The most recent incident, Uni-November 22, 2013-Pixel (NASDAQ:UNXL) The SEC investigation is by far the most important negative event in the 2013 disputed incident. The news sparked market volatility and investor anxiety, as well as questions about the credibility of the company and its statement. Judging from the information disclosed in the SEC document, the scope of the investigation is \"agreement on the company related to its InTouch sensor \". In a broad sense, there are three agreements of great significance. Two capacity/price agreements with pc oem and Intel (NASDAQ:INTC) Signed a manufacturing agreement with Kodak (NYSE:KODK). Subsequent versions of Uni- On November 25, 2013, Pixel noted that the company \"signed a preferred price and capacity licensing agreement with its pc oem and ecosystem partners. The company does not disclose to the public the detailed terms of these agreements as they contain specific terms of secrecy and non- Disclosure obligations. \"The existence of such an agreement has never been doubted, and the company\'s clarification release provides further assurance for price and capacity-related milestones that exist in the agreement. There is no closing date for the SEC\'s investigation and, if not longer, it may last for several weeks. The survey is covered with a cloud that takes time to clean up. One bright spot in this investigation is that once the company has passed the SEC review, there is no disruptive disclosure, and as many questionable arguments about fraud are thrown to the forefront, it offers a natural boost to the company. In addition, due to ongoing investigations, companies are now more inclined to announce achievements when they happen, and less willing to disclose expectations that are often misunderstood or distorted. Perhaps the survey could lead to stronger and more cautious investor relations efforts within the company. At the end of the SEC investigation, it is more helpful to focus on operations and re-focus on operations and production. In the end, this is where the tires meet the road. Uni-November 07, 2013- Pixel announces the first purchase order (PO) With the world\'s top 100 PC/OEM customers, it is widely regarded as Dell (NYSE:DELL) Although the company has not yet disclosed, the journey from technology development company to production company has reached a climax. The point of the first PO is that there are finally two Uni-customer verification Pixel manufacturing processes and the ability to commercialize products. What is expected to be the university Its additive manufacturing process makes Pixel stand out and attracts us. Uni- Pixel is a rare metal mesh touch sensor company that can actually make additional print patterns in a width of about 6 microns, compared to existing ITO products, this leads to a lower cost curve than other competitor metal mesh products. The level of performance is considered to be comparable to that of metal mesh products and is better in some respects than that of ITO products. Printing in a small additivevolume, lab- Like the environment, different from high schoolFactory- Like the environment. In 2013, there will always be a problem. Will Uni- While pixel technology is promising, it can provide a stable manufacturing process that can scale up and deliver commercial production to the market? Work closely and review with preferred price/capacity licensee pc oem/Dell ( Since then, most of them are called Dell) Kodak, Uni-manufacturing partner- Pixel\'s additive manufacturing process and supply chain has been fully reviewed, reviewed and validated and the company has now received POs from its customers. The production risk of unverified technologies that exist throughout the year has been greatly reduced. Initial order for pc oem (Dell) And from non- The number of preferred pricing customers is small, and growth is expected in 2014. Symbolically, 2013 of initial orders for the fourth quarter are not expected to generate much business revenue. Through the updates announced so far, it is clear that the company has made meaningful progress in the process of moving towards the 1 million capacity mark and has achieved key capacity milestones. Most of the problems raised related to production are notISSUESUni- Pixels have always been a volatile stock. A deep-rooted view Based on additional technology and profitability associated with successful execution, there is a strong appeal to the potential of the business. At the same time, concerns about the emerging technology company are reasonable because of its lack of prior success, execution risk, and competitive and price The sensitivity of the market is the most important. But over time, universities Pixel has also encountered misleading public arguments that have been rejected, but has succeeded in generating doubts and uncertainties about technology and production. Many doubts have proved to be nothing more than a whim. Some of the arguments that have been made are: Traces of broken; Visual MeSH not suitable for touch applications; The manufacturing of InTouch; Can not print, can not plate; Non-feasible production process that cannot be executed, and there are no purchase orders. Over time, these sensational concerns have been refuted by the company\'s business plan. Laminated production is right Recently, new concerns have been raised about the lamination and production of Uni- Pixel introduced the technology in