Ron Mertens from recently had the opportunity to interview Chyi-Shan Suen, director of sales & marketing of Vitex systems.

Headquartered in San Jose CA, Vitex is an IP-centric licensing, engineering service and material company in the business of thin-film barrier coatings and flexible substrates for the FPD market. Vitex's development of a thin-film moisture barrier technology continues to gain acceptance within the industry due to its demonstrated ability to meet the rigorous environmental requirements for thin-film encapsulation of bottom- and top-emission OLEDs. In addition, this technology can be applied to a wide range of organic semiconductor applications such as photovoltaics and batteries.

Q: First of all, thank you for accepting to do this interview session with us. Can you describe the Barix system?

The Barix Encapsulation™ is comprised of alternating layers of organic and inorganic films. The organic layer smooths and planarizes the display surface, while the inorganic is the real barrier. The total thickness of the coating is only about 3 microns or less. It is flexible, transparent and is applied at low temperature. The coating can be applied directly on top of an OLED display, eliminating the mechanical packaging components while providing the moisture and oxygen protection required by an OLED display.

When we started six years ago, we had to use five to six pairs of the organic/inorganic combination when coating customers' displays to cover the particles introduced by the transportation. Now we have demonstrated that we can meet telecommunication specifications with good yield with three or even two pairs. This was attributed to the cleaner process achieved by using the fully integrated production line; i.e. from OLED evaporation to thin film encapsulation all in one vacuum.

We have also dramatically improved our process speed to make sure that our solution is production worthy.

Q: Who are your business partners?

We are working closely with Tokki and ANS. The equipment we sold to the Japanese company was built by Tokki, while the one sold to Samsung SDI was built by ANS. Both machines were installed and accepted late last year. We continue to have a good relationship with Samsung SDI. We are also working closely with UDC to develop flexible OLED displays. We have a joint development program with a large chemical company to co-develop new monomer.

As for Flexible Glass substrates, we work with TMI, Dupont Teijin and are negotiating a license with a major company.

Q: You have got two major OLED makers (a Japanese company and a Korean company) to order your Barix system in2005. Can you name those companies?

I am sorry, but the Japanese company did not allow us to disclose their identity. The Korean company is Samsung SDI, who is the leader in the OLED field. We continue to have a close working relationship with SDI hoping to see that Barix technology is adopted in the next generation OLED display on a mass production scale.

Q: What is the competition for Barix?

Glass encapsulation. Glass encapsulation is not the best and cheapest solution, but it is available and acceptable for what most people would like to accomplish today.

For the future, when people move to top emission, thin film encapsulation is indispensable because there will be no space for the desiccant. We do not believe single layer barrier is going to work if you have to consider the yield. Multi-layer approach is a must.

Vitex's process may not look like the optimum process on paper, but we have come a long way to address so many equipment and process integration issues so it is a working solution today. People may have other materials or deposition methods in mind, but they all fall under Vitex's multi-layer approach.

Q: You have recently changed your focus to IP. Can you give some more details? What led you to this decision?

Vitex has always believed that its core strengths are the IP portfolios and the know-how we gained from working with so many different OLED display makers. We have 60 US patents, 56 international patents and about 60 patent applications pending. As a start-up company with limited resources, our previous business model as a total solution provider and a product company was hard to sustain. We were able to successfully deliver our solution to a limited number of customers, but we did not have enough resources to scale up and become an equipment company. It is hard to be in the equipment business. It is very capital intensive and requires economy of scale. Now our equipment partners have learned more about our process and they can start to develop next generation thin film encapsulation equipment. Vitex will provide suggestions and help but we are letting our equipment partners take total control of the equipment aspect and we are focusing only on the process integration. This is a more suitable and a more sustainable model for Vitex.

Q: Will you still sell complete systems, or are you only selling IP now?

We will no longer sell the equipment, but only our IP and know-how. However, we will work closely with our licensees to optimize their equipment and let them sell directly to the customers. We will assist our licensees as well as the end customers on process and integration issues when needed. For display makers who decide to develop their own thin film encapsulation solutions and who may need a license from Vitex to practice, we are also open for discussion for such arrangement.

Q: Now that you are using an IP model, how will you get revenues? Will you get royalties from manufacture machines sold, or from each resulting OLED panel? Or simply a one-time license to use your IP?

The license revenue can come from different sources, including both the equipment makers and display makers. The "typical" license structure will include an up front license fee plus a running royalty. However, we also recognize that companies in different industries have different needs, so we are open to discussion.

Q: Are there any OLED displays on the market today that were manufactured using any of your products?

Nobody is offering products with Barix Encapsulation on a commercial basis yet.

Q: In 2004 you started developing Encapsulating OLED panels with Fuji Photo. Any news on that?

The Fuji investment in 2004 was purely a financial investment. We have supplied samples to Fuji, as a potential customer, to evaluate our technologies, but I cannot comment on the results or the status of the evaluation.

Q: You have also announced a partnership with Samsung - for PLED displays. What's the situation there?

Again, we maintain a close working relationship with Samsung. And the relationship was not limited to any specific type of OLED or PLED.

Q: Back in 2003, you have demonstrated a flexible display, together with Universal Display. Are you progressing in this front? Can you give your take about UDC's PHOLED technology?

We are working with UDC through some government contracts. As a matter of fact, many of UDC's flexible displays (even metal foil ones) demonstrated at various trade shows were coated with Vitex's thin film barrier. PHOLED has many fundamental advantages. The announcements of UDC-SDI and UDC-AUO agreement are all big endorsement of their technology. We are glad to see that UDC is making a lot of progress.

Q: Can you give more info about the metal-foil work you are doing with UDC?

UDC, PARC, L3 Displays and Vitex are working together on an active matrix flexible display project with support from the Army CERDEC. In this project PARC is developing the active matrix backplane, UDC the top emitting phosphorescent OLED display, Vitex focuses on the encapsulation and L3 Displays attaches the drive electronics. We have shown that Vitex Barix encapsulation works very well with flexible devices on a metal foil substrate. Previously UDC has shown OLED icons on metal foil with Barix encapsulation at SID. In lifetime testing Barix encapsulated samples performed as well as glass packaged control samples. Flexible OLED display is the future. UDC is determined to make it happen, and Vitex is determined to help.

Q: You can encapsulate both OLED and PLED displays. Can you give us your views about these two competing technologies?

From thin film encapsulation point of view, OLED and PLED are not much difference. We have coated many OLED as well as PLED displays. With some process optimization, we can encapsulate both without problem.

Q: Where do you see the display market in a few years?

I think OLED will continue to play an important role. LCDs are getting so good and so cheap. They have become moving targets for OLED to catch. Because of LCD's fast price erosion, OLED is having a hard time to compete. LCD enjoyed a price premium in the early days for a long time because laptop people were willing to pay. After years, the accumulated momentum finally exploded and they became ready to take on CRT.

OLED is not so lucky, although it is a better technology and has the potential to be cheaper. It needs to find a niche market where people are willing to pay a price premium. LCD's economy of scale is difficult to challenge. The economy of scale is a chicken and egg thing. If you produce a lot, it becomes very inexpensive. If it is very inexpensive, people will buy a lot. So I think, in the short-term, maybe OLED try to be an enabler to LCD, not competitor. For example, white OLED backlight that Pioneer recently announced. In this case, OLED competes with CCFL or LED backlight and LCD people will help OLED to be successful. I believe that OLED can penetrate faster if it can find a way to ride on LCD's wave.

The other interesting area is the flexible (or bendable) displays. We start to see more and more flexible display prototypes in conference and trade shows, from monochrome electrophoretic to full color active matrix top emission OLED. I think people are finding smart applications, such as low resolution, short lifetime point of purchase or advertisement. I think we will see low spec flexible displays start to hit the market in the near future. Full color, active matrix, top emission flexible OLED displays are amazing and exciting, but there are still lots of technical issues that need to be resolved.

Q: When do you think we'll be able to buy an OLED TV or Laptop screen?

I hope soon. OLED materials are making impressive progress in many aspects: color purity, lifetime, efficiency and etc. Of course there are still issues, for example, the different lifetime requirement for TV, cell phone and MP3 and the equipment availability for larger size substrates. People replace cell phones every year or two, but do not expect to replace their TV for ten years. LCD panel makers are producing TVs with Gen 7 and Gen 8 equipment, while OLED people are still talking about Gen 4 or Gen 5.

For the laptop screen there is image burn-in problem and power consumption problem for PC type applications. OLED does provide some power saving in playing motion pictures because of its emissive nature. Unfortunately, Microsoft Office applications are not very OLED friendly because of the typical white background (in your Word, Excel and PowerPoint) and all the stationary icons. The other problem is that LCD TVs are getting so good and yet so cheap.

We are all amazed by the Korean and Taiwanese LCD panel makers how fast they can scale up the factory, ramp production, improve yields and cut costs. However, there are limits and people need to make reasonable amount of money. There are only so many places you can cut costs. After that, you have to do something different. OLED has the inherent advantage of lower cost. People are solving the technical issues one by one. All pieces of puzzle are finally being put together. We already saw the 40" OLED TV prototype from Seiko Epson and Samsung Electronics last year at SID. I hope that people can achieve some level of economy of scale so we can see the TV products on the market in 2009-2010 timeframe.

Q: In the beginning of 2004, you raised $24M. What is your financial situation today? Are there any plans for raising more money, or an IPO?

Vitex continuously receives funding from its current investors. It is also generating enough funding from licenses, royalties and engineering services to support the company's operation. At this moment, we do not have plans to raise additional money or go IPO in the near term.

Q: Where do you see Vitex in about 5 years?

Vitex had only focused on OLED since its inception, so we had said "NO" to many people who was seeking thin film barrier technology for their non-OLED applications. To reflect it new business model, Vitex has decided to explore more application fields. We are negotiating various deals with regard to the field of OLED. However, thin film barrier technology is a fundamental technology. Vitex has started to investigate how its barrier technology can be used in areas such as photovaltaics, thin film batteries, organic semiconductors, smart fabrics and etc. We will try to license our technology to more people and help people benefit from thin film barrier.

Thank you again for your time, I wish both you and Vitex good luck!

Merck - Advancing Display, Advancing LifeMerck - Advancing Display, Advancing Life