Venture Beat – March 23, 2016
Norwegian tech firm Thinfilm figured out a way to print tiny electronics chips on plastic surfaces, creating tiny smart labels to put on the Internet of Things, or smart and connected everyday objects. While others are making extremely powerful chips, Thinfilm is instead going wide: It is adding a little bit of intelligence to a lot of things.
When I last caught up with Thinfilm (whose formal name is Thin Film Electronics, traded on the Norwegian Stock Exchange), its people were working on a different product. They had a super-thin, rewritable printed memory, which was a storage product that was printed onto a flexible plastic surface. The company licensed this technology to Xerox, which began printing the memory devices in a factory in Rochester, New York. Then Thin Film Electronics pivoted into a new kind of printed electronics.
Now the company prints near-field communications (NFC) chips onto plastic, which can be pasted onto something like a liquor bottle as a smart label. You can scan the label with your smartphone just by moving the phone close to the label. That initiates a radio signal, reading the data in the NFC chip and transferring it to the internet-connected cloud.
“We saw that smartphones with NFC communication would be ubiquitous and provide a way for consumers to share personal information and exchange it in payment systems and get information about products,” said Davor Sutija, CEO of Thinfilm, in an interview with VentureBeat. “Thinfilm has pivoted from a widget company to a marketing technology company.”
Rather than manufacture chips in a traditional silicon chip factory (which can cost $3 billion to $5 billion to build), Thinfilm learned how to print circuits on top of flexible substrates, as if it were printing designs on a piece of paper. And it has done so for much cheaper — it has only raised $105 million to date during all of its existence. This is the company’s “hardware differentiator,” and it is enabling some very interesting communication between brands and consumers, through the packaging.
Think about the challenges that brands face today, Sutija said. They have been disintermediated by Facebook, Google, and Amazon. Those companies reap a lot of profits from selling or advertising brand merchandise. The value isn’t so much in the brand anymore. It’s in the platform, like Amazon Prime, which delivers that branded product to you.
But Thinfilm gives a way for those brands to fight back. That’s because the smart label that Thinfilm prints and puts on a bottle of Johnnie Walker Blue Label scotch is a means to communicate with the consumer. The smart label authenticates Diageo’s bottle, showing it isn’t counterfeit. And using NFC, it also can make the consumer’s smartphone go to a webpage with personalized promotions or a direct link to the liquor company. That solution is now in field trials.
“I think it is an important platform that allows companies of all types to innovate on in the Internet of Everything,” said Tim Bajarin, analyst at marketing consultancy Creative Strategies, referring to the idea that everything will be connected to the Internet in the future. “The overall role of printed circuits being applied to physical objects to deliver information contact points is important, and over time I believe it will enhance the overall IOE ecosystem of devices and services. Thinfilm has one of the best platforms for delivering this solution, and as they make their software development kit even more robust, I could see it being used to deliver many new and innovative NFC connected products and solutions in the future.”
“Our platform is an intermediary between the brand and consumers,” Sutija said. “We now have a complete marketing solution.”
Consider what Thinfilm is doing with Hopsy, a website that sells beer from 60 local micro breweries in the San Francisco Bay Area. Thinfilm puts a smart label on the beer bottle. The consumer taps an NFC smartphone on the label, and it takes you to a video that describes the beer in a video. The consumer can reorder more craft beer through that website, or take advantage of promotions. And the beer company gets to interact with a customer without spending a lot of money on ads.
“You can get engagement with consumers for a dime,” the cost of a label, Sutija said.
The NFC chips are turning out to be a better solution than older radio frequency identification (RFID) chips, as NFC is getting built into just about every smartphone now. And you don’t need a special reader, as with RFID, to read the data in the chip. There are more than a billion smartphones with NFC inside.
There are other ways that Thinfilm connects companies with consumers. Very few consumers ever fill out a warranty registration and send it back to the manufacturer. But if you put a smart label on the registration form, the consumer can tap the label with a smartphone and automatically register. That can give the consumer information on any recalls or updates on the product. Thinfilm has not only created the chips to make this possible; it also has the cloud-based software portal, dubbed Thinfilm Cnect, to make it happen. In this way, Thinfilm gives brands a way to disintermediate the social networks and online marketplaces. And there are other uses.
“How can brands innovate if they don’t get good data back from the consumers?” Sutija said. “You have to create a digital as well as a physical identity for brands.”
The anti-counterfeiting part of the technology is also a big deal. Millennials are likely to be more inclined to purchase an engagement ring using smartphone authentication. Sarine, a diamond company, is using Thinfilm to authenticate its diamonds. You tap a certificate on a smart label for a diamond. Then you can go to a website that certifies that the packaged item is authentic — and not supporting war.
“This is the single biggest threat to blood diamonds this century,” Sutija said, referring to the diamonds mined in war zones and sold to finance insurgencies. “It gives you the sense that what you bought is really worth it.”
Overall, the company is in 10 different vertical markets, from pharmaceutical pill authentication to fashion verification. And it wants to move into more. In May, Thinfilm is publishing a book, NFC Mobile Marketing for Dummies.
The only thing that has been limiting Thinfilm to date is its manufacturing capacity, Sutija said. It has been building its chips on in a building in San Jose, California. But now it is moving to a bigger building with a much higher manufacturing capacity. That facility, a former Qualcomm Mirasol display factory, will formally open on June 15. A new manufacturing plant like this is a rarity in Silicon Valley today.
“Moving to that site is a natural consequence of the traction we are getting in the market,” Sutija said.
While Intel is lucky to get 100 chips on a 12-inch silicon wafer, Thinfilm can pack much more on its sheets of plastic. It can put 13,000 NFC chips on a single 12-inch by 12-inch sheet, with each chip taking about 1,500 transistors (less than Intel’s original 4004 microprocessor in 1971). In the older building, the company could make perhaps 1 million units a month. That was great for field trials, but Sutija said, “Now companies are asking us to quote 60 million units.”
Thinfilm will start making its anti-counterfeiting tags first. Then the company will start making transistors for the NFC tags in early third quarter of 2018. So the company will go from 1 million chips a month to 100 million a month in about 15 months. By 2019, the company will be able to make 5 billion NFC chips a year and 1.5 billion anti-counterfeiting tags. It can make that many because it is printing the circuits on plastic sheets that can be unrolled through an assembly line. That’s called roll-to-roll manufacturing, and it is extremely efficient. Other things made with roll-to-roll manufacturing include radio frequency identification (RFID) tags and solar cells.
“We increase our batch size by 600 times, our labor costs go away, our capital expenditures get amortized, and the die becomes very inexpensive,” Sutija said.
This may sound like a lot of NFC tags. But there are a lot of traditional labels — maybe a trillion of them — that can be replaced with smart labels. And once Thinfilm accomplishes its task, it will be a key player in the Internet of Everything. Not bad for a company with just 130 employees.
“We’re going to scale from millions to billions,” Sutija said.
Read the full article here, by Dean Takahashi.