a November 07, 2013 article. On the same day the PO announced, this concern seemed very contradictory. It will be normal for Fortune 100 company Dell to release PO after engineering review and test feedback from its experienced supply chain. Suggesting that there is a major lamination problem will be a high level of dismissive of the engineering expertise that Dell and its supply chain have discovered before releasing the PO. In the field of computing hardware technology, Dell or Asian manufacturers will not be able to verify much. One of the advantages of PET film is that it has excellent lamination properties compared with glass Based on lamination. Uni- The Pixel is also using PET film, while the ITO sensor mainly uses PET, but also uses glass based on the form factor. Why is the lamination and integration process of the wire mesh on the film a completely different scientific world compared to the lamination of ITO on the film? The process is defined and well understood. It only needs customization and adjustment, not new science. This part of the process may take time, but it should never be a show -- Self parking. Interestingly, the touch sensor product data sheet on Uni- Pixel\'s website cites the improved module yield as one of the key advantages of its metal mesh. On the third- Later in the day, Uni- Pixel believes that the numbers generated by the module integration are floating as \"unreal\" and further clarifies that \"lamination and bonding with our technology is as good or better as ITO films. \"Now, this is what people usually expect. Touch power supply is a non- But TOUCH is still a cost problem. The same article last month highlighted the story of a PC World, citing Intel executives who mentioned that Touch is no longer a supply issue. The author then made the case for \"intel\" in early 2013. . . It may sound like a good idea to buy new capacity, or even new, but unverified technologies like metal mesh. But now in the author\'s explanation, Intel thinks this is a mistake. We agree that this contact as a supply issue has disappeared. Intel made this point. But in general, touch still exists as a cost issue. Intel is also aware of this. In fact, in the same reference article, journalists were able to properly explain the situation and wrote, \"if the touch screens become cheaper and more common, they could become ubiquitous. \"Intel has seen Uni- Pixels as part of a solution to successfully reduce the cost of the touch sensor, so agree to establish Uni- The capacity of the pixel through the preferred price/capacity license. Intel\'s strategy is typical of its goals. Hope the market for laptops and mobile computing is booming. With the vigorous development of the ecosystem, the sales of semiconductors are also booming. To this extent, Intel has invested in companies that promote its strategy, and it does believe that Uni- Pixel\'s technology is very good. The top $5 million paid for the preferred price capacity license may be considered as a venture capital behind an unverified but promising technology. However, once the capacity reaches 5 million square feet and meets certain quality standards, the next $1 million will only cover the cost of mature technology. This will confirm that Intel continues to work on low- Cost touch solution and provide further verification of Uni- High production capacity of pixels-volumes. The November 7 article also raised concerns about price pressures in the touchscreen market. This is an effective observation and an issue worth discussing. The touch screen market is very sensitive to price, and the market is currently in a state of oversupply. About this pricing pressure on the market, Uni- Pixel pointed out in the third quarter earnings report that for larger morphological factors (~+13\") Continue to be the core market Uni- Pixel is still confident in the price of $20/square foot, while the smaller form factor drops the price from 20% to 30%. \"Price erosion is a\" given \"in the industry \". This is not a phenomenon that affects only the touch sensor, but the entire component supply chain, including the touch controller and the display manufacturer. Recently, with the condition of the touch screen from insufficient to insufficient, the decline is very significant. to- Excessive supply of certain form factors. There are industry rumors that in the past few months, the price of touch screen modules with some shape factors has dropped by 30%. Within the scope of the University If pixels participate in the small-form market, they must adapt to the existing dynamics. Part of the reason for this oversupply is that, for various reasons, including the lack of a touch software ecosystem for laptop/desktop computing, touch has so far not penetrated as quickly as expected, due to the strong demand expected, manufacturers with additional capacity are in trouble. Still, touch is a growing phenomenon, and touch will become ubiquitous over time and with better touch computing software. The current price decline in the touch screen market is mainly due to oversupply, not just to technological innovations that permanently compress costs. Due to the significant cost structure of existing technology and manufacturing capacity, in the case of rapid cost reduction, rapid price erosion cannot be long-term This is a risk for the it industry. These over-supply As businesses exit or reduce plant production to correct the