NFC specialist Thinfilm has confirmed a strategic update and corporate restructuring, intended to align the business with the current market adoption of NFC.
This will see the company focus its resources on developing and building market adoption of its brand protection and consumer engagement technologies. Thinfilm has taken the following steps toward this goal:
- Paused development of printed dopant polysilicon (PDPS) technology;
- Realigned its sales organization and its go-to-market strategy;
- Sharpened its focus on complete product options, integrating hardware and software; and
- Reduced its global footprint and shifted weight toward San Jose.
These actions are designed to yield nearly $20 million USD in annualized savings at the operating level and will result in an approximate 40 percent reduction in the work force.
Thinfilm CEO Kevin Barber said: ‘I am very disappointed that we need to take these drastic steps, especially given the significant contributions of individual team members and I'd like to thank them for their commitment and wish them well for the future.’
The company’s Q4 2018 update noted that previous management was ‘too optimistic’ on timing of demand for NFC technology, the need for a PDPS option and mistakenly pursued a sub-optimal go-to-market strategy.
While the new management team is confident in the viability of NFC technology in the long term, market adoption has been slower than anticipated in the previous business plan and has been hampered by delayed support from leading handset vendors. As a direct result, the sales performance was disappointing.
Progress on the roll-to-roll PDPS factory has been unsatisfactory leading to significant delays to the scheduled completion. The board of directors and the new management team believe PDPS technology is not required during the early phase of market growth. It is, therefore, in the best interests of Thinfilm's shareholders to pause development of the PDPS technology. It is not nor ever was a critical part of building initial market volume. However, in the event of very significant market growth, Thinfilm may reassess this decision.
Finally, silicon-based NFC technology are currently readily available and sufficiently cost-efficient to deliver competitive options to drive a profitable business model. In addition, management believes it can drive significantly improved cost-per-unit on silicon-based solutions to cater for large volumes.
As a result of pausing the printed electronics line, Thinfilm will discontinue the current electronic article surveillance (EAS) business after exhausting existing inventory with our leading customer. All in all, EAS has been maintained as a tool to improve roll-to-roll factory learning, but, it has not positively contributed to Thinfilm profitability.
Thinfilm added that it is disappointed to report that discussions with a potential strategic equity partner are not expected to result in investment at this time.
Thinfilm noted that it continues to engage in multiple discussions with strategic go-to-market partners where we can integrate our NFC tags into specific components and leverage existing relationships to deploy our brand protection and consumer engagement solutions.
The company’s new management team is confident in the positive long-term outlook as communicated to shareholders in the Q4 2018 report.