Since our last earnings call, the MicroVision team has been busy in our efforts to secure design wins for our patented PicoP® display technology and to strengthen our supply chain – two of our main operational goals for 2013. As we cross the threshold from summer into fall and with nearly two months before our next earnings call when we typically provide an in-depth update, we wanted to share some recent news and revisit our progress year-to-date.
We continue to focus on two primary markets for PicoP display technology – consumer electronics and automotive Head Up displays (HUD) with a focus on embedded applications. MicroVision announced yesterday that we have made significant progress with a leading global Tier-One Automotive supplier as we move further in the design win process with them. We have been engaged with this Tier-One for some time in the multi-phase design win process for qualifying our HUD solution to be adopted as part of their embedded HUD application for at least one major automotive OEM. This recent milestone achievement includes supplying them with multiple prototype Scanned Engine Subsystems (SES) for reliability testing. The process for adopting new technology into an embedded automotive system is a rigorous one and we are pleased to move to this stage with a leading Tier-One supplier. In addition to providing the SESs we are supporting the Tier-One with engineering services and expect to deliver the systems and commence the testing before the end of the year.
One question we received about this announcement is whether it is the same company as the auto manufacturer we announced a development agreement with in 2011 or the Fortune Global 100 electronics brand we announced a development agreement with in April of this year– it is not the same company nor is it related to either of those development agreements. In the automotive market, in addition to the engagement with this leading global tier-one auto supplier, we continue to support the major auto manufacturer from the 2011 announcement in its ongoing evaluation of PicoP display technology, and we are also in discussions with other auto manufacturers and Tier-One suppliers for embedded HUD.
In the Aftermarket HUD arena, Pioneer Corp. earlier this summer launched an updated version of its augmented reality CYBER Navi that incorporates PicoP display technology. They added crowd sourced traffic data features to the product called “Smart Loop Eye” and continue to market the product in Japan. As our first commercial deployment of PicoP® Gen 2 based on direct green lasers, we were very pleased with the high quality of the components that we delivered to Pioneer, achieving a return rate of below 1 percent. We also were happy to receive Pioneer’s feedback that direct green lasers, in their commercial debut, were readily available and performed very well. We continue to evaluate aftermarket HUD opportunities but believe that embedded HUD is the long term play in this segment. Multiple analyst reports published recently forecast double digit growth in HUD in the next five years.
On the consumer electronics front, we also continue to make progress. In April we announced a multi-million dollar development agreement with a Fortune Global 100 electronics company. We are extremely focused on supporting this company’s development of a display engine based on PicoP display technology. Our engineering team is working closely with their engineers as they develop a display engine that capitalizes on the reference design we have for PicoP display technology and advances the solution to meet their unique requirements. We can’t discuss in any detail the products they are considering, but from what they have shared with us, we are excited by the possibilities.
We are also actively pursuing additional business opportunities with other consumer electronics OEMs that are interested in including PicoP display technology as part of their product roadmaps. Some of these companies are candidates for vertical integration of our components for their own display engine under a licensing agreement. Some OEMs are interested in integrating a complete display engine solution from a design manufacturer for a quicker time to market. For this latter group of OEMs, we are working with supply partners to offer these go-to-market options. We are working closely with these partners but like to keep these activities “under the radar”. Ours is a competitive industry and maintaining confidential relationships while in the development phase is insurance against disruption by the competition.
In other supply chain news, we are asked frequently about the supply and cost of direct green lasers. Direct green lasers became commercially available in mid-2012 from two suppliers as we had discussed in many communications before that time. We are not procuring lasers directly now as we did when we were manufacturing SHOWWX™ pico projectors, but we do maintain a relationship with the laser manufacturers and participate in discussions and negotiations in support of our customer and supply chain partners. As we forecast, the pricing of direct green lasers is significantly lower than the earlier synthetic green lasers – a mere fraction of the price in fact. As volume ramps up and additional suppliers come into the market, we expect that the prices can come down even more. And like any new, cutting edge technology, the companies pioneering their introduction in the market continue to make advances with them. Recently Adrian Avramescu from Osram Opto Semiconductors revealed significant advances in the performance of the company’s green and blue laser diodes while speaking at the International Conference on Nitride Semiconductors. This progress for direct green lasers comes less than a year after they first announced commercial availability.
The remainder of 2013 promises to be as busy for MicroVision as the earlier part of the year. We have reached multiple milestones in our development agreement with the Fortune Global 100 electronics company and remain focused on achieving the remaining milestones and negotiating the supply and licensing agreements. We are readying the SES systems for delivery for reliability testing with the global Tier-One automotive supplier as a precursor to additional development and commercialization activities, and we are in discussions and evaluation with multiple consumer electronics and HUD prospects. We are also preparing to speak at multiple investor conferences in the coming weeks and we are scheduled to exhibit in October at the SID Vehicle Display Symposium in Michigan – the hub of the auto market in the US. And of course we also continue to develop enhanced features and capabilities for PicoP display technology.