Recent projections by Gartner show global smartphone sales reaching 468 million units by the end of 2011 representing at 57.7% increase over 2010. The nascent tablet market is also growing robustly with Gartner projecting almost 70 million tablet sales in 2011, up from 18 million in 2010. Further, Gartner projects 300 million tablets will be sold in 2015.
What is the right way to invest in this massive growth? In pondering this dilemma an investor needs to sort through a plethora of questions. What will the operating system landscape look like in a few years? Will Apple dominate or will Android take over? What will become of RIMM (RIM) and how will the Microsoft (MSFT)/Nokia (NOK) relationship play out? Will the recently independent Motorola Mobility (MMI) be able to gain share and be a credible handset and tablet player? How will Samsung’s (SSNLF.PK) offerings evolve? Can Dell (DELL) and HP (HPQ) be credible participants in the tablet market?
As an investor if you are able to pick the winners in these highly competitive and dynamic markets you will do very well. There is, however, another way to play the growth in these markets. There is one thing that all of these devices have in common. They all utilize touchscreens. Further, the touchscreen market is greater than just smartphones and tablets. The market includes kiosk displays, flat panel televisions, car navigation devices, airplane cockpit displays, smart blackboards, and more.
Today, almost all touchscreen technologies utilize indium tin oxide (ITO) as a conductor. ITO is a rare earth metal found in zinc deposits. It is also largely controlled by China. It is used because it is transparent and also conducts electricity. But there are issues with ITO. It is rare earth metal and is in limited supply. In fact, there is some suggestion that the supply could run out within 10 year. (See the following two articles: "Oh No! We’re Running Out of Touchscreen Stuff!," and "Are we running out of touchscreens?")
In addition, as a result of its scarcity, ITO is expensive and the price is increasing. It also lacks flexibility limiting the size of touchscreens.
A company that could design a touchscreen technology equal or better in performance to those that utilize ITO, but using some other conductive material that is cheaper would be a home-run. It is possible that there is just such a company.
Uni-Pixel, Inc, (UNXL), based in The Woodlands, Texas, is a $50mm market cap company with no debt and $13mm in cash on the balance sheet. In its 10-K filing UNXL describes itself as follows:
"We are a production stage company delivering its Clearly Superior Performance Engineered Films to the Lighting & Display, Solar and Flexible Electronics market segments. Our newly developed UniBoss thin film high volume roll to roll or continuous flow manufacturing process offers high fidelity replication of advanced micro-optic structures and surface characteristics over large area, combined with a thin film conductive element. We will sell our films as sub-components for use in liquid crystal display as a back light film and active film sub-component. We are currently shipping our Clearly Superior Finger Print Resistant protective cover films for multiple touch enabled devices. We sell our films under the Clearly Superior brand as well as private label to original equipment manufacturers (OEMs)." (See the following: Uni-Pixel 10K)
In the fourth quarter of 2010 the company began selling fingerprint resistant films under their own brand and via private label for mobile devices.
For a great overview of the company listen to their 25 minute presentation at the Roth Capital Partners conference.
Uni-Pixel’s Touchscreen Technology
UNXLhas developed a flexible thin-film conductor that it calls the UniBoss platform that enables the highly efficient manufacturing of transparent touchscreens using transparent copper as the conductive agent. According to the company, UniBoss is more conductive, more transparent, lower cost, thinner, and uses less energy than ITO. In fact, the company claims that UniBoss touchscreens would use 75% less power, which would add to the battery life of the device. If this is true UNXL has not just developed a cheaper alternative to ITO, it has developed a superior disruptive technology.
According to their recent 10-K filing Uni-Pixel has demonstrated proof of concept to large computer system OEMs and is working to implement prototypes within an end user product. The company also states that they have had meetings with a variety of consumer electronics OEMs that are considering leveraging UniBoss touchscreen films into their products.
It’s also worth noting that the company did a stock offering in December raising $13.3mm of net proceeds at $5/share. They have the capital to fund commercialization.
It is highly unlikely that UNXL is the only company pursuing an alternative touchscreen technology. 3M is apparently working on some touchscreen technologies and the article referenced blow also mentions Tokyo-based Toray Industries using silver wire technology in lieu of ITO. (See the following article: "New silver-packing transparent conductive film could mean more durable touchscreens").
There is no question that UNXL is a small company with limited resources and a market this big gets the attention of the big boys, but the company does appear to be on track and quite close to formalizing relationships with OEMs. In the meantime, UNXL generates some revenue from its fingerprint resistant screen protectors.
UNXL offers a risk/reward profile that you don’t often find. While the result may be binary (the fingerprint resistant screens are not what the investment is about), the upside is extraordinary and worth the risk.
Disclosure: I am long UNXLD, MMI.