Shifting Opportunities for Suppliers of Conductive Coatings
A look at growth prospects in the conductive coatings segment.
The conductive coatings market for electronics is broad, and a large chunk of it is made up of established materials with established products. In these mature materials markets, there are few really new opportunities; at best, these sectors are “cash cows” for existing, entrenched suppliers. However, a few key applications are open to new materials and new suppliers, leading to real opportunities for new business, and opportunities for existing businesses to expand:
• First, the overall conductive coatings market in electronics is growing, generally in alignment with global economic growth, and fueled at least partially by growth in the developing world.
• Second, the specific kinds of conductive coatings favored by several of the underlying electronics markets are shifting. This will make it difficult for existing suppliers in some situations, but it also means there are plenty of opportunities for new suppliers, with new materials, to get into the game.
NanoMarkets expects the market to grow from its current size of about $9.5 billion to greater than $19 billion by 2019, at a CAGR of approximately 10.5 percent. (See tables)
While many of the electronics segments served by the conductive coatings industry generate significant revenues, many are also are characterized by low growth, often low profitability and established supply chains. However, in the past decade, two applications—displays and photovoltaics (PV)—have provided new ways for conductive coatings firms to make money. Today, these two segments account for about two-thirds of the conductive coatings market—a share that is not expected to change much over the next decade. However, closer examination reveals that there are significant changes afoot in both the display and PV sectors that will profoundly reshape the opportunity space for conductive coatings.
Applications Driving Growth in Conductive Coatings
The key growth areas in conductive coatings fall into two broad categories: fast-growth applications and “legacy” applications.In the fast growing and highly dynamic application areas such as solar panels and emerging electronics, the needs for conductive coatings are in a state of flux. In these markets, some conductive coatings firms will make considerable amounts of money by capitalizing on growth in the underlying addressable markets; but the flip side of this scenario is that these markets are constantly shifting ground, and demand for new materials can disappear as fast as it appears. In other words, there are significant risks associated with these markets.
In contrast, the legacy applications offer plenty of examples of existing coating technologies that are less than perfect, yet clearly entrenched and still profitable. Examples are electroless copper coatings for electromagnetic interference (EMI) or radio frequency interference (RFI) shielding and indium tin oxide (ITO) transparent electrodes for displays.These markets present far fewer risks for entering coating manufacturers, but also far more competition and fewer immediate opportunities for building a large new business. Nevertheless, conductive coatings firms that look hard into existing markets are likely to find some new ways to make money.
In addition, there are some important trends in conductive coatings markets that are shifting demand patterns. For example, in the PV sector, there is a growing emphasis on energy conversion efficiency as solar subsidies begin to go away and as panel prices are on a relentlessly downward trend. This shift translates into a need for more conductive, less expensive electrodes. With energy storage also becoming more important, there are new kinds of batteries and supercapacitors on the market that also need higher performance electrodes. These demands for better electrodes translate into new opportunities for conductive coatings.
Meanwhile, the display industry—the biggest consumer of conductive coatings—is facing the fact that the boom days for liquid crystal displays (LCDs) are over. On one hand, this leads manufacturers to squeeze the biggest possible margins out of the remaining (and still gigantic) demand for LCDs. On the other hand, it encourages them to look for entirely new business opportunities outside of the mainstream LCD industry, such as in e-paper, OLED displays, transparent displays and flexible displays. All of these new types of displays have either already appeared on the market or will appear in the next year-and-a-half.
While the developments in the display and solar panel industries are relatively new, it is also important to recognize that trends in the electronics and communications industries continue to promote growth in the rest of conductive coatings market, thus counteracting the core maturity of much of the conductive coatings space:
• The expansion of electronics, especially of electronics that support pervasive wireless computing, is fueling growth in the market for EMI/RFI shielding coatings. Legacy products will continue to do well, but new solutions for shielding are also expected to grow.
• Electrostatic dissipation (ESD) and antistatic coatings markets are also benefitting from the trend toward pervasive electronics, and are further fueled by the onward march of Moore’s Law, which makes errant charges ever more harmful in electronics manufacturing and assembly.
Conductive Coatings and the Shrinking Photovoltaics Market
The PV market has for the past several years been a gift to the materials industry. Partly thanks to government subsidies, the solar industry has grown dramatically, including significant growth spurts in 2010 and 2011. In particular, the PV industry has bought at least $3 billion in products from the conductive coatings industry in recent years. The chart at the top of this page contains a forecast for the PV conductive coatings market.
