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This is all about the gorilla game in relation to Flat-Panel Displays (FPDs) and the potential impact of developments in Organic Light-Emitting Diodes (OLEDs). Let's start with a few extracts from some of MStew's recent posts:

#402, 1-8-00 (http://boards.fool.com/Message.asp?id=1360002000106000)
I am wondering is what other's opions are regarding regarding the flat panel display market. With the advent of OLED (organic light emmiting display) technology--could the be a mist growing within which one might find a gorilla?

#426, 1-9-00 (http://boards.fool.com/Message.asp?id=1360002000106005)
I don't know if the technology is open yet but there certianly some proprietary ones (the above companies tout there patents) One thing is certain, the chasm still lies in front of this technology so the issue I am focusing on is whether this has potential as a displacing technology in this industry NOT on who may be a gorilla.

#471, 1-15-00 (http://boards.fool.com/Message.asp?id=1360002000112000)
It is beginning to look to me like there is the potential for Gorilla breeding here. There are a whole lot of monkey's and chimps in the current marketplace though. And TFT LCD looks to be on main street. I don't think think that we have approached the early adopters stage with the alternative technologies yet and the chasm is not even in view.

#551, 1-21-00 (http://boards.fool.com/Message.asp?id=1360002000137000)
I am beginning to believe that the chasm may be forming. Early adopters are placing orders and making investments. Bowling alley coming?? I'm watching.

A few observations of my own:

(1) The post on Jan 21 was, sadly, MStew's last significant post on the subject. Since then, there has been a little thread follow-up, but nothing substantial. (One reason for making this post is in the hope of stirring up some further discussion.)

(2) There have been a couple of significant recent developments in the technology. In early February, Cambridge Display Technologies Ltd (CTD) announced (http://www.cdtltd.co.uk/NR-seclicense.htm) a cross-licensing deal with Seiko-Epson to produce the world's first full colour plastic television in the first quarter of 2000. At the end of February 2000, Universal Display Corp announced (http://www.universaldisplay.com/press.shtml?000229) improvements in materials and techniques for the manufacture and production of then next generation of FPDs.

(3) One of the more important OLED contenders, Universal Display Corp (ticker: PANL), has seen its stock price move from <$5 November last year, to $10 during December, to $15 during January and February. Last week the price doubled, closing at $28.50.

(4) As discussed in OnAJungleHunt's thread (http://boards.fool.com/Message.asp?id=1360002000299000&sort=id), the Market seems to be valuing potential gorilla game candidates earlier and earlier. There is evidence of this happening in the (pre-tornado) superconductor market, where the three main players have all experienced stock price appreciation which is massively higher than any growth in sales.

Moving on to the somewhat thinner ice of opinion, I would like to suggest that flat-panel display technology is, as far as OLED is concerned, approaching the start of a tornado.

Tornadoes occur when - and only when - a new value chain comes into existence.
Sales channels and end users are already in existence. The only missing link - the technology for the products - may well be bridged soon (see (2) above).

1. Can this value chain develop into a tornado mass market?
The mass market part is straightforward. The most obvious immediate markets are displays for mobile phones and PDAs. Longer term, even the CRT may be replaced. The more difficult part of the question refers to the tornado. The signs are certainly there, in particular the combination of customer continuity (benefits of OLEDs: greater brightness, faster response time for full motion video, fuller viewing angles, lighter weight, greater environmental durability, more power efficiency) with vendor discontinuity (the new technology). In addition, the pressures of hypergrowth can be withstood, because, once technological capability has been created and licenced, "independent solution providers can produce effectively identical results without communicating directly with each other." When this hits, it will be a substantial tornado.

2. If so, what conditions are currently holding it back?
Currently there is no real value chain due to the lack of a physical product to form a mass market. The constraints here are threefold: development of required technology; dispersion = licensing of technology; manufacturing capability.

3. Are these constraining conditions likely to be removed?
IMHO, yes. Firstly, substantial work is being done in this area, with significant recent developments. Secondly, the FPD industry is characterised by numerous partnerships and alliances and also licensing agreements. Finally, existing FPD manufacturers are well-positioned to move into OLED manufacturing. Should they need any further incentive to do so (in the event of reluctance due to surplus LED capacity), the threat of losing market to new entrants (eg PlastDisplay, which appears to be a jigsaw waiting for the missing piece of technology) should suffice.

4. If so, when is the last remaining condition likely to be removed, and by whom?
Technically, the last remaining condition will be product manufacture. But a very likely domino effect means that, effectively, the last remaining condition is the necessary technological development. As to by whom, I don't see that it's possible to predict that at the moment (though more informed views are most welcome). But, surely, the answer to this should not be a requirement for a tornado watch - the main thing is to keep an eye on market developments rather than one specific company.


So what? At some point, we are going to move into the next generation of flat-panel displays, there will be hypergrowth and a tornado, and a gorilla game may emerge. What's the big deal?

Well, for one thing, the market's anticipation of tornadoes and simian antics implies the future likelihood of rather lower returns from classic gorilla "buy at the start of the tornado" strategy than have been historically available. However, we can recapture some of the lost returns by buying earlier, if (1) we can identify the relevant basket of stocks and (2) we can determine the likely amount of time to tornado formation. (It is possible that the recent appreciation in PANL is due to this sort of strategy.)

For another, there is a pretty substantial pie at stake. Mobile phone displays, PDAs, laptops, desktops, televisions, domestic appliances - and those are just the obvious applications - represent a huge and growing opportunity. Factor in less obvious but equally possible applications (watches, clothing, windscreens, windows, billboards etc etc) and you have a market which will encourage the technology to support hypergrowth for a substantial period of time. Universal Display says that "OLEDs are seen as the future replacement technology for the $40 billion electronic display market" - and that's without new applications.


So... is it worth getting some more in-depth discussion going?

For anyone interested in investigating the technology / companies further, I quote from MStew again: "The companies involved that I've discovered so far are:
Eastman Kodak, Planar Display, Idemitsu-Kosan, Universal Display Corporation, Pioneer, FED Corporation, Light Emitting Polymers (LEP), Cambridge Display Technologies', Uniax Polymer Electronics, Seiko-Epson, Hewlett Packard , Philips Components."
I would add PlastDisplay and Covion Organic Semiconductors to the list.

Looking forward to responses,

Mac

PS - Disclaimer / disclosure / confession: I own none of those mouth-watering acronyms which typically grace posts on this board. My portfolio is limited to a collection of utterly un-hairy UK stocks - though I hope to be able to remedy this by buying US stocks in the near future. This is my first post here, so feedback and suggestions would be most appreciated (give it to me straight - thick Scottish skin!). And - as is probably evident - I'm relatively new to both the worlds of OLED and The Gorilla Game. (But they are both fascinating!) Finally, I hope I've given something back in return for the terrific value I've got out of this board.
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Mac, Great work. I love Scotland and stay at "The Cally" (Caledonian) in Edinburgh whenever I can - love the view of the castle from the rooms there. Also, if you are ever on this side of the pond and find yourself in Cambridge, Mass. drop me a note in here first and I'll buy you a McEwans or three! Thanks again for a great post - and please keep up the great work!
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<< Technically, the last remaining condition will be product manufacture. But a very likely domino effect means that, effectively, the last remaining condition is the necessary technological development. As to by whom, I don't see that it's possible to predict that at the moment (though more informed views are most welcome). But, surely, the answer to this should not be a requirement for a tornado watch - the main thing is to keep an eye on market developments rather than one specific company. >>


I'm not much of a technophile, and I'm having a bit of trouble understanding the advantage of this technology. I have always associated flat panel monitors / displays with very high price-tags, and I have assumed that the big advantage over CRT monitors was that of space savings...that would be the compelling reason to buy; yet, I'm reading now about PDA's and cellphones with OLED technology, so I'm a little confused. For such small devices, what is the obvious, compelling advantage to switching to OLEDs? I'd appreciate a short n' sweet, point-by-point single paragraph that explains it, if that's possible.


Thanks in advance.



rex




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These come from Universal Display's (PANL) website.


An OLED is an electronic device made by placing a series of organic thin films between two conductors. When the current is applied, a bright light is emitted. OLEDs are lightweight, durable, power efficient and ideal for portable applications. OLEDs have fewer process steps and also use both fewer and lower-cost materials than LCD displays. Universal Display believes that OLEDs will replace the current technology and have the following performance advantages over LCDs: greater brightness, faster response time for full motion video, fuller viewing angles, lighter weight, greater environmental durability, more power efficiency and broader operating temperature ranges.
http://www.universaldisplay.com/press.shtml?000229

This page highlights numerous advantages of the technology over LCDS (assuming they can perfect them).
http://www.universaldisplay.com/press.shtml?000229

2nd
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2nd...

Thanks for that.


rex
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George...

Ditto!


rex
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The big question I would have with Flat-Panel Displays and their Gorilla potential (vs. royalty game) is how one company could ever create high switching costs, as displays are interchangeable. Now a new type of display may come along and be by far the best and capture huge market share. But what keeps the next improvement in displays from moving in?? And if they can't create high switching costs, they can't be a true Gorilla.
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The big question I would have with Flat-Panel Displays and their Gorilla potential (vs. royalty game) is how one company could ever create high switching costs, as displays are interchangeable. Now a new type of display may come along and be by far the best and capture huge market share. But what keeps the next improvement in displays from moving in?? And if they can't create high switching costs, they can't be a true Gorilla.

OnAJungleHunt,

Spot on, or "rem acu tetigisti", as my old Latin teacher never tired of saying.

I can't see a means of creating high switching costs, other than via patents, which seem to be a fairly important part of the OLED scene. Let's explore.

If memory serves me right, there is little discussion of patents in The Gorilla Game, other than obliquely via a (prescient?) reference to Rambus which "took on a gorilla position in the emerging market for next-generation memories." There is no specific reference to patents, and two fleeting but inconsequential mentions of intellectual property.

Before I start digging into the thorny question of who has which OLED patents, do Gamers here have any thoughts to offer on the subject of patents as applied to gorilla formation? Does it merit a little more attention and/or discussion?

I'm probably wrong here, but I can't think of any accepted gorillas who are purely generators / owners of intellectual property which is licenced out to OEMs. Non-software gorillas tend to be manufacturers. One reason for this could be that accepted gorillas have been around for a reasonable amount of time, and have been able to start small, think big, and grow quickly. They have experienced manageable hypergrowth.

Today more than ever, however, the world is fraught with risks for the newly-born, would-be gorilla. The opportunity is huge, never greater, as technological take-up of a must-have innovation can occur at unprecedented speeds. But that means either building massive capacity, with the associated potential for disaster in the event of miscalculation, or starting slowly and running the risks of being unable to satisfy demand, alienating customers, and possibly losing out to a more aggressive competitor.

So how about the safer, manageable approach to potentially unmanageable hypergrowth? Don't make it, just work out what to make and how and let others do the dirty work (and take capacity risks). Meanwhile, you can spend the time working on the next generation of your intellectual property, maybe even learning off all your licencees.

So - to finally get back to the point - this could be a viable path to gorillahood. Universal Display Corp (or whoever) nails it, works out how to make mobile phone displays that are clearer, lighter, thinner, less power-hungry, work with video streaming, etc etc. Everybody wants one, so UDC licences the process, lets the OEMs get on with the manufacturing process (as well as royalties) and gets on with moving on to the next step of replacing the CRT. Spend a small (relatively) fortune on marketing and letting people know that it's "UDC outside" and bingo! A gorilla is born.

Or is it? Please, you be the judge.

My (newly-formed) impression is that Rambus is doing something along these lines - and it gets an acknowledgement of gorillahood. So perhaps this is a viable model. How about ARMHY, the fast-growing British company licensing RISC chips for all sorts of new markets? A possible gorilla?

Or - just to complete the loop - how about a company (again British - sorry!) which licenses the technology (150 licensees to date) for flat-panel speakers? In fact, the display can act as the speaker. How about that for an addition to your full-colour mobile video phone? Want more? Same company has military patents in voice-recognition technology...


Apologies, all - it's turned into a rather rambling, stream of consciousness post. Let's summarise:

1) Flat-panel displays may soon be subject to a tornado, but it's hard to see how a gorilla could evolve from this due to the difficulty in creating switching costs.

2) One possible model would be for the breakthrough company to form an intellectual property company, license technological capability to OEMs, and focus on (a) marketing and (b) further development of IP. Is this a valid model for a future gorilla? If so, we could yet see one in the FPD market.

3) This model has been shown to work in the case of Rambus (frequently acknowledged as emerging gorilla) and ARMHY (status unknown). Furthermore, another British company is just starting down this path and may merit further investigation, especially as there are potentially excellent fits with the FPD market. Any interest?


I suspect I'm really reaching here, so please highlight holes and set me straight! And thanks all for the support/appreciation for the previous post - you sure know how to extend a welcome (especially brownu88 - McEwans sounds great!)

Mac
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Flat Panel Displays.

I believe you hit the nail on the head with points 2 and 3 below. UDC, stock symbol PANL, does not own the patents but has exclusive marketing rights to them, if my understanding is correct (see attached link).

Not unlike RMBS, they will collect royalties on all future products developed with this technology. Unlike superconductor technology, where one must buy a basket to ensure success, if OLED succeeds PANL must by definition succeed. The question is: will OLED succeed?

Unfortunately, one must place bets earlier and earlier (IMO) to reap the best returns. I do wish I had considered this before this weekend, as PANL has doubled in the past few days. In the sake of full disclosure, I admit I went long today on PANL on Monday, 3-6-2000, and have been long on RMBS for some time.

PANL patents
http://boards.fool.com/Message.asp?id=1260033000027000&sort=postdate

PANL informative link
http://boards.fool.com/Message.asp?id=1260033000038001&sort=postdate

Does: PANL compete with CREE - below
http://boards.fool.com/Message.asp?id=1080276000358008&sort=postdate

Discussion of OLED below
http://boards.fool.com/Message.asp?id=1360002000307000


<<1) Flat-panel displays may soon be subject to a tornado, but it's hard to see how a gorilla could evolve from this due to the difficulty in creating switching costs.

2) One possible model would be for the breakthrough company to form an intellectual property company, license technological capability to OEMs, and focus on (a) marketing and (b) further development of IP. Is this a valid model for a future gorilla? If so, we could yet see one in the FPD market.

3) This model has been shown to work in the case of Rambus (frequently acknowledged as emerging gorilla) and ARMHY (status unknown). Furthermore, another British company is just starting down this path and may merit further investigation, especially as there are potentially excellent fits with the FPD market. Any interest?>>


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Mac: This is my first post to this board also and it certainly won't match your excellent summary of the OLED. However I did come across this company in Vancouver British Columbia, Canada, that perked my interest. I wondered how it placed in this milieu.

www.stockhouse.ca/shfn/mar00/030300ca_luxel.asp

The company, Luxell Technologies, is listed on the new Canadian Venture Exchange with the ticker LUX.

I served as an RCAF exchange officer at RAF Kinloss in the late 50's, so am familiar with that thick Scottish skin.
Regards
Dick K.
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In the Flat Panel Game, one company thats been doing some very interesting things is Westaim (WED) on the Toronto Stock Exchange. I believe that it was Toshiba that recently licensed some of their technology for use in the flat panel market.. especially the in-car markets.

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you may also want to consider Westaim traded on the TSE..who I might add have made impressive gains in this area both in research and trading momentum.
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Great Post Mac but unfortunately you missed the Gorilla. Its called AVT, but the bad news for investors news it is now 100% owned by Applied Materials Inc (AMAT) already a RB candidate! - Matthew
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Apologies, its past my bed- time! That should of read AKT not AVT, they have the inside track on the money winners the 15" and 17" flat screens. Sorry again for the confusion - Matthew
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Matthew,
Applied Komatsu Technologies makes the equipment for the manufacture of the current flat panel display technology. This thread is discussing a future technology which would not use the AKT equipment. OLED manufacture will likely use ink jet deposition technology. Once mastered this will decrease the manufacturing costs manyfold over current technology.
I don't think that AKT is an OLED play in any way.
MStew
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Mac,
What a great first post, welcome. My posting frequency has dropped on this subject matter because I don't think this technology has yet crossed the chasm, much less entered the bowling alley. Yes, it is exciting and I believe it holds great promise but there has not been any revenue generated by the companies playing with this technology much less hypergrowth of slaes and earnings. Jungle Hunt's comments regarding switching costs ring true as well. If there is a gorilla play here it may have to be on the technology/manufacturing process patent play not on the finished display.

I am tracking and watching and waiting but I am not buying yet-- save a silly forray into PANL for all the wrong reasons ( No judgement on the stock or company It's just that I try to restrict myself to gorillas and Kings so that I don't have to watch my port too closely).

At best I'd say one could begin to acquire a basket of these players but I fear that 1) it would be a large basket and 2) the future winner may still be private.

I don't know if I buy into the market's increased sensitivity to future gorillas per se. I don't see the market finding tornadoes, I think it's more a situation whereby a young gorilla stock's momentum reaches a certain level and there is a piling on phenomena but I still doubt the market's ability to truly understand a gorilla's value. But then I am not a basket buyer-- I wait till I see who's eating all the bananas then buy. I'll exchange a portion of the ride up for the security of knowing that the company is truly a gorilla.
Mstew
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Here are three links to articles concerning the future of the OLED market. Looks like the main players are Universal Display, Kodak and Cambridge Display Technology.

http://www.pacpub.com/new/business/b030399.html
http://www.ammagazine.com/archives/0200/0200feat13.html
http://www.stanfordresources.com/news/articles/str_1.html

What do you think?

JB
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