Energy Conversion Devices: An Amorphous Gem

Probably the most intriguing and fascinating company in the world is Energy Conversion Devices (ENER), also known as ECD, also known as Ovonics. It has been a public company for more than forty years, yet few people know of its existence. Products using the technology developed by this company include the MIR space station, solar powered airplanes, and the batteries that enabled the development of the EV1 (electric car) and the Prius hybrid, all of which are based on the science of amorphous materials, which some decades ago many scientists dismissed as an uninteresting and almost useless area of science. The man that proved the value of these materials and science is the founder of the company, Stan Ovshinsky, who didn't attend college and is an autodidact. Stan and Dr. Iris Ovshinsky, together with many brilliant scientists and engineers (like Jeffrey Yang and S. Guha), have developed over the years one of the most valuable patent portfolios in the world (e.g. the company is included in the Ocean Tomo 300™ index). Yet, despite these amazing inventions, the company has yet to show an operating profit.

Why should someone invest in a company that has been unable to make an operating profit for more than forty years? Because many things have changed making the future look very bright for the company, and it looks like it will finally be able to construct the business after spending so many decades working on the R&D foundations.

Arguably, the most valuable division is Unisolar, which is the only large solar company offering flexible & lightweight thin-film solar panels. These panels have an important competitive advantage in that they are ideally suited for BIPV applications (building integrated PV). In other words, they not only produce energy, but serve as the roof too. Being lightweight and flexible reduces installation costs, and in some cases they are the only solar option some buildings can choose without having to reinforce the building structure (it is calculated that approximately 30% of buildings fall in this category). Unlike CdTe solar panels from First Solar that use toxic and scarce materials, Unisolar's solar panels use abundant materials that are environmentally benign. The company is currently producing approximately 58 MW per year, and is on track to increase production to almost 180 MW next year (the goal is 300 MW in 2010). Something that investors should be realizing (which judging from the pps is not the case) is that more than 50% of sales are exports (therefore the company benefits from a weak dollar), and margins are expected to increase significantly.

There are several forces driving margin expansion:

1) economies of scale

2) higher production yields

3) higher product efficiency

4) higher throughput per machine.

The company is targeting 25%+ gross margins (which seems to be conservative and considers ASP reductions). If ASPs fall to $2/watt by 2011, assuming 15% net profit margin and 300 MW production, the company would be looking to make 90 million dollars in 2011. A 30 p/e ratio would produce a 2.7 billion market cap, discounting to the present at a 15% rate would yield a net present value of almost 1.6 billion dollars. The company has enough cash to build capacity to at least 180 MW, and might be able to attain 300 MW using cash flows.

But that is not the end of the story. The company owns, on a fully diluted basis, about 1/3 of a little company called Ovonyx. This company has licensed its memory technology to semiconductor giants like Intel (which is a partner in Ovonyx), Samsung, Elpida, Hynix, Qimonda, and ST Microelectronics. The memory technology is based on chalcogenide materials,and is called PRAM, OUM, PCM, CRAM, and phase change memory. It is expected to replace NOR flash memory, and could also eventually replace DRAM and NAND flash. Samsung has announced production of a 512Mbit part in 2008, and Intel a 128Mbit part that could arrive as soon as the end of this year or early 2008 (Intel's part codename is Alverstone).

What's interesting for investors is that phase change memory could become a 40 billion+ market in a few years. The royalty rate is not known, but they usually tend to be around 25% of gross profits. Assuming 12% gross profits for semiconductor companies, the royalty rate should be around 3% (about 1% for ENER). To try to give a valuation to this part of the company I am going to assume a 40 billion phase change memory market in 2017, .7% royalty received by ENER (assuming a conservative 2.1% royalty rate), 25 p/e ratio, and will use a 20% discount rate. That results in a net present value of approximately 1.1 billion dollars (ENER has significant tax loss carry forwards).

The company also owns 50% of a JV called Cobasys that is the only North American manufacturer of NiMH batteries for hybrid vehicles. There is too much confidentiality and ambiguity around this JV, but hopefully it is worth something, especially with oil close to $100.

If these valuations are approximately correct, the company is selling today at less than half of its intrinsic value (a good margin of safety), and its wonderful technology promises to give the company a wide moat in the future, allowing it to obtain high returns on invested capital (therefore becoming more and more valuable as time goes by). The new CEO Mark Morelli seems to be very smart and very hard working; he comes for the Carrier division of United Technologies. There was some insider buying recently, and approximately 30% of the shares are shorted. With so much pessimism and such a bright outlook, don't be surprised if ENER becomes the stock of the century.

Disclosure: Author holds a long position in ENER

Comments

[borisb:]

i wonder why the stock has fallen so badly after the intial spike on the earnings beat. makes no sense.

2007 Nov 29 07:04 PM

[Mark Anthony:]

Sergio:

Very, very, very interesting! I am glad I noticed your article and read it through. I heard about the name ENER but did not pay attention. I knew the name ovonics. I knew the new flash memory chip by Intel, which uses a phase change material, called chalcogenide, which uses tellurium. But I never connected all the dots together!

You have helped me connect the dots. It all related to a material that contains tellurium. And tellurium, you know, is an extreme rare elelment also used in the CdTe solar panel of First Solar (FSLR).

They are all connected by tellurium! ENER and the electronics companies. They are creating a tellurium based high-added value products. They will drive the tellurium demand up, drive the price up. But they can afford very very high tellurium price and will still pay to get their tellurium supply.

What it means is that they will kick FSLR, the least affordable tellurium customer, out of the tellurium user's club, and knock FSLR out of business.

That also means people really should seriously consider hoarding physica tellurium as a potentially very profitable investment!

Please read this article relating FSLR with tellurium:

www.seekingalpha.com/a...

Thanks again for a great article. I just wish you could have embedded more URL links within your article text.

2007 Nov 29 10:16 PM

[Mark Anthony:]

"...The company owns, on a fully diluted basis, about 1/3 of a little company called Ovonyx. This company has licensed its memory technology to semiconductor giants like Intel (which is a partner in Ovonyx), Samsung, Elpida, Hynix, Qimonda, and ST Microelectronics. The memory technology is based on chalcogenide materials,and is called PRAM, OUM, PCM, CRAM, and phase change memory. It is expected to replace NOR flash memory, and could also eventually replace DRAM and NAND flash. Samsung has announced production of a 512Mbit part in 2008, and Intel a 128Mbit part that could arrive as soon as the end of this year or early 2008 (Intel's part codename is Alverstone).

What's interesting for investors is that phase change memory could become a 40 billion+ market in a few years. The royalty rate is not known, but they usually tend to be around 25% of gross profits. Assuming 12% gross profits for semiconductor companies, the royalty rate should be around 3% (about 1% for ENER). To try to give a valuation to this part of the company I am going to assume a 40 billion phase change memory market in 2017, .7% royalty received by ENER (assuming a conservative 2.1% royalty rate), 25 p/e ratio, and will use a 20% discount rate. That results in a net present value of approximately 1.1 billion dollars (ENER has significant tax loss carry forwards)."

======================

Get it? Know what is chalcogenide, what is phase change memory? Look it up in wikipedia:

en.wikipedia.org/wiki/...

In one word, this material uses tellurium. This will be a gigantic HUGE industry, sucking up all the tellurium that's available in the world. As producers of extremely high added value products, e.g., computer chips, they can afford ANY high price and alway get the tellurium thay they need, and in the way kick the small players who could not afford tellurium OUT OF BUSINESS.

That means KILL FSLR by suffocating its tellurium supply!

Time to load up some physical tellurium, folks. This will make you very very good money in just a few short years.
seekingalpha.com/artic...

2007 Nov 29 10:37 PM

[Mark Anthony:]

See also this link:

A 30-year memory problem solved?

www.news.com/A-30-year...

2007 Nov 29 10:46 PM

[solar jim:]

Hey, Mark Anthony, we get it already. You're short FSLR and need it to fall to get back to even.

2007 Nov 29 11:29 PM

[Mark Anthony:]

Solar Jim:
No I am not talking about just get back to even. I am talking about short FSLR to ZERO. I will be adding short positions on the way down to $20. Tellurium price is currently going up more than 2% a week. It only takes tellurium price to go up 3 to 5 times current level, to KILL the profit margin of FSLR. It takes only about a year or so to get there.

2007 Nov 29 11:43 PM

[lefty:]

What everyoneseems to be leaving out is the cost of converting direct current into Ac. cost recovery could be 40-50 years.

2007 Nov 30 05:11 AM

[From the Ar...:]

Energy Conversion Devices,
Inc. - Company Report

Redmond, R.W.


1 August 1985
PIPER, JAFFRAY & HOPWOOD INC.


(ENER - OTC)



ENERGY CONVERSION DEVICES, INC.



HIGHLIGHTS:



* Energy Conversion Devices' lock on amorphous materials

technology is beginning to pay off. The Company's extensive patent

portfolio is forcing increasing numbers of large corporations to form

alliances with ENER in order to access its technology.



* ENER has excellent technological capabilities and is assembling

a capable management team to help manage the growth.



* Several products are in the process of being commercialized that

have billion dollar market potentials.



RECOMMENDATION: Buy



Recent price: (7/26/85) 17 1/4

DJIA: 1353.61



INVESTMENT CONCLUSION


Concept/'kan-,sept/ n 1: something conceived in the mind. 2: a

complex product of abstract or reflective thinking. 3: an abstract or

generic idea.



Energy Conversion Devices, Inc. is truly a concept. Formed over

25 years ago by Stanford Ovshinsky, the Company today has over 75 Ph.D.

physicists and chemists who are all working on "the last frontier of

solid state physics," the technology of amorphous materials. Amorphous

materials are solids that do not have a crystal structure. Ovshinsky

discovered that under certain conditions these materials have physical,

chemical and electrical properties equal, or superior to, crystalline

materials. What makes this significant is that crystals are often

limited in size and very expensive to create, while amorphous

materials, because of their random nature, are inexpensive to produce

and device sizes are not limited. In addition, amorphous materials can

be synthesized to possess properties that are unavailable in

crystalline substances. Until recently this technology had not been

widely embraced by the scientific community. In fact, it was only

within the last ten years that scholars accepted the concept of

amorphous materials, with a Nobel prize being awarded for work in this

area in 1977. ENER currently has about 190 U.S. patents with another

175 pending.



Energy Conversion Devices Inc. is in the process of evolving from

a pure research organization into accelerated commercialization. To

fund this evolution, the Company has licensed parts of its technology

and has entered into joint ventures with several large corporations.

The most significant of these are with Sohio, American Natural

Resources (ANR), Matsushita Electric, Hitachi, Nippon Telegraph &

Telephone, Nippon Steel, Sharp and Canon.



The Company is centering its product development on three primary

industries: energy, information and synthetic materials. The products

that are being developed range from high contrast flat panel computer

displays to high efficiency photovoltaic cells, optical memories,

copier drums, rechargeable batteries, thermoelectric generators and nth

generation computers.



Energy Conversion Devices should really be viewed as a large

development stage company. As such, the stock does not trade on

fundamental valuations but on long-term earnings expectations.

Therefore, this security should only be considered by the most

aggressive investors.



For the year ended June 30, 1984, ENER lost $8.85 million on

revenues of $29.23 million. We anticipate that for the year ended June

30, 1985 the Company will lose $11-$12 million on $28 million in

revenue. Our preliminary estimates for fiscal 1986 and fiscal 1987 are

for losses of $3-$4 million on revenues of approximately $45 million

and earnings of $1-$2 million on revenues of about $70 million,

respectively.



We think that at current levels ENER stock is a good Buy for both

the trader and the long-term investor. The stock is currently trading

at 17 1/4 per share, down from the 40's within the last 18 months. One

of the reasons for this is a delay in a unit offering to shareholders

for the development of flat panel displays. Initially, the SEC decided

to conduct an informal inquiry into whether or not ENER did, in fact,

have exclusive rights to the flat panel technology because of all the

joint ventures it is involved in. Although the inquiry is continuing,

when resolution does occur a major cloud overhanging the stock will be

removed and the potential exists for significant appreciation. The

Company has been able to secure intermediate-term financing, so the

delay has not seriously affected the project. Long-term we think that

amorphous materials have significant potential. Ultimate success in

only a few of its projects could catapult ENER into considerable

profitability. Therefore, because of the significant potential

associated with amorphous materials, we think the depressed stock price

gives aggressive investors an opportunity to participate in a

technology that could revolutionize all industry.



BUSINESS SUMMARY


Energy Conversion Devices, Inc. has pioneered research on

amorphous and disordered materials. The Company is currently involved

in developing products for the energy, information and synthetic

materials markets. This is being accomplished primarily by the

formulation of alliances with several large, well-established

companies, primarily in the form of joint partnerships and nonexclusive

technology licenses.



The Company currently has approximately 476 employees of which

over 75 are Ph.D researchers. More importantly though, ENER has

recently been complementing this "brain trust" with proven business

managers who previously held high level management positions in large,

multinational corporations.



OVONIC TECHNOLOGY

----------------------...


ENERGY INFORMATION SYNTHETIC MATERIALS



Sovonics Solar Ovonic Display Systems (*) Ovonic Synthetic

Systems (A partnership - Flat Panel Displays Materials Company (*)

with Sohio) and Imagers - Coatings

Sovonics Solar - Magnets

Technology (A Matshushita Electric - X-Ray Mirrors

partnership with Industrial Company (a) - Atomic

Sohio) Hitachi, Ltd. (a) Ceramics (TM)(b)

Sharp-ECD Solar IBM (a)

(A joint venture of - Optical Memories

Sharp and Sovonics

Solar Technology) Raytheon Corporation (a)

- Solar Cells - PROMs



Ovonic ThermoElectric Nippon Telegraph &

Company (*) Telephone Corporation (b)

ThermOvonics (*) - Ultra High Density

- Ovonic ThermoElectric Electronic Memories

Generators

Major International

Ovonic Battery Company Corporation (b) (Name

(A partnership with withheld for competitive

American Natural reasons)

Resources) - New Computer Applications

- Rechargeable (N-Gen (TM))

Batteries - Optical Fibers



Electrophotographic Drums



(*) Wholly-owned by ECD

(a) Licensee

(b) Research & Development Agreement



Source: Energy Conversion Devices, Inc.



AMORPHOUS OR DISORDERED MATERIALS TECHNOLOGY


Amorphous or disordered materials are a unique type of synthetic

solid. They can be best understood as the antithesis of ordered or

crystalline substances.



CRYSTALLINE (ORDERED) MATERIALS


These are solids that have precise mathematical order. That is,

each molecular cluster or atoms within a material is exactly like every

other cluster. Therefore, all chemical bonds and bond angles are

equivalent and physical properties are predictable. Another way to

describe it is in a crystal each atom is surrounded by equidistant

neighboring atoms (short range order) and there is a correlation

between the positions of the atoms over macroscopic distances (long

range order). The problem is that to obtain the long range order a

crystal must be in absolute form. That means impurities and bond

disclocations cannot be tolerated. Therefore, crystals must be prepared

or grown in ultra-pure conditions and controlled environments. This

usually involves considerable expense and puts practical constraints on

substrate sizes. For example, the semiconductor industry has been

working with crystalline silicon for over 30 years and still can only

grow crystals with approximately a six-inch diameter. One other

limitation is that not all chemical compounds will form crystals. As a

result, only certain physical and electrical characteristics are

readily available from existing materials. Therefore, even though a

certain chemical formulation may possess desired microscopic qualities

it may not be producible in crystalline macroscopic form.