It now appears, however, that the boom days are over for the PV sector, at least as far as the highest-priced conductive coatings products are concerned, and there are significant challenges to the status quo in the types of conductive coatings used in the PV market. First, the high price of silver is forcing it out of PV backside electrode and reflector applications wherever possible. There is also the ongoing shift in market share toward more thin-film PV that is changing the accepted landscape, as the kinds of conductive coatings used in the market dominant crystalline silicon PV sector are quite different, and generally less expensive, from those used in the various thin-film PV technologies.
In addition, in most countries, many of the subsidies that have supported the PV industry for a number of years are being significantly reduced. Germany, currently one of the largest PV markets, recently announced sharp cuts in feed-in-tariffs (FITs) that support its PV industry. The ramifications of these cuts are not yet fully known, but when the Spanish government took this step a few years ago, the PV market in Spain declined by 75 percent.
The impact of these trends on sales of conductive coatings to the PV industry will be large. Specifically, $70 million in revenue will be knocked off the value of conductive coating sales over just the next couple of years, rising to about $335 million by the end of the decade. This reduction means that conductive coating firms can no longer count on the PV sector to provide new business revenues simply based on organic growth.
The bright spot for conductive coatings suppliers is that the shift in market share toward more thin-film PV will create new opportunities, because the electrode materials used in thin-film PV are not a settled matter. Therefore, a new supplier entering this space is not battling an entrenched material and probably not an entrenched supplier either. This opportunity can only get better over time, since with subsidies removed, firms are more likely to come up with innovative new types of solar panels with even more uncertain electrode requirements.
Thus, there are near-term opportunities to offer lower-cost carbon pastes, molybdenum coatings, aluminum, and silver-aluminum products, instead of conventional (and high-priced) silver materials. In addition, alternative transparent conductors—beyond ITO—have already made significant inroads on ITO, as indicated by the use of both tin and zinc oxides in several PV types. Longer-term opportunities could include the deployment of a broader range of nanometals and other nanomaterials.
Saved by the Display: Conductive Coatings’ Future in Displays
Not only are the overall markets for PV coatings likely to decline somewhat during the coming decade, but also the materials suppliers will likely have to pour more money into marketing to the PV space. Unless they can prove significant performance advantages or vastly lowered cost, it is likely that margins will decline for conductive coatings firms targeting the PV space.
Fortunately, the display industry may save the conductive coatings industry. Of the $9.7 billion in extra revenue projected to be generated by the conductive coatings industry over the forecast period, $6 billion, or about 60 percent, will come from new sales of conductive coatings into the display industry.
The obvious short-term opportunity in displays lies in the replacement of ITO by less expensive and more resilient materials, from alternative transparent conductive oxides of tin or zinc, to coatings made using conductive polymers and nanomaterials of various kinds. This trend has been apparent for several years, but recent signs indicate that what might have been dismissed a year or so back as wishful thinking by a few firms with a propensity for hyping the latest materials is beginning to look like a market opportunity that could someday be worth billions of dollars.
Today, there are display products using transparent conductors other than ITO actually appearing in the market. For example, firms that are pushing alternatives to ITO in the display industry have found a receptive market niche to test-run their products: the touch-screen sensor market. Touch screen applications have the advantage that ITO is not as entrenched as in the mainstream LCD business, and the underlying touch-screen display market is growing fast.
Unfortunately, if ITO replacement is ever going to be a really substantial market for the conductive coatings firms, these new materials will need to break through into the mainstream LCD market, where ITO is entrenched; the touch screen sensor market just is not that big. Some small signs of activity in this regard first appeared in 2011; if these signs grow in visibility over the next year or two, a huge market opportunity for conductive coatings makers could emerge.
Beyond LCD: While the possibility of ITO replacement in conventional displays has been known and discussed for quite some time, entirely new generations of displays may soon rescue the conductive coatings firms from the problems faced in the PV sector. Just as PV once presented the conductive coatings business with a substantial new market that emerged from “nowhere,” the same thing is expected to happen in the display industry within a three to five year time span.
Why? The “LCD revolution” is coming to an end. The industry is reaching near saturation in its major addressable markets, and it is now in need of new ways to maintain profitability. As a result, the big display manufacturers are looking toward the next big thing, and a slew of new display technologies have started to emerge, including OLED displays, e-paper, flexible displays and transparent displays. Not so long ago, these display technologies were the kinds of things seen only at trade shows, but OLED displays and e-paper are now fully commercialized products, and flexible displays and transparent displays may soon follow in their footsteps. Therefore, just as the emergence of the PV industry a decade ago rapidly created entirely new revenue opportunities for conductive coating firms, the new generations of displays will next do the same.
Replacement of ITO transparent electrodes in displays is the biggest factor, but there are other opportunities as well. For example, e-paper and OLED displays, both of which are not backlit, need new kinds of opaque conductors for the back electrodes. Meanwhile, the arrival of transparent and flexible displays in the next few years will certainly change the rules of engagement for conductive coatings makers. Transparent displays—and transparent electronics in general—will likely trigger the need for an entirely new set of transparent materials, and conductive coatings firms may tap into this opportunity if it emerges. Similarly, flexible displays will require flexible materials; the great hope for ITO replacement lies in the area of nanomaterials, which have yet to achieve any substantial penetration of the market, but as an early stage technology have, at least, the potential for a “great leap forward.”
What About OLEDs?
The OLED sector warrants special attention by conductive coatings firms looking for new opportunities, because it is already quite large and promises to be larger. Full color, active-matrix OLED displays have emerged in a big way in the last 18 months in smartphones, and OLED TVs seem (finally) ready for commercialization in the next year or so. In addition, although today’s OLED lighting products consist almost entirely of luxury lighting, large office lighting panels are poised to be the next big thing.
The good news for conductive coatings suppliers is that OLED makers have not only shown openness to replacing ITO, they have shown actual enthusiasm, at least at the R&D level. There is not the high level of commitment to ITO—or installed machinery—that one finds in the LCD segment. For TVs and larger OLED lighting panels, the areas involved add up to quite large amounts of conductive coatings consumed per panel, which is another reason that OLEDs represent an important opportunity for conductive coatings makers. There is plenty of skepticism in the industry about whether large panels—TVs or lighting—will ever succeed in the market; some believe they present too many technical problems, so there are probably some substantial risks involved for conductive coatings firms. However, Samsung and LG, both recently exhibited 55-inch OLED TVs at the annual Consumer Electronics Show, and while neither disclosed the exact cost of these big-format products, both indicated they would be much less expensive that previous OLED TVs commercialized, and both are publicly projecting a rapid rise in sales over the next five years.
Satisfying Demand for Conductive Coatings with New Materials – The Rise of Nanocoatings
The vast majority of the revenues generated in the conductive coating space over the next eight years will be made with conventional materials that at worst may need some technical upgrading or some market repositioning. None of the markets described above are expected to completely throw off the old guard in conductive materials and embrace new ones. By way of a measure of the importance of conventional materials, NanoMarkets projections suggest that 97 percent of the revenues from conductive materials will come from conventional materials in 2012, and that their share will still be very significant—84 percent—by the end of the forecast period.
However, this reduction is a substantial decline, and it is largely a result of the rise of nanomaterials and conductive polymers that has broadened the choice of materials beyond conventional metals and carbon. Although the potential for nanomaterials have been regularly discussed in the literature for many years, real signs of opportunities for these materials are now appearing in the conductive coatings space. For example, the fact that both conductive polymer and nanosilver transparent coatings have taken a small share of the ITO transparent electrode market in the past couple of years should be encouraging to developers and suppliers of novel conductive coatings technologies.
In fact, incorporation of nanomaterials is one of the most exciting trends in the advanced coatings materials space. These materials still have a long way to go in terms of product development, but not only may nanomaterials potentially enhance the performance of conductive coatings, they may also help reduce manufacturing and/or materials costs, preferably both, in several applications. More importantly, because “conductive nanocoatings” are clearly still in the early phases of their evolution, there remains considerable room for innovation to establish valuable intellectual property positions.
Revenues available to firms from the “conductive nanocoatings” space will soon become large enough to attract the attention of both large specialty chemical companies and hopeful start-ups. By 2016, annual revenues from nanometal coatings are expected to reach $665 million, growing to $1.4 billion by 2019. The biggest opportunity for nanometallic coatings will be in the ITO-replacement market, where nanosilver will take the lead.
The equivalent numbers for carbon nanomaterials are roughly $525 million in 2016 and $1.1 billion in 2019. While carbon nanotube (CNT) transparent conductive coatings have not taken off as quickly as many in the industry hoped a few years ago, firms in this market are starting to make tangible strides toward commercialization in some key applications such as displays, electronics and sensor markets, for example, and the costs of CNTs are rapidly declining. Meanwhile, there is the current darling of the materials industry, graphene, which may be the wave of the future in conductive coatings applications.