Is Kopin "Microsoft Ready" For HoloLens V2?

The Holy Grail: Large FOV Optical See-Through AR (Mixed Reality)
Everyone wants to experience the Hollywood version of AR that we will call Mixed Reality: dynamic Optical See-Through transparent overlays that fill a user’s Field Of View (FOV) with information in effect enabling super powers. Think Iron Man. Many companies large and small are pouring resources into efforts to perfect this concept in a device that humans will wear and accept. I think we are 5, maybe 10 years from this version of AR or Mixed Reality users can safely use. To learn more, I recommend reading my interview with Kopin CEO, and Extended Reality (XR) industry veteran Dr. John CC Fan to better understand why:

One Tech Titan is ahead of everyone in bringing a Mixed Reality device to market: Microsoft. Their first attempt, the HoloLens Mixed Reality headset launched on March 30, 2016, igniting imaginations of many with the possibilities of AR and Mixed Reality. However, it had drawbacks including its large size, weight, and relatively small Field Of View. It was truly a developer device and not ready for prime time.

As background, Optical See-Through displays with waveguides are provided by a number of suppliers, most notably using Reflective LCOS from Himax inside Microsoft HoloLens V1 and a number of Lumus optical engines. Also, the MEMS projector engine from Texas Instruments that Vuzix is using in their Blade product. 

Enter A Waveguide Display Disruptor: Kopin
The following data points suggest to me that Kopin may have secured a major display design win for a waveguide optic based device - I think there is chance that Kopin is inside Microsoft’s Second Generation HoloLens Mixed Reality headset. Here’s why I believe this:

  • Kopin made an announcement when reporting Q1 2018 results that they had secured a design win inside for an Enterprise AR device on track for launch this year. It is a Silicon Valley type company: “In addition, we're excited to report a major design win with a global U.S.A. tier one company for a new AR-smart glass for enterprise applications.” During Q&A the customer was further clarified as a “Silicon Valley type company”
  • Many on-line sources corroborate that the Second Generation HoloLens will be revealed this year:
    • Microsoft has a Mixed Reality Summit August 27-31, so I expect HoloLens V2 developments and launch details to emerge in the second half of 2018
    • 2018 Hololens V2 reveal example in this article:
    • The talk John Fan gave at AWE 2018 focused on AR and VR; however, as with last year, he referenced Mixed Reality:
      • "Mixed Reality will transform our world” - John Fan
      • As a leading AR and VR display supplier, my assumption is that Kopin is including emerging Mixed Reality headsets in its product roadmap and I see inclusion in his speech as an indication of this
  • ODG optical patents purchased by Microsoft bound HoloLens Gen 1 to Reflective LCOS (from Himax); BUT, improvements made by Microsoft to the original ODG waveguides open up a display socket opportunity as noted in a number of recent granted patents. Here is one example:
    • US Patent 9,791,703 granted to Microsoft Technology Licensing, LLC entitled, “Waveguides with extended field of view” are based on a display engine that fits the description of Kopin transmissive AMLCD - “The image former 206 can be implemented using a transmissive projection technology where a light source is modulated by an optically active material, and backlit with white light. These technologies are usually implemented using liquid crystal display (LCD) type displays with powerful backlights and high optical energy densities. The illuminator 210 can provide the aforementioned backlighting.”
  • While Himax was quite vocal about HoloLens V1 display win using their reflective LCOS module, I have not observed them guiding towards a HoloLens V2 socket win from what I can see reviewing recent quarterly conference calls and presentations:
  • Significant advances in Kopin’s Nanojet process & Brillian AMLCD panels have resulted in higher contrast ratios and very high brightness levels - in excess of 10,000 nits. This is exactly the kind of display performance a full FOV device like HoloLens would need for indoor and outdoor use. In my opinion, Kopin’s Transmissive AMLCD with a high brightness backlight is the best solution for AR and MR today; this high level of brightness is key for Mixed Reality when the AR overlay is competing with bright sunlight and the optical inefficiencies of waveguides or combiners
  • In a pattern similar to the original Google Glass, I see Himax Reflective LCOS being used for the initial HoloLens device, (mainly due to ODG legacy optical architecture they purchased) but the second generation production version being upgraded to Kopin transmissive AMLCD

