Q&A with Dick McCartney of Pixel Scientific
ID magazine interviews Dick McCartney, CEO of Pixel Scientific, a company with a new name and a rich heritage. Until recently, Pixel Scientific was Tannas Electronic Displays, founded in 1999 by display visionary and pioneer Larry Tannas. In late 2015, McCartney and fellow investors bought the company from Tannas, and are carrying on with its custom display-sizing technology and license portfolio management, while also branching out to new areas. Before acquiring Pixel Scientific, McCartney was director of technology creation for Samsung Display in the US. He is a fellow of SID and has held many offices within the Society for Information Display, including general chair and program chair.
Based on written commentary by Dick McCartney and interview conducted by Jenny Donelan
Information Display: What’s the history behind Tannas Electronic Displays and Pixel Scientific?
Dick McCartney: About 18 years ago, Larry Tannas [founder of Tannas Electronic Displays] realized that he could serve a need that had emerged for custom-sized LCDs. Quality LCDs were only being made offshore – there wasn’t an adequate domestic supply – and this was a big concern at the time for the US military. Larry came across a cracked LCD that still worked on one side of the crack. As he thought about why it would still partially work, the seeds of invention were planted. He began to envision that one way to obtain special-sized displays was to excise a smaller display from a bigger one, and this approach enabled his custom-sized remanufacturing.
Customers need custom-sized or special-sized displays for various reasons. At the heart of our business is the fact that LCDs are very expensive to make. They require billion-dollar factories, and the very high start-up costs for a new design must be amortized over a long run. So LCD companies generally only make high-volume displays, which largely go to the consumer electronics market: TVs, monitors, tablets, phones, and notebooks. It’s from that base, then, that we obtain those “blanks,” as do our licensees. That’s how we can furnish a relatively lower volume and substantially higher value for industries including aviation and aviation simulation, the digital signage market, the medical market, and others.
ID: There aren’t many other companies that do this, are there?
DM: We have the basic patents, but we have created a significant industry through licensing of that intellectual property. So no, not very many, but there are a handful of licensed companies throughout the world, including several in Asia and Europe as well as the US. All of our licenses are limited in some way, either into specific applications or geographies, or for embedding into a company's own system-level products. We are the only company that can produce in all markets and geographies.
ID: How did you become involved with the company?
DM: Nearly all my career has been in displays in general and LCDs in particular. I did some seminal work in LCDs in electronics, optics, and LCD subpixel construction in the early 1990s while developing LCDs for the Boeing 777 airplane. LCDs were not at all ready for aircraft applications at that time, and we had to invent several new technologies. Many of those have found their way into consumer-market products today. Larry was familiar with my background, and a few decades or so ago, he invited me to teach a section in the LCD course he had organized through UCLA. Over the course of time, as his custom-display business grew, Larry would contact me to see if I could help him with special projects or to figure out something that wasn’t working. So as a consultant, on nights and weekends, I would work to identify solutions. I became very familiar with the excising process and thought it had a lot of merit.
The opportunity came along to buy into the company when Larry wanted to retire, and so I raised my own money together with some from an investment group, and we purchased the majority share of what was then Tannas Electronic Displays, or TED. I became CEO and renamed the company Pixel Scientific. I also moved the company and a key production technician from Orange County in the LA area to a leased office and factory in Scotts Valley, so we are now part of Silicon Valley. We are a modestly small company, with four direct employees at the moment. But we have off-shore contract manufacturing as well as contract optical, electrical, and mechanical design engineering and a cadre of consultants, so we command a lot more individual effort than we have directly employed. The contract manufacturing and engineering has really enabled us to take on more and new business quickly. It also gives us the opportunity to gradually grow the company in a controlled and profitable way as we choose what to bring in-house.
I think there’s a lot of opportunity going forward that I’m very excited about. As I look around the world of displays, it isn’t shrinking but growing. There are a lot of opportunities that do not have solutions yet, and I think that we’re gearing up with new technology to bring solutions.
ID: Is the corporate culture different from what you were used to?
DM: I was previously with Samsung, and with National Semiconductor/Texas Instruments before that. They were very large corporations where primarily my focus was in near- and long-term research. I also worked for Honeywell in aerospace doing technology development, as well as having been part of three startups, one of which was how I came to National Semiconductor. So I have worked in both the start-up environment and for some pretty large technology companies. I feel I know the benefits and limitations of a small technology company. Large corporations have the staying power to spend what is needed to succeed and survive a few missteps. Small companies like ours need to invest frugally and be careful to stay focused on the right technologies. Although we are doing some of that longer-term research right now at Pixel Scientific, it is certainly a different environment than my large-company experience in that we are closer to the customers and their immediate demands, and I personally am much closer to operations than I have been in the past. Our plan, though, is to grow and position the company to fully fund new advancements in display technology.
That is the history, or culture, if you will, that we inherited, and it is the strategy for our future success. Technology companies large or small cannot rest. That is why I chose to buy the company and to leverage the core competency we have into new competencies and new classes of display products. We are standing on the shoulders of an established company, but are looking forward with an entrepreneurial mindset.
ID: In terms of the immediate future, where is LCD resizing most important now? What’s the major market? And going forward, what’s the focus for the diversification you mentioned?
DM: The dominant areas right now are in digital signage, and that includes transportation signage and the gaming industry. It surprised me to learn how many licensed displays are part of gaming machines – all the machines you see in Las Vegas, for example. Looking forward, you also see a lot of displays in automobiles these days, and it’s becoming very commonplace to see those displays in forms other than rectangles. We have made prototypes for automotive concept cars, and that has given us some insight into that future. So we are looking at technologies that enable those kinds of opportunities.
The aircraft industry is particularly important to us. The physical constraints of instrument panels make custom-sized displays essential. We supply heavily into the aircraft simulation space, and we have some displays flying on aircraft today. But a growth area for us is in winning more flight displays. I believe strongly that a properly engineered and manufactured, excised LCD using our proprietary sealing process is as robust as any custom designed LCD. Since the takeover, we have gained a growing reputation for quality and depth of engineering and we are getting the attention of avionics manufacturers. In fact, we have won our first large-scale production program in avionics, although it is with a standard-sized LCD and not custom sized. But we have several opportunities in process, and I am certain we will soon win a volume-order flight display opportunity with a custom-sized display. We are taking the right steps. We have added NVIS capability, heater glass, and anti-reflective cover glass to our offerings in both flight and flight-simulation hardware. Overall, the display industry is moving to new sizes and new formats, and fitting into new spaces, and I think that’s where our technology comes in.
In addition, as I said, we are not just a custom-sized-LCD supplier. We are now a total-solution-display supplier, offering whole modules. And this has allowed us to add value like high brightness, better viewing angles, larger color envelopes, better color matching, and other technologies. We have customers for whom we offer both a standard display and a custom-sized display for the same flight deck, for example. Our business is becoming much broader, and this is a difference. TED focused exclusively on custom sizes and was largely a service business. The customer furnished the original display, and TED provided the service of excising a smaller display from it in open cell form. Certainly, the custom sizes and service are a core part of our business, but we are now a display-technology supplier with both custom-sized and standard-sized display products, which is why we picked the name Pixel Scientific. We’re taking the technology that we have, augmenting it, and pushing ourselves into places where others couldn’t go before.
ID: What is the size of the marketplace for resized LCDs, and what are/have been the volumes?
DM: It is a bit difficult for us to accurately estimate the size of the worldwide market for our excised displays because we have limited access to the businesses of several of our key licensees. I can put a little perspective on it in terms of market size by dollars. Keep in mind, though, that average selling prices can vary substantially given other factors such as backlight brightness and the ruggedizing needed for things like the outdoor environment. But I estimate the aerospace simulator market is about $6 million and flight displays are about $160 million. Digital signage worldwide, including specialty displays like those in gaming machines, is about $120 million and growing rapidly. This growth has prompted some OEMs to introduce what they call stretched displays, which are designed specifically for digital signage. The OEMs’ entry, first of all, only helps expand the market, which is good, of course. But we and our licensees are quite happy to buy a native display and add the value of brightness and ruggedization to it. There are virtually no customers in the digital signage market for open cells. All of our licensees are providing custom modules. Excising allows them and us to offer a broader range of sizes than otherwise would be possible.
ID: How many steps are involved in the LCD resizing process, and what are the yields like?
DM: Well, I can't really talk about yields other than to say that they are quite high. The process is heavily automated at virtually all of our licensees, certainly all that are doing large volumes. It has to be automated to service the signage market. That automation assures consistency. Yield losses are much more related to handling errors and equipment failures than variations in the excise process itself.
As for the steps, I don't think I want to dive too heavily into the details here, but I do want to separate out a few elements in both the glass and the electronics. The largest part of what determines at what column or at what row a display can be cut is the location of the row and column drivers; you must go between them, of course. But just that alone is not the whole story. A significant part of the effort can involve re-engineering the attached circuit boards. If you are shortening a display, generally you want to shorten the attached circuit board too. That can involve a good bit of reverse engineering to determine if and where to cut the board and how to restore functions that would be lost in removing a part of the printed circuit board. As the industry has gotten more sophisticated – moving to multilayered boards, for example – techniques like X-raying to map out traces are needed. Then techniques like designing a custom flex board to reattach, say, the cut-away piece of the circuit, but in a different place, are needed. So it isn't just about cutting glass. It takes a good bit of competency in LCD electronics in order to produce a design.
