Thinfilm to sell NFC business due to ‘slow market adoption’

The announcement comes as the company closes an equipment term loan facility with Utica for financing of up to $13.2m, which it is expected to fund in two parts this month. 

R2R printed line

The cash is intended to restructure its operations to move away from making and selling NFC tags and towards use of its roll-to-roll (R2R) printed dopant polysilicon (PDPS) line in San Jose for other undisclosed applications.

“Thin film is confident in the use of NFC technology for consumer engagement, brand protection and supply chain tracking in the long term, [but] market adoption has been substantially slower than anticipated​,” the company said in a statement.

Preliminary discussions have started between its US subsidiary and potential partners who are interested in its NFC tag manufacturing and CNECT software platform

The announcement is a move from its strategy forecast earlier this year, when it said it wanted to focus on driving market adoption of NFC and reduce investment at its San Jose R2R facility.

Since then first-half revenues plunged 35%, prompting a second restructuring to save $15m and a 50% cut in its workforce.

Thinfilm, the US operating subsidiary and global headquarters of Thin Film Electronics Group, entered into a Master Lease Agreement with Utica, securing an initial $5.6m four-year term loan that funded on September 11, 2019. 

Interest-only monthly payments are due for the first six months, followed by three months of interim payments, and thereafter a four-year amortization period during which monthly principal and interest payments are due. Thinfilm intends to borrow the second tranche of $7.6m prior to September 30, 2019, under substantially the same terms and conditions. 

“This financing strengthens our balance sheet and allows us to pursue our aggressive growth strategy to maximize the value of Thinfilm’s roll-to-roll production technology and factory and to move toward operating cash flow break even​,” said Kevin Barber, CEO, Thin Film Electronics.

“We are pleased to partner with Utica as we reposition Thinfilm for growth​.”

Reaction

In response to the news, Cameron Worth, CEO and founder of SharpEnd – 'The Agency of Things', said Thinfilm has found out the hard way that brands want entire engagement solutions and not just platforms or point technologies.

“It was notable over the last few years the company was producing one-off promotional activities such as NFC on neck-hangers​​,” said Worth. 

“These projects weren’t great for the industry, or for SharpEnd, as it was limiting people’s perceptions. We’ve been fighting really hard against the idea that NFC is just an add-on tool to be used for tactical promotions, because the creative opportunity of the technology is far more wide ranging​. 

“Across the industry a lot of time is spent on R&D, looking at how to get NFC natively onto products as neck-hangers tend be tear-off and then affect engagement rates because they’re no longer on packaging​. 

“It doesn’t give brands a fair chance to assess the tech when we at SharpEnd are seeing engagement rates of 15% and above for our clients connected packaging projects utilising NFC.​” 

He added there are many reasons to be positive about the future of NFC. For example, Apple announced in June it is continuing its strategic investment in NFC, from enabling the technology within the handset, to the NFC connected packaging for its Apple Card.  

“Consumer awareness and adoption of NFC-led solutions are on the rise, whilst the costs behind the technology are reducing rapidly. The industry shouldn’t view Thinfilm’s withdrawal from the space as an indication that NFC is on its way out. Instead it should remind us all of the need to treat innovation as a creative opportunity rather than a technical/ industrial challenge right now​,” said Worth. 

Thinfilm is already working with partners in various industries such as food and beverage and pharmaceuticals. It has previously negotiated partnerships for NFC with Tapì Group​ and Bericap​ for the wine/spirits and over-the-counter (OTC) pharma sectors respectively, and has been targeting the cosmetics and personal care category.

Deployments of NFC this year alone include a project with Martell Cognac, drugmaker Boehringer Ingelheim and haircare company Slikhaar.