Image Source: RealWear Press Release

Kopin - Lens To The Metaverse

Now that CES has drawn to a close, we have identified a number of key industry updates and near term catalysts for Kopin in 2022.

Enterprise AR - Now A High Growth Business
Leading up to CES, we noted a couple of very important news items from Kopin customers and partners:

  • RealWear announced the release of the Navigator 500 modular AR headset
  • Moziware revealed their new Cimo headset already available in mainland China

We believe quite strongly that Second Screen AR / Assisted Reality will be the form of augmented reality most widely accepted for Enterprise use cases near term. RealWear and Moziware represent best-of-breed Second Screen AR today. In particular, we think Moziware’s growth will be very strong in 2H 2022 as front line workers in mainland China and around the world snap up the new Cimo device that is so compact it folds up like a wooden ruler and fits in your pocket!

We should note that we continue to believe RealWear is in the process of raising Series C funding of approximately $50M which sets the stage for strong growth and may spur an acquisition or IPO event by the end of 2022. As an early investor, Kopin would see an injection of liquidity from such an event and potentially see hockey stick revenue growth by the end of 2022. 

2022 Is The Year of The Metaverse
CES 2022 announcements added to 2021 events we observed along the path to broad Metaverse/VR adoption:

  • Sony announced PSVR2 to ship in 2022
  • Panasonic launched a Micro OLED headset that is lightweight and super compact
  • New Kopin P80 Pancake optics were revealed - Metaverse Glasses are coming!
  • Facebook has changed its name to Meta and plans a public event by the end of Q1 2022 to change its stock symbol from FB to MVRS which will spur a plethora of media attention.

Reflecting on these announcements and activity, combined with increasing tempo of rumors about Apple’s 2022 VR entry, we infer the following: VR is mounting a serious comeback as part of a renewed focus driven by the Metaverse. 

We are convinced Micro OLED-based headsets are the future for VR and will enable much longer Metaverse sessions due to lower weight, reduced power consumption, less heat, and increased comfort. For example, the new Panasonic VR headset is designed for Metaverse users who will be immersed 2,000 hours per year or more than 5 hours per day!

This is why we think the Panasonic VR device announced at CES 2022 is so important:

  • Lightweight. The new Panasonic device weighs 250 grams versus ~500 grams for Oculus Quest 2. This ergonomic breakthrough is made possible by a move to Micro OLED architecture.
  • Ultra-High Resolution. The Panasonic device has one 2.6K X 2.6K OLED HDR microdisplay for each eye with 120Hz refresh rate. These specs are considerably better than Quest 2 or any other consumer headset in the market and are astounding considering the reduced size and weight of the Panasonic device.
  • Comfortable. In addition to low weight, Panasonic has incorporated Flexible diopter and IPD adjustments to accommodate all users - including those who require prescription lenses.

We think the Panasonic/Kopin headset is now the Gold Standard for VR and will set the benchmark for all new high end devices and commence lower prices for Micro OLED as Tier Ones introduce new devices and take advantage of scale.

Additionally, Pancake lenses are emerging as a key component for all Metaverse devices. Watch for next generation VR devices using microdisplays to increasingly employ patented All-Plastic Pancake lenses - many to be supplied by Kopin. Why is Kopin’s announcement about their new P80 Pancake lens so important? Note the following sentence from the press release:

“The P80 Pancake optics provides a very sharp, 77° field-of-view (FOV) image with very long (23 mm) eye relief and large (12-mm-diameter) eye box. Kopin previously announced the world's first all-plastic Pancake optics with 95° FOV but with a smaller eye relief and eye box.”

In our view, the new Kopin P80 Pancake lenses shown at CES enable a high fidelity image with a “very long eye relief” so that devices can be worn over prescription glasses with ease (see Catalyst #1 below). Kopin’s Pancake optics could enable broad Consumer adoption of a new class of Metaverse Glasses.

Five Near Term Catalysts For Kopin
We expect the following catalysts to trigger strong investor interest in Kopin:

  1. We expect a Metaverse Glasses device that uses Kopin’s new P80 Pancake optics announced at CES AND potentially have new higher resolution Micro OLED panels designed in. This breakthrough Metaverse device could even come from Solos, the wearables spin-off of Kopin that has shipped a unique Audio AR smartglass platform. We believe this lightweight device (below ~200 grams) would be the first to use a new high resolution (4K X 4K?) OLED panel from Kopin and be the first production VR device with resolution this high at scale from any manufacturer.
  2. We believe Kopin’s 2021 partnership with a Japanese display company for LED backplanes to be delivered within 24 months has likely enlightened said company to push forward with Kopin’s Micro OLED Si backplane architectural expertise. As a result, we expect them to form a JV to mass produce Micro OLED in late 2022 or 2023. Who is this Japanese display partner? Candidates include Sharp and Japan Display Inc. (JDI). JDI has been a primary display supplier to Apple for many years and has since been refinanced by Sony, Panasonic, Hitachi, and government entities. We believe JDI has recognized the superior architecture of Kopin’s Si backplane for Micro OLED and Metaverse Glasses. We want to highlight that, while Sony’s Micro OLEDs are fantastic for digital cameras, we do not believe they perform as well as Kopin’s Micro OLED architecture in AR, VR, and Metaverse Glass applications. Since Micro OLED is now confirmed as the AR/VR industry’s display of choice, JDI in particular cannot afford to remain on the sidelines. A JV or strategic partnership with Kopin accelerates JDI’s entry into this critical market and signals a resurgence of Japanese microdisplay manufacturing capability.
  3. We expect an announcement confirming a licensing arrangement between China-based Moziware and Kopin. We think the Moziware device, if priced below the key $1,000 price point OR bundled as a subscription package, will appeal to the massive front-line workforce in China first and then expand to global markets.
  4. We expect Apple to reveal a VR headset between now and WWDC June 7, 2022, that signals a complete shift in headset architectures to Micro OLED. We believe Apple will initially choose Sony for Micro OLED panels due to that company’s existing production capacity supplying the dying DSLR viewfinder market. However, we believe Apple will choose a secondary supplier long term and JDI (see above) or Sharp could be leading supply candidates if they choose to enter the market as we expect.
  5. We expect Facebook to release Oculus Quest 3 and it will mimic Panasonic & Kopin’s dual Micro OLED and All-Plastic Pancake form factor.

Based on current Enterprise AR, Military program expansion, and 3D Metrology growth (EV car production!), and last but not least Consumer, we see Kopin’s top-line 2022 FY revenue in the range of $60M to $62M - well above current consensus of $52M.

Kopin has spent over a decade preparing for the Metaverse. In fact, it's the only display company offering all four key microdisplay architectures (AMLCD, LCOS, uOLED, uLED) under one roof along with a portfolio of patented AR and VR optics. We see more Si backplane deals for Kopin in the future ...

Following CES, a seasoned Kopin Long summarized the company well:

“As John Fan and his team did with the HBT transistor (now in every smartphone on the planet), and is doing now with AR, VR, and the Metaverse, Kopin is again where the market wants to be years before the market knew it was the place to be. This MIT startup has now proven to be both early and right more than once in my opinion!”

To further validate these points, in 2017, Goertek, (the "Foxconn of wearables" and a $200B company) who is a Qualcomm XR partner, maker of Oculus Quest 2, Playstation VR2, and many other headsets, took a 10.1% equity stake in Kopin (7.6M shares at $3.25/share), confirming the strength of the company’s IP portfolio:

“This agreement further aligns the interests of both Goertek and Kopin,” said Long Jiang, Goertek’s CEO. “We will utilize Kopin’s industry leading technologies to create a range of wearable products with the most advanced features for our customers. We are excited to see the initial products utilizing Kopin key components hit the market later this year.”

Furthermore, Goertek has not sold any of their original Kopin investment despite the share price running from $3.25 to $13.62 in 2021. One can assume that Goertek believes the value of the company is much more than $13.62 per share. We concur.

In 2022, we believe Metaverse investors will open their eyes to Kopin’s deep IP for all XR wearables if the aforementioned catalysts come to realization.

Image Source: Panasonic/Kopin Press Release

Originally posted January 11, 2022

Image Source: Kopin CES 2022 suite.