Friday, 8 March 2013

Neonode Announces 'Flush Bezel,' Likely Close To Solving Windows 8 Touch Cost Conundrum

UniPixel's (UNXL) shares have exploded (+200% over the last 3 months) purely on their prospects (initial UniBoss production is at the end of April) of solving the Windows-8 "Cap-touch crisis".

Just about every non-Apple PC OEM, ODM, and silicon supplier - like Intel (INTC), Advanced Micro Devices (AMD), and Nvidia (NVDA) - is complaining that a touchscreen required for Microsoft (MSFT) Windows 8 Certification can add $65-110+ to a laptop's cost (retail ASPs have to be marked up further) - and therefore notebook sales will get dinged.

Thus, I believe investors should be looking at Neonode (NEON) more carefully, as they are quietly making major and extremely relevant strides, behind the scenes, and could theoretically be just as compelling as UNXL.

Neonode's stealth management team has just announced (albeit buried at the end of their Sunday 2/24 Mobile World Congress press release for their new "proximity sensing" smartphone case -) that they have solved their "bezel issue," which means they can do a flush coverglass design, just like everyone else in touch world - Apple (AAPL), Samsung (SSNLF.PK), etc.

Meanwhile, NEON should be super-close to solving their 5-finger Windows 8 hurdle. Management has already publicly stated at the Needham Conference in mid-January, that they recently made the technological breakthrough of supporting more than 2-fingers, and was likely "a few months away" from locking-down 5-fingers. They also mentioned (at Needham) that 10-finger touch is on their 2013/2014 roadmap, and does not require major engineering breakthroughs (akin to "Flush Bezel"), but rather is more of a software/algorithm tweak.

As NEON has repeatedly asserted, an OEM's total system cost (including the NEON licensing fee, LEDs, TXN controller, plastic lightguide, etc) for an optical touchscreen is less than $1 per diagonal inch (and will continue to decline, as LED prices keep declining) while capacitive touch above 10-inches can easily exceed $7-$10 per inch. Thus, a 14-inch laptop optical touchscreen will theoretically cost OEMs $14, a pittance compared to the $65-$110 for a capacitive version.

Meanwhile, UNXL beloved ITO-replacement wunderkind, UniBoss, with its copper-metal-mesh and roll-to-roll process, should dramatically lower the cap-touch sensor cost ... perhaps to just below $2 per-inch. This is accomplished via UNXL's replacement of costly ITO (made of expensive "rare earth"), and its roll-to-roll lamination process, which dramatically enhances yields (current yields are 80% - due to the manual lamination process, while newer in-cell technologies have even worse yields ... just ask Sharp).

While UNXL's solution will likely be embraced by many PC OEMs (they already have an unnamed Tier One), especially those whose Taiwanese ODMs are capacitive-oriented (UniBoss is a retrofit, rather than a forklift upgrade) and could be wildly successful ... what happens the moment Neonode's 5-finger touch is ready for prime time?

At that point - NEON (along with UNXL) could totally disrupt the cost-challenged Windows-8 touchscreen market (at the expense of incumbents like TPK, etc). While UNXL will stake its claim to the lowest-cost cap-touch retrofit solution (Atmel (ATML) would be nipping at their heels), NEON should be able to claim the lowest overall cost solution (albeit a forklift upgrade). With 200M+ laptops selling annually ... I imagine there will be plenty of room for both UNXL and NEON ... as the low-tech labor-intensive cap-touch module incumbents lose their ability to justify their exorbitant costs.

Meanwhile, regardless of NEON's potentially huge laptop prospects, the company is rapidly solving all their upscale issues (has conquered flush, with 5-Finger a mere "few months away"), is quieting naysayers who insist optical-infrared touch is merely an eReader solution (NEON just announced a licensing deal with Shenzhen Wave, for Android smartphones and tablets), and is methodically grabbing the 2014/2015 automotive market. NEON has already announced (July 2012) a deal with Alpine (#1 market share in automotive infotainment), has licensed BYD, and has been publicly featured by Volvo/Ericsson at CES.

With 3.369M NEON shares short (13%+ of the short), a 12-day coverage ratio, and a tightening float (rapidly expanding long-only institutional shareholder base) ... how long is it before en epic and violent short-squeeze gets triggered?

Disclosure: I am long NEON. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)


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