In terms of the glass-cutting itself, there are some critically important steps. The seal in particular is very important. The LCD seal does a few jobs and the replacement seal needs to do the same, as well as or better than the original seal. One of the jobs is to keep oxygen, water, and other molecules out of the liquid crystal. Another is to keep the liquid crystal in, of course. But the seal also provides proper spacing between the glass plates at the edge, as well as providing high compression and tension strength (including adhesion strength) to maintain integrity through pressure, temperature, and bending variations. What's more, no air bubbles can be trapped inside the liquid crystal in the sealing process. So the seal is a significant piece. Our seal has survived the rigorous testing needed for flight displays. That’s not easy.
ID: Have your techniques had to change with different backlighting or LCD technologies? Do they affect your processes?
DM: They do. We have had to adapt to changes in backlighting and also in the LCDs themselves. Things that are changing include the display glass thickness and the cell gaps becoming thinner. Techniques that worked before need refinement. The biggest change in backlighting has been the move to LEDs. Beyond those changes, at the mechanical level, subpixel electrodes are getting closer together because of higher resolutions. This also puts pressure on our technology because the feature sizes require new precision and we have had to adapt. As we offer whole modules, we need a custom-sized backlight too, and so we have been developing our own backlights.
As I said, LEDs are the big disruption in backlighting, and this works to our advantage, fortunately. LEDs make backlight design much easier. We outsource a lot of that work at the moment but are beginning to develop our own in-house capability. We have a partnership in which we design our own waveguides, and through that relationship, we have access to custom LEDs that emit in RGB bands rather than conventional white LEDs, which are broad-spectrum sources. That means we can offer a much bigger color envelope straightforwardly without immediately turning to more sophisticated technology like quantum dots or direct RGB backlights, for example. These changes all give us the opportunity to innovate. We’ve had to adapt as we go along, and it’s an important part of our ongoing portfolio of patents. We continue to add to it as we solve this or that problem.
ID: Speaking of your patent portfolio, it’s our understanding that this aspect of the business has been quite successful.
DM: Larry was very wise to pursue the intellectual property to the extent that he did. He spent millions of dollars developing our patent portfolio, and it’s pretty watertight. It’s been defended and successfully vetted in the courts, and he was able to turn a substantial portion of the business into a licensing business, so a good portion of the revenue that we take in annually comes from royalties. And we continue to push that model forward as well, as we bring on new licensees. We are adding a few licensees in China. We are also in negotiations with places in Europe and other parts of Asia. Throughout this year I would project that we’ll be closing several license deals.
The key thing I would say is that not every patent is a peer to every other. Some of them, of course, are just techniques, and those aren’t the ones that you want to pursue with every dollar that you have because someone could maybe get around it, but there are fundamental patents that you should pursue and lock up. In other words, just having a patent isn't enough. You need to be able to claim the fundamentals somehow. Look, once you have an instance proof of just about anything useful, someone will find a way to duplicate it if it has any value at all. The advantage you have ordinarily is being first to the scene, so to speak, rather than more capable than anyone else. So the strategy is to have a water-tight, fundamental patent, and a portfolio of patents, really, that force anyone who wants to duplicate what you have done to have to go through one of the doors you have patented.
Having said that, though, relying on patents to protect a business takes strategic planning. It is said that patents are a sport of kings. A small company can easily go broke trying to stop an infringer with deep pockets or frankly even not-so-deep pockets. Litigation is very expensive for both parties. Often it is far better to create partners than fight adversaries. Licensing can be an important tool in that way. And lastly I'd say that patents must be asserted. Otherwise, they won't be taken seriously. There has to be a sense that ignoring your IP will have consequences.
Larry did a brilliant job of creating an industry on the backbone of the patent portfolio. It’s protected not only through the litigation but also by those who license it. They find people who may be infringing and we bring them into the fold one way or another. We’re in the middle of an ongoing infringement case right now, and we continue to contact companies who might be infringing.
ID: So it’s a combination of having something that is patentable on a fundamental level and then doing the work to protect it. Not all small businesses are quite this forward thinking.
DM: That’s right, and there’s another component to the licensing. When Larry came up with his technical solutions, he could have taken on the whole world and said, “All roads lead through me.” And I think that is a common error that small companies make. They want to service the entire world. It’s really hard to do. On the other hand, if you can take on a portion of that and license to others who want to take on other portions, you can grow from there and over time you can compete with those licensees and integrate further. Or you can form strategic partnerships with them. A rising tide lifts all boats, and that’s an important business strategy when you have this kind of core technology. •
Jenny Donelan is the editor in chief of Information Display Magazine. She can be reached at jdonelan@pcm411.com.