Thin Film Electronics ASA (Thinfilm)
This week’s IT-company: Ambitions to earn 9B NOK in a few years’ time
Extremely Thin Billion Dollar Market
Equity Markets: After five-and-a-half years as a public company, Thinfilm CEO Davor
Sutija promises that the memory dream will soon be a reality. In total, 800M NOK have
been invested in the Norwegian IT company.
Henrik Charlesen
Henrik@finansavisen.no
Thinfilm Facts:
 Established in the mid-1990s as a subsidiary of Opticom.
 Listed on the OSE as an independent company in 2008.
 Distinct from other memory producers in that it prints electronic memories on
thin plastic materials rather than by using silicon, which is used by the
conventional semiconductor industry.
 Has 30 employees in Oslo, San Francisco, Tokyo, and research center Linköping,
and production in Pyongtaek, South Korea.
Thin Film’s growth ambitions can make one dizzy.
A quick look at the presentation CEO Davor E. Sutija gave in conjunction with the
Company's Annual Shareholder’s Meeting on May 8th, show that in a few years’ time,
Thin Film aims to earn one and a half billion dollars a year - nearly 9 billion NOK.
The goals seem crazy for a company that in 2012 had a turnover of NOK 3.8 million and
lost 47 million.
Flexible and cheap
Thinfilm is mainly about printing memory on a plastic-like surface. The benefit of this
memory technology is that it is very thin and flexible; it can thus be placed on a variety
of goods and products. In addition, the cost of Printed Electronics is a fraction of siliconbased memory (like Intel's memory chips that dominate the market today). Thus, even
low cost products can include memory solutions, explains Sutija.
The production process is comparable with newspaper printing. The electronic layers
are printed on a plastic substrate in a roll-to-roll process, similar to a rotary press.
Behind the technology are many years of advanced research. In the mid 90s, investors
pumped in around one billion in Thinfilm, including Intel's share of Opticom.
- We are the first company that has managed to print electronics without the use of
Silicon, and we have today 13 patent families in rewriteable memory, says Sutija.
Although it is not evident in today's accounting books, Thinfilm has developed
technology that is available in the market now.
- We are already a commercial company. Over the last year, we have signed four
agreements with companies with a turnover of at least one billion dollars a year, and
customers pay us for access to our technology, says Sutija.
One of the companies that signed with Thinfilm is the US-based Bemis Company (Bemis
is after Kodak's bankruptcy the company with the longest history on the New York Stock
Exchange) to develop intelligent packaging systems.
Another company that has signed a contract with Thinfilm works with brand-protection
and it is in this market Thinfilm shareholders will first see the results on the top line.
Revenues in the short term
Each year companies are swindled for, according to analyst Frost & Sullivan, an
estimated 600 billion dollars, where clothes, electronics and consumer goods are most
vulnerable to counterfeiters.
Traditionally, manufacturers have protected themselves by using barcodes and
holograms, but in recent years they have also used safer solutions such as watermarks,
RFID tags and microchips. The goal is that consumers and other end users should be
confident that the goods they buy are not a copy.
- In the 80s holograms were considered safe, but today recipes on how to copy these are
easily available on the Internet, says Sutija:
- Thinfilm´s technology competes with holograms on price, but our technology is
impossible to copy and costs no more than a few cents.
Analysts estimate that the hologram market alone is worth around 5 billion dollars. With
Thinfilm´s authentication labels under their belt, the company is ready to sell to
manufacturers of everything from Gucci handbags to liquor bottles and Nike socks.
Scale, safety and price
Besides selling product, the company is currently working with partners to connect
memory, sensors, displays and wireless communications together in so-called closed
systems. This makes it possible to give all possible objects intelligence.
Using memory and a temperature sensor, for example, end users can even read what
kind of temperature fruits and foods are exposed to during transportation, while a
hospital in rural Uganda will be notified if high temperatures have destroyed vaccines
during transport.
Today there are technologies that do much the same, but these are based on silicon and
cost far more than what Thinfilm has in mind. Currently, about 20 billion silicon chips
are produced globally. 75 percent of this production is used in consumer electronics,
while 2.3 billion are used for PCs and mobile phones, and the rest go to power various
industrial purposes.
- There is simply not enough silicon to cover the market for other goods, says Sutija.
- Silicon-based memory with a battery and sensor costs about $12 and is discarded after
use. Our technology is environmentally friendly, scalable and cost-efficient, claims the
Thinfilm CEO.
For the work that has been carried out so far, the technology has gained recognition
internationally, especially in the American electronics industry, but the company has
also received awards organized by the Wall Street Journal and GigaOM.
In 2013 we will finish development of a complete closed system. There remains some
work related to how we solve problems involving batteries, but in 2014, I am confident
that there will be products in the market with this kind of technology, says Sutija.
Fully funded into 2014
Back to billions. We've heard it before. A few years ago the company talked about
operating in a market that would be worth $4.5 billion in 2013. There is little in the
books to suggest that Thinfilm is a part of this market now. While total sales since
2005/2006 passed 17 million in the first quarter, the overall deficit is 260 million.
This does not scare investors like Fast-founder John Markus Lervik, Tore Aksel
Voldberg, UK-based Robert Keith and Thomas Fussell, Geir Brumoen and Rune Sundvall.
Having risen 55 per cent in value on the stock market over the past year (31 percent
YTD in 2013), the company has climbed steadily and is now approaching just over three
NOK per share, its all-time high from March 2008. On Friday, the stock traded for 2.50
NOK with the market value nearly one billion NOK.
The owners have invested around 800M NOK, while a similar amount was used on
development by Intel, during the period when the IT giant collaborated with [Thin
Film’s parent company] Opticom. At the end of March, Thinfilm had NOK40 million in
the bank and the company is fully funded into 2014.
- We use about 3.5 million NOK of our funds each month, but since we have begun to
gain revenue from the sale of our developing tools the burn rate will not increase even
as the activity of the company increases, says Sutija, who is working to expand the
organization by 50 percent over the next 6-8 months.
Huge market
In the presentation the Thinfilm CEO points at five different areas for the memory
technology. The total market is estimated at nearly 33 billion dollars, and Sutija thinks it
should be possible to take between 2 and 8 percent of the RF market, which includes
communication between smartphones and objects (Internet of things), interactive
labeling, dynamic price system (eg. shelves) and the temperature monitoring of
perishables and other goods (eg. medicines).
It is in these areas that Thinfilm will manage $1.5 billion in revenue in seven years.
- The Internet of Things is where you give intelligence to objects so they can
communicate with each other. IoT is a mega trend. There is not enough silicon in the
world to meet future needs, and if one should expand the production it takes a lot of
money. A plant with a capacity of 20,000 silicon wafers per month alone requires an
investment of about 5 billion.
- What is the competition?
- There are currently over 2,000 companies working with printed memory and
companies such as Kovio and Plastic Logic are both capable of taking 5 to 10 percent of
the market. Many have recognized that integrated logic is exciting and Thinfilm has
acquired a central role in the development of the market, says Sutija continuing:
- The quicker competitors come around, the better it is for us.