imbalance in the coming months, the formal factors of supply have begun the process of natural correction. Is falling prices worrying? The concern is that this is unexpected. Any long-term and rapid price erosion is heavy- Differences in capital expenditure between infrastructure and Uni- According to the company\'s estimate, Pixel\'s low capital expenditure is about 10 times. The industry has learned to manage normal price erosion, which requires constant technological innovation to improve cost efficiency or the exclusion of suppliers from the market. High price- Sensitive markets with pricing pressures, where do you want to go? The answer is direct. forward. Work with low cost suppliers! Become a low-cost, high-yield supplier The pixels are low, this is unambiguous Cost manufacturers of touch screens. The low-cost state is possible through the following combination: first, its additional printing pattern-based technology, and second, providing a strong yield. In price-sensitive markets, the efficiency of the production process is crucial. Since production is a key part of the solution, it would be helpful to review the production situation qualitatively. The cost is quite high, and PET film is the most expensive raw material- Benefits of using copper metal mesh and additive technology. In the manufacturing process, production has a significant impact on the cost of full load sensors, which will also reflect the capital expenditure for capacity construction. Yields are also important because it is easier to invest and manage 2 lines than 4 for the same output. Relative to the capacity already achieved, the company seems to be satisfied enough with the production as it has been maintaining a lower production Cost manufacturer status. Benchmark yields must be encouraging for the company to reiterate its lowcost position. Continuous process improvement can increase the rate of return, thereby increasing the profit margin and providing further pricing capabilities. But the bottom line must be high enough to be convicted. Recent comments by Uni Reed Keeling, CEO of pixel, said on the yield issue at the third quarter earnings call, \"I\'ll be happy when we\'re close to 100%. \"This is not a rash comment. Mr. Killion sounds serious, and the company is reaching a fairly high level through continuous process improvements. If your baseline yield stays at 30% or 40%, you will not make a comment like this At this point, even 60% will leave you ecstatic. The two key steps of the company in the manufacturing process are printing and electroplating. Uni- Pixels have been mentioned in the past, for millions of square feet, it currently needs 10 printers in 1 single-threaded mode, or 5 printers in dual-threaded mode. So plating is a slow process to some extent. Speed pass factor. Pollution can lead to a decline in production. This is the most basic rule in the electronics and semiconductor industry. One of the key reasons for the high yield of Uni -- The manufacturing process of pixels is able to reduce the possibility of contamination due to fewer steps and greater automation. Remember, Atmel (NASDAQ:ATML) Absolutely top This was a problem at the Colorado Springs factory. Not because Atmel has no experience. Most likely because of the low degree of automation, more They are licensed for the step-by-step production process where the metal mesh technology exists. Engineering expertise in Atmel and six Over time, sigma vouchers allow them to overcome these problems through process improvements. Similar contamination possibilities are minimized in Uni-The process of pixels No wonder Mr. \'s \"start clean, keep clean\" spellKillion. For the past four months, the company has not encouraged a specific discussion on yield. Its recent caution may be due to its progress in production, customer negotiations, competitive interests, ongoing litigation, and perhaps even to the slanderous wildfire. In the industry, it is quite typical not to disclose the manufacturing details of professional and key processes. The additive process combined with a high yield leads to an inevitable conclusion. When the ramp is actually made higher, Uni- Pixel\'s low-cost base will allow it to have enough margin even after pricing pressure and split with Kodak. The author\'s comments can find another point of view on output, while the author Hoffman can find a point of view on gross margin. Does the metal net supplier panic due to price pressure? Atmel\'s XSense products are Uni-\'s close metal mesh competitorPixel InTouch. Due to the start-up delay of the XSense mass production line in Colorado Springs, we believe that Atmel is now about 2 to 3 months ahead of the execution plan, compared to the universityPixel. How enlightening it is to observe a well Respected peer views on market dynamics as it provides another data point to reconfirm Uni-Pixel. Atmel\'s CEO made the following comments on the earnings call on October 30, 2013. Our edit to the clarification is in brackets, and the emphasis is on bold. The confident rhetoric that emphasizes the metal net market and XSense does not mean a company that is in chaos and unable to adapt to pricing pressures. By the way, it was revealed last week that XSense was included in HP Omni 10-inch tablet. The metal mesh touch sensor has a cost advantage and can compete even in smaller form factors. Uni- Pixel also has a similar advantage, which is further enhanced by the process of adding a pattern. Recently, on November 19, 2013, Atmel\'s partner Carclo Plc on XSense products was first released-Half of finance In the chairman\'s comments, it was pointed out that the recent update does not sound like a black hole where a business is staring at loss and declining metal net opportunities. Pricing pressure is not the death knell of the metal mesh. CHALLENGESUni- Pixel has made measurable progress over the past six months. As it aims to be a high volume supplier, there are still implementation challenges and concerns in the future. As we have pointed out in the past, there will still be a lot of sliding between the cup and the lips. Some of our key issues are highlighted below. Production. We believe that the challenges of manufacturing will begin to fade after three key milestones are achieved. Installing and verifying enough capacity during the PO phase is the first such milestone, which reduces production risk. In our view, the next important obstacle is the university. Pixel brings Kodak\'s capacity in Rochester, New York, online, using 1 to 2 printers and 4 tablets that are being installed and calibrated. This should be a matter of time as the company was able to successfully launch Lufkin Operations with 1 printer and 3 tablets in advance. But it still needs to get there. Once Rochester capacity goes live, it is possible to have about 600,000 to 800,000 square feet per month depending on plater throughput, and then add about 600,000 capacity of Lufkin, the combined installed capacity will enable the company to cross the 1 million square feet/month milestone. Assuming that quality standards and reviews are met at the same time, this may trigger a $5 million remaining engineering payment and a $10 million revenue confirmation request to Intel. According to the review and agreement involved, the time for such a request can be Q4/2013 to Q1/2014. Since then, we believe that the installation and verification of 1 million square feet/month capacity on a production line at the Rochester plant will be the last key milestone. For us, a production line includes 1 printer and 5 ( Throughput based on plater). Once successful, we estimate that at some point in Q1, 2014 itself, high The increase in quantity will gain its own motivation. Demand. Uni- Pixel has not yet gone through the entire production, integration and sales cycle, and end users can buy its products on the shelves. Since the metal mesh is a new technology, OEM can launch products through a limited number, which is a natural Road. Once the sales model and consumer acceptance data points have been established and statistics are made within acceptable limits, this will encourage bulk orders. Perhaps, the acceleration path can also be adopted based on OEM/ODM comfort. The whole process has not happened yet. Most of the process will be completed in the first quarter. One can naturally expect multiple initial orders, which will have the potential to enter higher bulk orders based on market feedback. It should be noted that it will not immediately translate into revenue as capacity goes online. It\'s a step-by- The process of gradual improvement. As demand visibility increases, revenue will be driven by the speed at which the number of businesses grows. Competition and technology evolution. The market competition of touch sensors is fierce, and emerging technologies are emerging. A lot of new technology is still in the early days, not yet. ready yet. Presently, Uni- Pixel\'s graphic printing technology appears to be leading the way. Understanding Uni-will help Pixel\'s technology roadmap, and how it intends to further improve the technical specifications in this dynamic market, and maintain its competitive advantage through additional technologies. Perception. There are advances and milestones for some emerging technology companies than Uni- Usually higher value pixels. Uni- Pixels are still under the control of negative perception, which is more complicated than the frequent misconceptions and distortions of statements made by management. Some can be avoided. The recent disclosure of the SEC investigation further raised anxiety and contributed to negative perceptions. Someone would expect Uni- The progress of Pixel, in particular, leading to the progress of the PO, will be well reflected in the valuation. As announced by PO, short arguments were made immediately that afternoon. Although most of the arguments, except for the price erosion point, are off-going -- The uncertainty of base, yield and price pressure has led to confusion. At the earnings call, the company continued its policy on the non-specific rate of return figures, but still provided sufficient qualitative clues to indicate a trend in the rate of return as expected (low- Cost manufacturer reviews). Shares hit a high of $19. 36 on the day of the PO announcement, profits fell to $13 after a brief debate and earnings call. The next day, more than $6 fluctuated. As discussed earlier, from market data, we know that price pressures can be managed by metals. mesh providers. While in terms of production, the company has achieved all the key capacity milestones so far, although it has not received enough trust in this complex achievement. For some reason, the clarity of the problem and achievement is mainly suspicion and fear. To this extent, we believe that there is a credibility gap, which hinders valuation. This gap can be bridged, and many different cautious measures can weaken negative perceptions. Pixel can promise to rebuild investor confidence. But most importantly, the company needs to start shipping products and reach a total capacity level of 1 million square feet per month. In this regard, it is right for the company to attach great importance to ability and sales. Evidence of a rise in product sales is the first step in starting to reverse the unfavorable trend. Strategically, the multiple levers of the story business continue to show measurable progress, and POs has begun to enter. There are still multiple strategic levers for universitiesPixel story. Pricing strategy. People must believe that universities At about $20 per square foot, Pixel will not expect to compete forever. To what extent the company will compete entirely on price is a decision that is affected by the following capabilitieshand. At present, with the increase of production capacity, Uni- Pixel will be priced near ITO pricing and allow the benefits of metal Grid competing with ITO. It\'s no different from the way Atmel launched XSense. With a large number of production capacity ( More than 1 month), Uni- As sales increase, Pixel will have the flexibility to quickly reduce prices. Later in 2014, the university Pixel will have to decide that it wants to drive factory sales by pushing down prices sharply. Will it develop a strategy for market share and significant volume growth through a faster transition to the metal market Weaken or delay competition by dropping prices by 30% to 50%? Or will Uni- Pixels take a more measured approach and keep their own benchmark at a few % below the ITO price? Please note that at any given time, Uni- Pixel needs a hybrid pricing point low enough to sell its plant capacity. The company doesn\'t have all the answers yet. It must calibrate its equilibrium price based on existing market dynamics and the strategy it decides to take. However, cards can only be controlled if the production process is lowcost. Capacity construction. Uni- Pixel expects its production capacity to reach 10 million units by the end of 2014. According to the company\'s evaluation, this will be 10% of the market for touch sensors of various shapes. The company has not discussed in detail how to fill this capacity. We doubt that the company has a good view of the prospects and interests and realize that it can sell its products Cost production model. Signs of interest from Dell and Intel may suggest potential demand later in 2014. These orders still have to win the competition compared to these interest levels. Nevertheless, one must observe why a company is producing about 3 million units per month (3 printers) In ~ Q2, 2014, if you doubt whether Asian manufacturing has the ability to sell 1 million units/month for the first time after reaching the appropriate qualifications, please consider the presence of Asian manufacturing. In markets where prices are highly sensitive, demand exists due to price/performance value. In a recent press release, even Kodak mentioned the need. \"Given the initial interest in this product, we believe that this solution has the potential to shake this huge and growing market,\" Perez said. Production in Asia. Production plants in Asia can be a strategic advantage, especially when merging or collaborating with module integrators. This will create greater vertical integration from printingto-Product (end-user) Can be a structural template for metal grids. It can enhance timeto- Market, improve design change management and maintain/increase profits by reducing transportation and handling related costs. At present, many touch screen manufacturers also do ITO mapping on the film and then integrate the equipment. Since the metal mesh is provided The patterned film of the manufacturer of the touch panel loses the profits of the patterned. The production presence in Asia can conceivably allow module integrators to participate in a larger part of the metal mesh chain economy, not just through device integration. This will also allow Uni- Pixels compete more effectively with other integrators who are developing their own metals Grid products like O- The film and its silver nanoparticles mesh. Due to the low capital expenditure footprint per million square feet, the potential single Pixel can also have specialized factories for a large number of committed customers. Production in Asia is a natural Road. Kodak. Eastman Kodak seems to be working on this relationship because it has built and expanded the plant in Rochester and has committed to hiring employees. Kodak has expertise in running film at high speed and running film at the expected quality level. This is also a company that will get sick. Participate in engineering failure immediately after bankruptcy, especially if it agrees to write its own name on the product \"powered by Kodak. \"It provides horsepower for manufacturing efforts and allows Uni- Pixels project a wider net in less time. The structure of this relationship will be guided by strategic and financial considerations. In addition, with opportunities in Asia and different business areas, it remains to be seen how the relationship develops. It is expected that the gross profit margin of the business operated through the factory operated by Kodak will reach 50%. In our estimation, division must be beneficial to the university. