NanoMarkets' just-published analysis of the ITO alternatives market suggests that this market - much touted for several years - is ready to take off. We have been following ITO alternatives for several years now and have generally been quite bullish on their long-term prospects. In our latest report, however, we show that news from the alternative ITO "industry" is pointing towards accelerating commercialization.

In terms of hard cash we see revenues from ITO alternatives growing from about $140 million in 2010 to $1.1 billion in 2015 and then going on to reach almost $2.0 billion in 2017. And while almost all of the 2010 number will come from low-margin/commodity transparent conducting oxides, much of the future opportunity will come from more exotic  and certainly more profitable  nanomaterials; especially carbon nanotube films and nanosilver films.

The PV industry has already shifted its interest from ITO to other TCOs on cost - and cost stability - grounds. But, while alternative TCOs inevitably have cost advantages over ITO, they are usually far less transparent and conductive. We continue to believe that nanomaterials--especially nanosilver inks and carbon nanotube coatings--represent the only materials category where there is a significant likelihood of achieving materials that outperform ITO in terms of both transparency and conductivity while also reducing costs. Such materials either realistically promise very low materials costs (carbon nanotubes) or low-cost processing (nanosilver inks) or both. Other advantages that these alternatives may offer are cost stability (nanotubes again) and flexibility (good for touch-screen and flexible displays).

Research and development in these areas has been ongoing for years and this has often seemed to involve mostly fairly obscure companies. However, dig down a little further and you find that there is considerable interest from larger firms too. Ascent, a major player in the CIGS PV space, is working with Cambrios to develop nanosilver materials as the transparent electrode for its PV cells. Meanwhile, Sumitomo has a tripartite relationship with Chisso and Cambrios to sell a similar material into the LCD industry. Sumitomo, through its CDT subsidiary, has also announced the use of a copper formulation to replace ITO in OLED lighting.

And on the nanotube front, LG Display has a recently negotiated a joint development agreement with Unidym, which is also working with Samsung on nanotube transparent electrode film for e-paper displays. Then there is Novaled and Saint-Gobain Recherche, which announced as long as two years ago that they had developed a transparent electrode material for OLEDs with up to ten times the surface conductivity of ITO.

We believe that with the involvement of such companies, there is a very good chance that ITO alternatives will quickly reach a level of technological maturity that enables them to be a serious competitor to ITO in a number of important applications.

The Argument from Price: A Thought Experiment

NanoMarkets' enthusiasm for ITO alternatives is also based on our belief that (1) the price of ITO is going to continue to rise over the next few years and (2) transparent conductors will continue to be used in cost sensitive applications.

As far as this second point is concerned, according to NanoMarkets' analysis almost 90 percent (by value) of transparent conductor shipments, currently end up in the flat panel display (FPD) market; a market that is notoriously competitive. And the share of the transparent conductor market represented by FPDs is likely to fall to just over 75 percent in 2015, but from the perspective of transparent conductor makers, the price sensitivity of the markets into which they sell may actually get worse!

This is because, by 2015 almost 15 percent of the transparent conductor business will be accounted for by thin-film solar panels, OLED lighting, EMI shielding and antistatic materials. These are all areas where keeping prices low is vital; perhaps even more so than in the display industry. In the case of FPDs, solar panels and OLED lighting, continuing price declines are actually built into the long-term business model for these products.

This is in harsh contrast with the current realities of the ITO business. After price declines during the worst of the worldwide recession, ITO prices are beginning to rise again. So we are looking at expected rising prices for a material (ITO) that is being sold mostly into markets where price declines are expected for final products.

All of this suggests to us a useful "thought experiment." These are the kind of experiments that theoretical physicists often "perform" when they are trying to follow the logic of a piece of abstract thinking to its inevitable consequences. This kind of approach, we think, is useful to working out where the logic of rising ITO prices and declining prices for the final product actually take us.

Let us suppose that the factory cost of some kind of finished product (display, PV panel, etc.) is $500 and that value of the ITO used in this product is about 1.5 percent (i.e., $7.50). Assuming that ITO prices climb at an average of nine percent for eight years and the factory price of the finished product declines at eight percent, the price of the ITO used reaches $13.88 by the end of the period and the factory cost of the finished product reaches around $305.

The implications of these estimates are that the cost of ITO is now almost six percent of the factory cost of the product; four times its share at the beginning of the estimation period that we have considered here. These are arbitrary, but plausible, numbers and historically speaking prices (of both ITO and final products) have changed at much faster rates in many years.

A few years ago, there were projections by serious forecasters suggesting that Indium prices would reach $10,000 per Kg and that, of course, would raise the ITO to extraordinary price levels too. It was with numbers like this in mind that many firms who offer - or plan to offer - ITO alternatives launched their businesses. However, what our thought experiment above shows is that profit margins in the product areas into which ITO is sold can be seriously damaged by even modest price rises in ITO; prices rises that it seem highly likely to occur in the near term future.

This we believe will provide strong incentives for product manufacturers to switch to ITO alternatives. Even where they are nervous about making such a switch on performance grounds, profitability arguments are, in the end, likely to speak more loudly than technological conservatism.

Alternative Scenarios: More Recession and More Extraction

The argument above is not presented with an assertion of historical inevitability. Prices for ITO went down during the recent recession and, should the world fall into a double dip recession, they would probably decline again. If this were to happen, the ITO alternative business might not look as attractive as it does now. However, let us assume for the sake of argument that this rather grim scenario does not actually take place.

Also, it is worth noting that in response to higher ITO prices, more firms might get into the indium business, which would hold ITO prices down. Indium is a by-product of zinc mining - it is normally recovered from zinc concentrates - and there are certainly zinc mines that could be producing indium that are not doing so but will in the future. Indeed, Japan has recently been staking out indium rights in Australian mines and new indium-bearing mines are being developed--or at least readied for development--in Canada as well. There are also plenty of zinc mines worldwide from which indium is not extracted but where the recovery of indium would be economic at a somewhat higher price. (On the other hand, China, the dominant supplier of indium China has been closing mines.)

In a similar way, reclamation of previously used indium (e.g. from sputtering processes) and less wasteful deposition processes for ITO could also hold down the ITO price.

We don't doubt that all these improvements on the supply side would go a long way to keeping the price of ITO in check, but there seem to be no expectations in the display industry of an ITO price slump or ITO glut because of such moves and we will follow this consensus in this analysis.

Our conclusion, therefore, is that over the next few years, and absent some major decline in indium prices, price factors will serve as a major driver for ITO alternatives, and especially nanomaterials.

From NanoMarkets' report Opportunities for Carbon-based Inks, Pastes and Coatings for Electronics Applications

Carbon inks have been a mainstay of the thick film electronics business for as long as most people can remember.  The established carbon inks are used with silver inks, either to adjust conductivity levels or to reduce costs; carbon, obviously, is priced at a lot less than silver.  And in a period of deflation, especially when this is (paradoxically) combined with high silver prices, NanoMarkets sees a growing opportunity for standard carbon inks to replace silver inks wherever this is technically possible.

But in the long run purely cost-based strategies are inherently based on the idea that what is being sold is no more than a low-margin commodity, which is essentially what the older carbon inks are.   By contrast, inks and pastes based not on these inks, but on new high-conductivity carbon materials; carbon nanotubes and graphene, provide a way forward based on value-added products that potentially at least can offer suppliers attractive margins.

Carbon nanotube inks have been available from a number of vendors for several years. It is especially closely associated with Eikos, which seems to have pioneered the idea. By contrast, graphene inks are very new and have been mostly identified to date with Vorbeck Materials which has developed a graphene-based ink in cooperation with BASF. But today, the revenues from these inks are negligible. However, NanoMarkets believes that five years from now these newer materials will have created reasonable size businesses – $157 million for carbon nanotube inks and pastes and $130 million for graphene.  A few years later, by 2017, we expect carbon nanotube and graphene inks together to account for almost $815 million in revenues.

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See other OLED Lighting research from NanoMarkets.

Although the expectations are that the OLED lighting market will eventually generate billions of dollars in annual revenue, today's revenues from these products are miniscule. Many of the OLED lighting products that are being sold today are intended: (1) to get the message out to designers, rather than create business directly; (2) to get feedback from designers on how to improve the product; and (3) to enable luminaire and consumer products companies to create new value-added products and opportunities, thereby helping to bring into being a market for OLED lighting that has never existed before.

Interim Products: Before the General Lighting Market Takes Off

NanoMarkets' latest analysis suggests that, absent any major economic crises, the OLED lighting market will start to see a transition to "real" products during 2010. By "real" we mean products that are intended to be sold to customers other than designers/architects and not just limited editions or prototypes intended to impress the lighting community at trade shows.

What we are seeing this year is that several firms are starting to ship OLED lighting in sampling volumes. These include GE and Konica Minolta (who are in an OLED lighting partnership), LG (which may have altered its plans since the Kodak acquisition), Showa Denko and Modistech. By next year we expect the product launches to accelerate. Still even then NanoMarkets does not expect the initial volumes shipped of these products to be all that great; no more than perhaps in the hundreds or thousands per item.

And the products being sold at first will be of the luxury or specialty kind. This is because of the technical performance, high pricing and competitive realities of OLED lighting, which mean that for a few more years OLEDs will not be able to chase after the general lighting market. Instead, OLED lighting will first make its mark in areas where there is a premium for novelty and where the price sensitivity is not too great.

Current and Future Pricing of OLED Lighting: Too Expensive for Prime Time

Pricing is everything, of course. At this early stage of market evolution, the price points of OLED lighting products do not come close to being competitive with conventional lighting. In the past year or so, however, several firms have announced pricing for products and in some cases have also said something about future products too.

In our most recent report on OLED lighting, we analyze these announcements in some depth. We note here, however, that the products with the greatest mindshare are "designer kits" from Philips and Osram; two of the world's biggest lighting makers. Osram's Orbeos product is priced at ¬250, while the Philips Lumiblade kit offers an OLED driver and electronics is priced at ¬70, with small pre-shaped OLEDs ranging from ¬72 to ¬248.

Future Products: The Shift to High Volume OLED Lighting Production

The big question - the multi-billion dollar question actually - is when will the OLED lighting industry shift to really high volumes? On the supply side, there are still manufacturing and performance issues that need to be addressed and manufacturing plants capable of delivering high-volume OLED production will need to be constructed. In addition, supply chains need to be established. On the demand side, NanoMarkets believes that for OLEDs to really take off, the impact of regulation essentially banning the incandescent lamp will have to be felt.

At the present time, all indication is that most consumers are not aware that the incandescents are about to go. But by 2013 or so, the general lighting market is likely to be transformed by the changes in regulation and by new products put on the market by lighting firms in response to it. Governments all over the world - but especially in Europe and the U.S - are legislating the phasing out of inefficient light bulbs.

The replacement for incandescents will not all be OLED lighting products, of course, indeed most of them won't be. But, immediately after this 2013 "inflection point" there is a good reason to expect that OLED lighting firms will begin to ship in very large volumes with products that will in some sense compete with regular light bulbs. As an indication of what we might expect out of a moderate sized firm early in this period, we note that Lumiotec has established a pilot mass-production line at a production facility, which by the middle of 2010 will have reached a production capacity of about 40,000 panels per year, with the company beginning mass production by 2013. Organic Lighting, a Japanese OLED start-up, says that it can reach sales of ¥10 billion ($108 million) by 2014, although this does seem quite ambitious from a firm that is just getting started.

NanoMarkets believes that really large volumes of OLED lights will not be shipped until a few years after 2013. This ties in nicely with Osram's expectations that it does not expect to have a high volume OLED lighting product until 2016 and GE's statement that by 2015 it believes that its OLED lights will be both efficient and inexpensive. It is also important to look at this future potential in terms of expected revenues and with this in mind we note that Konica Minolta says that it will reach sales of over ¥100 billion ($1.0 billion) in OLED lighting by its 2017/18 fiscal year. We suspect that few other firms are thinking quite as big as this. Indeed, at the other end of the spectrum, there is Panasonic, which seems fairly pessimistic saying that OLED lights will become widespread as "supplemental lighting" within the next couple of years, but that "it may take about 10 years before they are commercialized as main lighting."

Let's face it, printed electronics hasn't turned out the way we all hoped. Just a few years ago the market was talking itself into a frenzy--sharing fantasies of those majestic R2R fabs churning out organic RFID tags and display backplanes with the speed of the New York Times coming off the presses. Seems rather silly in retrospect.

The dirty little secret here is that technology revolutions always begin with more hype than substance and in the absence of market reality. During such giddy periods, forecasted growth rates that are anything less than high double digits are usually greeted with calls skepticism. So even if the entire world economy hadn't decided to take a southward trend, printed electronics was fated to get a massive dose of reality.

And that massive dose of reality is now being force-fed to the market. If one accepts the traditional thick-film business, which is more like coating than printing and isn't usually counted as printed electronics anyway, the current status of printed electronics is distinctly niche-like. Our Google Alerts for both "printed electronics" and "printable electronics" never turn up much of interest these days--a few unimpressive corporate announcements here; a few academic projects there; a lot of discussion still about how to build. Unfortunately, this meager level of activity reveals that after years of talk, there is still not a lot to be excited about when it comes to PE.

What to do? A post mortem may conclude that most advocates of printed electronics knew/know little about printing and therefore had unrealistic expectations of what could be achieved and in what timeframe. Another conclusion is that it is easy to talk about what happens in the lab or to deliver Power Point slides and industry "conferences." But delivering products that people will pay for is what really counts. Technologies need applications to propel them into the mainstream.

However, the recognition that hubris, exuberance or naiveté in varying degrees have been involved here doesn't address the issues surrounding how we achieve something approaching legitimate industry status. Post mortems tell us where we have been, not where we are going.

Where Does Technical Realism Get Us?

Another response is to argue that if a lack of realism got us into this mess, it's high time that we applied some more realistic thinking to printed electronics. This thought was expressed in a recent industry press release, which made a plea for abandoning grand visions in favor of focusing on "finding the best way of doing things."

Finding a better way of doing things points us in the direction of successes and potential successes for printed electronics. Two examples spring to mind: the use of printed nanosilver to create fine traces in miniaturized PCBs and printing nanosilicon layers on silicon substrates to produce PV cells with improved performance. And, there are certainly plenty of other examples of where printing can be used effectively in electronics, where printing's unique ability to combine patterning and deposition along with low costs is appropriate to the task.

But, technical realism of this kind can also produce some pretty disappointing answers to the vital question as to how long we have to wait before printed electronics is more than just a collection of little projects in industrial laboratories and small tactical maneuvers on production lines. When will printed electronics become an industry?

At the end of the press release referred to above, comes one answer: ten years it says. One can almost hear the writers' sighs of resignation.

In Praise of Market Realism

At NanoMarkets we see things very differently. First, we think that if we have to wait ten years for printed electronics to take off, then we are talking about an academic research program, not a commercial endeavor. This is fine, of course. But no venture capitalist or corporate investment committee is going to make a substantial investment in a technology that is a decade away from taking off. Nor will they buy a futuristic story of printed and organic electronics becoming a mega-industry in twenty years. At a time when tight credit, incipient inflation and continuing worries about the health of the global financial system are in play, long-term investment in risky technologies is a fool's game.

The other issue is that continuing to keep the conversation on the technical realism isn't enough. Market realism is what really needs to be embraced.

A Semantic Digression

One implication of this shift is that we need to stop talking about "printed electronics," and instead find a name that is suggestive of functionality, one that customers may actually buy into; that is, a title that is market oriented in the same way that printed electronics is technical.

This little semantic exercise shouldn't be too hard to do, because "printed electronics" has always meant more than just printed electronics. It has typically been taken to include organic electronics and some newer forms of thin-film electronics. As a presenter at a recent industry gathering we attended put it, "when we say organic electronics, we also include printed electronics." This really makes no sense at the purely semantic level, but those of us who have watched the evolution of printed electronics know exactly what he meant.

Nonetheless, redefining printed electronics to include a particular class (or particular classes) of materials really isn't all that helpful either. "Use the best and most appropriate materials available" is still a technical prescription; it is an example, once again, of technical realism, not of market realism. The market doesn't care what materials you use any more than what fabrication equipment you use.

Where we think market realism is pointing us is toward terminology that emphasizes flexible electronics or plastic electronics, which we take to be (more or less) the same thing. There are four good reasons for thinking of the new electronics in this way.

Market Realism and Flexible Electronics

First, "flexible" is a customer-oriented measure; it is something that customers either want or do not want in their products. No one spends (or will ever spend) much time thinking about printability or materials sets (say) when making a customer choice. You are not likely to hear, "Gee Jennifer, I was going to buy this wonderful new e-book reader, but then I realized that the backplane didn't use OTFTs and it wasn't even printed."

Secondly, there is some evidence that flexible electronics is something that customers actually want, and want now. While it is impossible to know what kinds of products will sell in advance of those products being produced and marketed, some very plausible arguments can be made for the commercial viability of flexible electronics products. A few examples: flexible displays add the possibility of consumers carrying around displays large enough to do justice to the capabilities of today's smart phones; flexible PV would be a powerful enabler of building integrated PV (BIPV), since most building products generally need to be flexible; low-cost, flexible transistors suggest a new generation of smart packaging with new levels of brand identification in an era in which brands are notoriously devalued by pirates and where packaging is generally itself flexible; and flexible OLED lighting, which provides novel ways for lighting firms to distinguish themselves in the marketplace. All of these possibilities have to do with features and functions that people might actually want, not technical achievements.

Of course, technical realism still has a role to play. Technical improvements will be required in all of the product areas listed above if they are ever to come to market successfully. We note, for example that flexible displays have proven very hard to produce in volume and that firms have died trying. But unlike a view that emphasizes mere technical realism, market realism puts marketable functionality and technical issues second.

Third, and this takes us back to the possibility of a 10-year timeframe before "printed electronics" really makes a big splash in dollar terms, one consequence of thinking of the new electronics in market realistic terms is that the focus is on getting products out there, not on technical excellence. This surely inspires shorter times to market, in and of itself. By way of example, consider the Amazon Kindle book reader, the early versions of which were a little fragile but which still managed to transform the book publishing industry. Good enough are the watchwords here.

Finally, consider the fact that our industry is looking for something to unify it. As we have seen, the "printed" moniker doesn't seem to work very well. And neither does a naming based on a particular material type. Most notably, "organic electronics" clearly leaves out much of what we need to cover in any reasonable definition of our space. However, "flexible electronics" is a term that is broader in scope and in addition its various parts and applications are melded together by key enabling technologies--flexible substrates and related encapsulation technologies.

This article is based in part on research from Touch Screens: Technologies, Materials and Markets - 2010

Touch-screen displays, a target for the ITO-alternatives business for a few years now, were singled out as a special opportunity for ITO alternatives because of their particular vulnerability to ITO's tendency to crack. Polymers and nanomaterials, which are much more flexible than ITO, have been presented as ITO alternatives that do not crack. And while most ITO alternatives currently are not as transparent or as conductive as ITO, this fact may be outweighed by the non-cracking capability of these alternatives for certain applications.

The cracking problem is most relevant in the case of analog resistive touch-screen technology in which touch is sensed by moving ITO sensors. Over time, sometimes over an unacceptably short period of time, this movement causes ITO cracking. Other types of touch-screen displays are less vulnerable to the cracking problem, but until recently virtually all touch-screen displays used analog resistive technology.

Blame it on Apple

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