AMORPHOUS (DISORDERED) MATERIALS


As contrasted with crystals, amorphous materials have constituent

molecules arranged in disordered fashion without repetitive,

mathematical patterns. Therefore, even though an amorphous material

may have a chemical formula equivalent to a crystalline substance it

would not possess long range order. That means the molecular clusters

would not line up in an orderly fashion across the solid in the same

way crystalline solids do, even though the microscopic or short range

order is nearly identical. For a long period of time it was thought

that this characteristic would inhibit the practical use of disordered

materials. The surprise came when it wa discovered tha amorphous and

crystalline substances in many respects exhibit comparable properties.

That meant the essential properties of a substance are determined

primarily by chemical bonding or short range order, rather than by the

macro structure. This being the case, there was one other important

implication. Freedom from crystalline constraints allows one to design

completely new materials. Researchers can create new materials with

physical, chemical and electrical parameters that were heretofore

unavailable with crystalline materials. This is significant because

now materials can be tailor-made for specific applications.



WHY ARE AMORPHOUS MATERIALS COMMERCIALLY SIGNIFICANT?


1. COST ADVANTAGES: Amorphous materials are created by using

methods such as plasma deposition, cathode sputtering and thermal

evaporation. These techniques are significantly cheaper than growing

crystals of an equivalent substance. Therefore, even if crystalline

materials can perform a task equally, the economic benefits of

amorphous materials can be significant.



2. MATERIAL CHARACTERISTICS: Because amorphous materials are free

from crystalline constraints, materials can be created with unique

physical, chemical and electrical characteristics. This may allow

companies to produce products that were previously impossible with

crystalline substances.



3. SIZE ADVANTAGES: Devices can be fabricated with amorphous

materials that do not have the size limitations of crystalline solids.

An example of this are traditional semiconductor devices versus ENER's

work on the N-Gen computer, which is literally an entire computer on a

very large substrate.



ENERGY DIVISION


In the Energy Division ENER is involved principally in the

development and commercial production of photovoltaic solar cells and

thermoelectric generators. The Company is also preparing rechargeable

batteries for commercialization. In addition, research is under way on

specialty catalysts and superconductivity.



Photovoltaic solar cell development is currently under way via

operating and technology partnerships with Sohio. The operating

partnership, called Sovonics Solar Systems, was formed to continue

research and development on photovoltaic technology and to

commercialize solar products. As of March 1985 ENER owned

approximately 33% of the Company subject to restoration up to 49% if

funding requirements are met. Energy Conversion's share of the

operating partnership cannot drop below 25% even if the Company fails

to make all required cash calls. The technology partnership, named

Sovonics Solar Technology, holds all the patent rights to the

technology and is responsible for all licensing agreements.



Major Fields For Ovonic Commercialization
MAJOR FIELDS FOR OVONIC COMMERCIALIZATION



ENERGY -- Photovoltaics

Thermoelectrics

Batteries

Hydrogen



INFORMATION -- Optical Memories

Solid-State Memories

Flat Panel Displays

Copier Drums

Microelectronics (large area)



ENGINEERED MATERIALS -- Coatings

X-Ray Optics

Superconductors

Catalysts

Magnets



ENER holds a 51% interest in the technology partnership which is

not subject to dilution. Currently the partnerships are involved in

producing multi-layer, amorphous silicon alloy solar cells. The

emphasis is to produce high-efficiency cells on very light substrates.

The theoretical efficiency available from a multiple layer amorphous

device is 60%. However, a realistic upper limit is probably about 30%,

with a 15% conversion rate necessary to make solar cells commercially

competitive with other energy forms in large central power stations.

To date, this Company has produced a device in the laboratory with an

11.7% efficiency. Crystalline solar cells currently operate at

approximately a 10% efficiency. A very distinctive characteristic of

Sovonics solar cells is that they are produced on lightweight flexible

substrates. All other solar cells, amorphous or crystalline are

currently manufactured on glass or other rigid substrates. This

characteristic will become increasingly important as larger and larger

modules are built in commercializing the product. In addition, the

Company is currently able to manufacture its solar cells with a 99%

yield. Furthermore ENER's solar cells are very stable, while other

amorphous silicon devices are not. ENER is currently involved in

preliminary discussions with a government agency as to potential

applications of ultra light flexible solar cells in space.



Sovonics Solar Technology is currently involved in a joint venture

with Sharp in Japan for the production of tandem amorphous silicon

alloy solar cells utilizing Energy Conversion's proprietary

roll-to-roll production equipment. These cells are used in Sharp's

solar-powered-calculat... To date, SOHIO has invested approximately

$75 million in the partnerships and Sharp about $6 million. Sharp has

also invested approximately $20 million for manufacturing facilities in

Japan. The industry estimates the current photovoltaic market to be

approximately $300 million, growing to $2 billion by 1990 and $10

billion by the year 2000.



The Ovonic ThermoElectric Company (OTC) is now wholly owned by

ENER subsequent to the Company's purchase of ANR's interest in March

1985. OTC operates as a Division and develops and produces devices that

convert heat into electricity, called Ovonic thermoelectric generators

(OTEGs). These are solid state devices (without moving parts) which

make use of the Seebeck effect to cause electrons to migrate toward the

cold end of a device when heat is applied to the opposite end. The

Company is currently developing devices for a variety of applications

ranging from remote power generators to commercial cooling systems. To

date the Division has sold approximately 300 units at an average cost

of $900, primarily for use as remote power generators. The major

competitor for this device is Teledyne, however, ENER believes its

device operates at lower temperatures and has a substantial cost

advantage. The Company is also working on several large volume

applications.



The Ovonic Battery Company, (OBL), a partnership with ANR

(recently acquired by Coastal Corp.) was formed to develop lightweight,

nontoxic, high energy density batteries. OBL is initially developing

secondary, or rechargeable batteries targeted at the high end of the

nickel-cadmium market. The batteries will be sold primarily to OEMs

manufacturing portable, battery-driven products. OBL has to date

developed preproduction prototypes that exhibit 2.0 AH (ampere-hour)

capacity as compared to 1.2 AH for nickel cadmium. There is currently

some question as to whether or not ANR, subsequent to being acquired by

Coastal Corp. will continue with the partnership. The Company believes

that, in the event this does happen, other partners can easily be

found. To date ANR has contributed over $6.5 million to the Ovonic

Battery Company. Contributions of $20 million would represent 50%

ownership. ENER believes the addressable market for the Ovonic Battery

to currently be in the range of $250-$500 million and growing at 10%

annually. Some studies have placed the market at $1 billion by 1990.



Other projects in the Energy Division center primarily on

efficient, low cost catalysts and superconductors which carry very

large electrical currents and produce extremely large magnetic fields

without dissipation of energy. Conventional superconducting materials

only operate at very low temperatures which limits practical

application. ENER's ultimate goal is to create superconducting

materials which can operate in an extended temperature range, thereby

stimulating commercial application.



INFORMATION DIVISION


The Information Division is involved in the development of

products for the telecommunications and computer industries. Primary

products are flat-panel computer displays, optical memories,

electrophotographic drums (copier drums), programmable read-only

memories (PROMS), optical fibers, a microfiche system, large scale

circuit interconnect technology and nth-generation computers.



In May of 1984 ENER formed Ovonic Display Systems, Inc.

("DISPLAY"), a wholly owned subsidiary, to complete development and

market high contrast LCD flat panel displays. Initial work is focused

on developing an "active matrix" technology for LCDs which will offer

extremely good contrast and a wide viewing angle. Conventional LCD

displays utilize a multiplexed signal technology which compromises

contrast, viewing angle and resolution due to the effects of cross talk

and lack of sharpness in the liquid crystal voltage threshold. ENER's

product will initially be marketed as a replacement for a cathode ray

tube (CRT) monitor. Eventually the Company also plans to develop solid

state electronic image processing technology for devices, such as page

readers and facsimile machines. These devices would not have moving

parts like traditional machines, and hence could be much cheaper to

build and substantially lighter. The Company believes that this could

eventually be incorporated in its LCD flat panel displays, such that it

serves a dual role, display or page reader. ENER also anticiptes the

development of touch sensitive and color LCD displays. In September

1984, Energy Conversion Devices filed a registration statement with the

Securities & Exchange Commission for a rights offering to ENER

shareholders. Proceeds were to be used to continue product development

and to build a semi-automated production facility. However, the SEC

delayed the offering to conduct an informal inquiry, which initially

revolved around the question of whether or not ENER did in fact have

exclusive rights to the active matrix technology, because of its large

number of joint ventures. It appears that the inquiry is without

merit. In order to continue development until this measure is resolved,

ENER entered into two business agreements in April of 1985. One was

for $3 million with a large institutional investor and the other was $1

million from a large multinational Japanese corporation. There does not

appear to have been any significant delays in product development

because of this inquiry. The Company believes it is only about two

months behind schedule. The potential market for LCD flat panel

displays has been projected to reach approximately $3.2 billion by

1992.



More than a decade ago Energy Conversion Devices developed an

optical memory technology for the storage and rapid retrieval of

massive amounts of data. This technology revolves around a reversible

bistable switch which is activated by amorphous-to-crystalli... and

crystalline-to-amorpho... phase transitions. The driving mechanism for

this transition is a laser beam with 1 uM resolution. Until recently

this has been the inhibitor to the extensive commercialization of the

product. However, recent advances in solid state laser technology have

removed this barrier. IBM, Matsushita Electric and Hitachi are

currently licensees of optical memories with additional licenses under

negotiation. To date Matsushita has invested approximately $2 million

and Hitachi approximately $0.8 million. Some market researchers

believe demand for this type of device could reach approximately $10

billion by the year 2000.



Electrophotographic copier drums have been developed by ENER which

utilize an amorphous silicon alloy to produce a photoconductive coating

that is extremely hard, scratch-resistant and long lived. These

properties are significant because approximately 90% of all copier

problems are currently related to the copier drum. ENER believes that

its amorphous silicon drum will have a usable life over 10 times longer

than conventional drums. Although many companies have understood the

desirable characteristics of amorphous silicon copier drums, they have

been uneconomical to produce. However, ENER has perfected a deposition

technique that very substantially reduces manufacturing costs and

creates the hardness required to make its proprietary material a viable

option. In September 1983 a Japanese firm, Shindengen Kogyo Co.,

invested $400,000 in a research agreement for development of this

technology. Shindengen is the largest OEM copier drum manufacturer in

Japan. On June 19, 1985, ENER and Canon of Tokyo, Japan signed an

agreement whereby ENER will license certain technologies to Canon for

manufacturing amorphous silicon copier drums in Japan. In addition,

the two companies will establish a joint venture in the U.S. which will

be 51% owned by ENER and 49% by Canon who will have management control.

The terms are structured such that ENER will receive $7 million as soon

as Japanese government approval is obtained and an additional $3

million over the next 18 months.



Programmable read-only memory (PROM) technology is being developed

via a license agreement with the Raytheon Corporation. Energy

Conversion Devices developed an amorphous silicon switch as a

replacement for the metallic fuse link elements used in conventional

PROM devices. This will ultimately result in a 50% size reduction in

the PROM cell.



Raytheon has completed a two-year engineering program and is in

the process of gearing up for production of the devices. It is not

known when manufacturing will commence. The PROM market has been

forecasted to grow approximately $650 million by 1988.



Energy Conversion Devices patented "amorphous silicon antifuse

technology" used in the PROM device is also evolving into another

application. In January 1983 ENER transferred a nonroyalty bearing

license to this technology to a new corporation, Mosaic Systems, Inc.

In return ENER received approximately 10% of the original stock.

Mosaic Systems is involved in the development of discretionary wiring

for wafer scale integration. What this will do is to connect

programmatically crystalline chips that reside on monolithic wafers.

Therefore, instead of breaking a silicon wafer into small chips and

then reconnecting them by packaging them on a printed circuit board,

manufacturers will be able to do everything electronically at the wafer

level. Mosaic Systems anticipates this will reduce cost and size while

increasing speed.



A revolutionary area of research that is proceeding at ENER is

called the N-Gen (nth generation) computer. Conventional

semiconductors are based on single crystal silicon, which after years

of research and millions of dollars still can only be practically

produced in six-inch diameters. This puts a limit on device sizes,

allowing researchers to only go so far in full wafer scale integration.

In contrast, Energy Conversion Devices utilizes amorphous silicon

semiconductors which can be produced on substrates a number of times

larger and in multiply layers. The implication is that by using

amorphous silicon, one could literally design a computer more powerful

than today's mainframes on a single chip. ENER has received $4.3

million from Nippon Telegraph & Telephone and another major

international firm to proceed with this research.



The other major areas of work in the Information Division revolve

around topical fibers and a microfiche system. In optical fibers the

Company is developing ultra low loss fibers for use in

telecommunications and ultimately in devices such as optical computers.

A major international corporation has recently invested $750,000 in

preliminary research. Energy Conversion Devices has also developed an

instant, dry development process into a microfiche system. In November

1983, ENER licensed the technology to Memcom International for $1

million and royalties.



SYNTHETIC MATERIALS


The Synthetic Materials Division, or the Ovonic Synthetic

Materials Company, OSM, is working primarily in the areas of

specialized coatings, hard magnets and x-ray optics.



Specialized coatings are being developed for a number of different

industrial applications. OSM has been able to develop coatings, again

based on amorphous materials technology, with the ability to withstand

high temperatures, abrasion and corrosion. The underlying basis of

this business is the Company's ability to create materials for specific

tasks. This again is due to the nature of amorphous materials. OSM is

currently involved in a two-year development contract with the Nippon

Steel Corporation for the development of corrosion resistant coatings

for the steel industry. To date Nippon Steel has contributed

approximately $800,000 to this project.



The hard magnet project has developed a permanent magnet with a

large magnetic energy capacity in relationship to its size and weight.

The emphasis will be to replace rare earth and ferrite magnets with

magnets superior in performance as a function of weight and size.

Potential applications would include computer disk drive motors,

automobile starters and other home appliances.



OSM's Xray mirror project has developed materials that can be used

to reflect and focus X-rays. X-rays, of course, penetrate most all

substances. The only substances currently available that will reflect

or disperse X-rays are certain single crystal materials. OSM has

developed a thin-film multi-layer technology or "super-lattice"

material that overcomes many of the shortcomings involved with current

materials. OSM believes this will enable X-ray instrumentation

manuacturers to design increased functionality into future machines.

This is already a profitable product with sales currently over $1M

annually to customers such as Philips.

2007 Nov 30 03:12 PM

[alex moot:]

I have a question if anyone can answer me... I would like to use the Ovonics materials for my house, and a business project that i am working on. Do you have any idea how i can find information about this company and its products, but not concerning stock or finance partnership forms.
thank you

Jan 15 08:20 PM