I have being following UniPixel's UniBoss for over a year and it is no secret that I have been holding a bearish view on UNIPIXEL. This is not because of UniPixel history of failed products and broken date lines. I'm not bearish on UniPixel because of insider selling or other controversial subjects. The reason that I'm bearish on UniPixel is simply because I believe that the technology doesn't work.
So what is the UniPixel amazing technology?
UniPixel's amazing technology is that they press catalytic resin on a printing plate at 6 microns and they hope that the resin will stick to film. That's it! That's all! There is nothing else going on here except curing the resin and metalizing it.
The problem that I see here is that there is no guaranty that the resin will properly transfer from plate to film. Such process could create an infinite numbers of errors and it makes think that UniPixel just doesn't know what they are talking about. If it was so easy to transfer resin at 6 microns everyone would be doing it but no one is. Currently the smallest printing that is currently being achieved for printed electronics without the use of photo-lithography is 80 microns. As noted by Xuhua Zhou on his blog "UniPixel -- Broken Lines Plus Broken Words Add Up To A Broken Company." Xuhua questioned UniPixel ability to print at 6 microns as I do.
No one in the industry can print under 80 microns without the use of photo-lithography. To think that UniPixel has succeeded where everyone else in the industry has failed is just deluded. Not because UniPixel has created samples of metal mesh at 6 microns does it mean that they are able to mass produce it. As noted by Alpha Exposure on his article "Uni-Pixel: A Picture Is Worth a Thousand Words":
"Another former employee also told us Uni-Pixel was unable to properly produce UniBoss. Uni-Pixel enticed potential customers by producing small batches of samples in a lab and by promising significant improvements in short order. However, Uni-Pixel was unable to progress from lab to greater scale production, and he lost contracts with customers as a result. He cited two examples of failures with the 10 micron version of UniBoss. In each instance, Uni-Pixel was able to win initial contracts due to cherry-picked samples and big promises of advancements, but Uni-Pixel would ultimately fail when it came time to produce UniBoss in material volumes and in a real-life setting outside of the lab. He said such instances were very embarrassing and led to his decision to leave the company."
The Amazing Shifting Yield
Aristides Capital on its article "Musings On Minneapolis: Uni-Pixel Is Moving... Backwards" questioned UniPixel integrity based on it's contradicting statements. On a conference UniPixel stated that by switching films they went from a 30% yield to a 70% yield. Later they back-pedaled and stated "our goal is to achieve yields of 70% in three to six months." After that conference UniPixel stock price dropped like a bowling bowl. So what is it, 30 or 70%?
Personally I don't even think that UniPixel can even achieve a 30% yield.
KODAK Enters in the Picture
On April 8, 2013 UniPixel released a press release stating:
"With the printing and plating line qualified and production ready, we are on track to meet the capacity target of sixty thousand square feet per month by the end of April. Our focus is to scale capacity as quickly as possible to meet the two million square feet per month capacity target for our licensees and continue to scale to meet future production capacity requirements from interested OEMs, ODMs, panel manufactures and supply chain partners."
As far as I knew in April 8, 2013 UniPixel was ready for mass production. I even proudly advertised the fact in a SA article titled: Uni-Pixel Delivers. But I got fooled just like the rest of the street. UniPixel was not qualified nor production ready. How they could be production ready when they didn't even have the in-line inspection equipment installed to inspect the sensors?
Later UniPixel did an IPO and shockingly they announced that they entered into a manufacturing contract with Kodak. At first this makes you think that UniPixel was increasing capacity but what really this meant was that the Lufkin manufacturing facility was a failure and they needed the help of Kodak to improve their process. In fact they stated that UniPixel needed Kodak's capabilities to inspect and qualify UniBoss. UniPixel projected this contract as a great achievement when in fact it was a confession that they were unable to mass produce UniBoss.
UniPixel was then was accused by Cintron Research of selling half of Uni-Boss to Kodak. On a statement Cintron clarified:
"After Citron reported on this last week as "UniPixel sold half of UniBoss" Alvarez & Marsal immediately issued a press release denying that UniBoss was sold. The company has now reduced demand for material disclosure of this much-hyped transaction to a ridiculous semantic game of evasive language."
"So if UniPixel was not "sold", they committed half the revenues and/or half the profits in this deal to Kodak, with exclusivity terms. Whether it is a manufacturing agreement with covenants, or a joint venture, either way, Kodak has been extended rights via covenants to participate materially in the profits of UniBoss. These obligations of UniPixel come at a price, and that price provides a critical valuation data point for UniPixel. The company is doing everything it can to prevent disclosure of these terms to the public…for a reason."
Now we know that UniPixel has entered into an agreement with Kodak where at least Kodak will have a share of InTouch's revenue. But why would UniPixel do this? Why would UniPixel share its revenue with Kodak when they could just hire Kodak as a manufacturer? And why would UniPixel share with Kodak intimate knowledge about its manufacturing process?
In my opinion the reason that UniPixel had to go to Kodak was because the Lufkin manufacturing facility was a failure and they needed Kodak to try to fix the process. UniPixel with its recent IPO was in no need of Kodak's cash (not that Kodak had any) so UniPixel was in no need of a partner. What UniPixel needed from Kodak was its brains to correct UniBoss manufacturing deficiencies. There is no evidence that Kodak has invested a penny into InTouch manufacturing. Kodak is in no risk if InTouch fails. So far UniPixel has carried all expenses. Neither did UniPixel was in any need to re-brand UniBoss into InTouch with Kodak. UniPixel already had Intel as a marketing partner and UniPixel had already marketed UniBoss in Asia at great expense. So the name change doesn't make sense unless Intel has dropped UniPixel.
My interpretation of the events that have occurred during the last year is that UniPixel deceived the market about having a viable manufacturing process when in fact they didn't. UniPixel lied about its potential yield and qualifications. UniPixel fooled everyone with cleverly written press releases that made everyone think that UniBoss was qualified and ready for production when in fact it wasn't.
My position is that the UniBoss manufacturing will never be successful on the 6 micron area. That there is no guaranty that Dell will accept InTouch as a viable touch sensor. And there is no guaranty that the module manufacturers will accept InTouch to be laminated into touch panels.
The allegations that Dell can waiver the in-line inspection requirement is absurd. Even if they do the cost of manually inspecting the touch sensors will sky rocked the sensor cost making any revenue null and UniPixel will not be able to produce in any significant volume that will justify module manufacturers to change their lamination process.
There are some out there that have alleged that UniPixel has met every dateline they have self imposed. No they haven't, UniPixel has failed to achieve qualifications on their manufacturing line and failed to achieve qualifications of their end product with the costumer. Each time they have blamed factors outside of their control but I say "bull". Windows 8.1 requirements were not any different from Windows 8. The problem was never with the underlying operational system but the problem that the module failed to meet Windows 8 specs.
Why I'm so angry with UniPixel? Because they fooled me, they made me think that they had a viable manufacturing process when they didn't and they made me lose $2,500 in a small investment I had there. Is not much but the point is that they lied to me.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.