons that Kopin has achieved such success with their displays is their decision to pursue transmissive LCD technology. This design is similar to the back-lit LCD TV you have at home. It enables simplified and thinner optical engines for wearables just as back-lit LCD TVs have become thinner and brighter than a DLP projector style TV ever could. Simplified optics also mean a more durable and rugged design that is easier and more cost effective to assemble with improved reliability.
Kopin has a good summary of the advantages transmissive over reflective LCD displays for wearable applications at the following link:
Military design wins for the transmissive LCD technology also support the superiority of Kopin's displays in applications where durability is important. You can review the long history supplying various military partners at their website (kopin.com). This military pedigree translates well to consumer and industrial markets where customers require a high degree of reliability for their branded products and will be hesitant to design-in unproven and high cost/low yield display technology.
The bottom line: Kopin's transmissive CyberDisplay technology has been proven in high volume consumer products as well as in multiple military design wins over the past 10 years. Additionally, Kopin's history of high volume display production provides a cost advantage: I believe that pixel for pixel, Kopin's high quality displays give their customers and partners a gross margin advantage.
These factors have resulted in Kopin becoming the leading supplier of micro-displays in the world - some estimates put their share of the global micro-display market at 80%. If you were building a head-worn wearable device, wouldn't Kopin be on your list of suppliers?
Moving Up the Value Chain - From LCD Panels to Complete Optical Engines
Now that we understand some of the advantages of the CyberDisplay LCD panels, what about the risk of display component commoditization as competitors enter the market and copy or offer alternative display technology? Fortunately, Kopin's experience supplying consumer as well as military partners and customers has driven the management team to identify an opportunity to increase gross margin while providing a competitive advantage: Kopin is now the world leader in design and manufacture of complete optical engines.
Kopin's complete optical engine solution provides their customers with:
- CyberDisplay panel at the required resolution
- Optimized LED back light utilizing waveguide technology to achieve high brightness with low power consumption
- Tuned optical lens match specific to your wearable application: Pupil, Pearl, or Prism optics are detailed in slide #10 of the following presentation:
near-to-eye display modules are very application specific
- Custom ASIC display driver circuitry to deliver the most power efficient module possible
- Optical engine housing designed and built to customer specifications
There is an excellent SPIE article entitled "Microdisplay Module for Enhanced System Integration" which details Kopin's advances in display technology up to 2012 available from spie.org for those technically inclined.
The result of Kopin's efforts to evolve from a fabless microdisplay manufacturer to a complete optical engine developer is improved unit gross margin and higher overall revenue as they become a full solution provider.
Wearable Ergonomics - Integrating the Optical Engine Into Something You Would Actually Wear
Google's Glass introduction has been somewhat of a double-edged sword. It has sparked our imagination regarding what is possible with a near eye display while raising concerns (privacy aside) as to what will be accepted by the mainstream as fashionable. I still believe that once users realize the full utility of head worn technology, the overwhelming advantages it offers will offset any minor perceived fashion concessions required. History is full of examples of this pattern of adoption.
A review of some key ergonomic intellectual property developed by Kopin to lead mainstream adoption of head worn wearables can be found at the following links:
Kopin Pupil smartglass reference design compared to Google Glass -
(Source) - Note: German language content
"Monocular display device" - Granted US patent
"Wearable electronic display" - Granted US patent
"Wearable electronic eyewear display" - Granted US ornamental patent
"Swappable headset computer with reversible display and temple supports" - Granted US ornamental patent
"Folded head set computer " - Granted US ornamental patent
"Wearable electronic display" - Granted US ornamental patent
"SPRING-LOADED SUPPORTS FOR HEAD SET COMPUTER" - US patent application
This is a small sample of work which has been underway within Kopin to develop valuable IP which will enable adoption of head worn wearable solutions across all market segments beginning with heavy/light industrial likely this year.
Kopin: OEM Supplier of Choice for Near Eye Wearable Solutions
Based on the information contained in this summary, it is a reasonable to conclude that Kopin can leverage its existing position as the leading supplier of microdisplays to significant growth in the wearable space. This growth will be more than just a step change in sales of CyberDisplay panels. Dr. Fan and his management team have insightfully prepared Kopin to benefit from the growth of Wearable Technology as follows:
- In 2013, Kopin divested their HBT transistor business to focus solely on Wearable Technology driven by their CyberDisplay product line - they are now a Wearable Technology pure play
- Kopin has proven their ability to supply high volume customers in the consumer electronics segment as well as demanding low volume military partners and customers
- Kopin has upgraded their display revenue stream by offering complete optical engine solutions tailored to customer and partner requirements resulting in higher gross margin
- Kopin has invested heavily in ergonomics R&D resulting in reference designs and protected IP which will be an additional source of revenue through licensing or consulting activity
As an investor, I see Kopin shares as currently undervalued based on their intrinsic value (licensable IP and cash as discussed in prior articles) combined with significant upside in sales and gross margin as they become the optical engine supplier of choice for near-eye wearable applications.
Disclosure: The author is long KOPN. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.