Why A HoloLens Display Socket Win Is So Significant
Microsoft HoloLens V1 sold roughly 50-60K units according to estimates creating a strong user base, developer community and platform for the next generation coming to an Enterprise near you. Note:

  • Microsoft is not giving up on AR or MR, so partnering with this tech titan is beneficial to the industry and to Kopin
  • If Kopin wins the HoloLens display socket, they have essentially run the table and are now inside all AR shipping devices that matter
  • A HoloLens display socket win validates Kopin business model and technical superiority of its solutions

This information is by no means a definitive guarantee that Kopin has secured a socket win inside HoloLens V2. To be fair, the new design win could also be Google Glass V3 as Google is already a Kopin customer. However, I believe there is enough information here to trigger investors take a closer look at the possibility Microsoft is going with Kopin for HoloLens V2. Furthermore, it adds strength to my ongoing narrative for investors that Kopin is the undisputed supplier of choice for Augmented Reality and now potentially Mixed Reality head-worn wearables. As such, I think it deserves serious consideration as a core holding for an AR, VR, MR, or wearables investment portfolio.

After all, wouldn’t you want to own the company with the majority of socket wins heading into the explosive AR and Mixed Reality market that is likely to be worth more than $200B within 5 years?

Interestingly, of all of these companies, Kopin has the longest customer list, largest relevant patent portfolio, and most experienced AR, MR, VR management team in the industry. Yet, they are on the low end of the valuation scale. Is that an opportunity? I think so.

The Augmented Reality Market Is Maturing
I have been observing this market for a long time and now see Augmented Reality (AR) market segmenting itself into two areas:

  • Video See-Through AR - This is the near term growth opportunity for practical hands-free monocular video see-through AR; Enterprise adoption has already started moving from Pilots to rollout in large organizations globally
  • Optical See-Through AR or Mixed Reality with large FOV - It’s early days for this architecture, but long term opportunities are immense if someone can perfect optics like waveguides or image combiners to overcome current limitations

I continue to maintain that Hands-Free Monocular Video See-Through AR is the architecture that will see broad adoption over the next 5 years beginning in the Enterprise market and eventually catching fire with Consumers.

Regular readers of my work will know that Kopin’s market share for displays inside shipping Monocular AR devices is dominant. The list of customers using Kopin’s AMLCD displays is long and represents virtually all devices that matter in my opinion.

In 2016 I published a graphic of how I saw the market evolving and, while AR adoption has lagged my initial estimates, I think we will see a solid 5 years of Hands-Free Monocular AR growth culminating in millions of units being shipped annually a couple of years in:

Author: Derrick Zierler - First published: June 26, 2018 / Updated: August 1, 2018

Before I propose a ground-breaking potential Augmented Reality display socket win for Kopin, that I believe could be revealed later this year, a few comments on the company’s current market cap.

There are two primary markets available to get investors to value your asset: 

The Private Markets
This is where you'll find the smartest money when it comes to valuing an asset. The investors are Venture Capitalists (VCs) and they're also large companies in their respective field that put aside capital to invest in promising companies in the markets they serve. Think Qualcomm, Intel, Boeing amongst many other large companies that have venture capital arms. 

The Public Markets
This is where everyday retail investors can risk their capital with companies micro-managed to ensure transparency for everything they do or don't do and exact timing. In this arena companies are often left undiscovered, get left behind, or are not given the proper attention to detail until the market opportunity hits investors in the face.

To make my point, I've attached sample companies in the Augmented Reality (AR), Mixed Reality (MR) wearable space that are attempting to bring products to market in what could be a $200 to $400 billion dollar opportunity within 10 years: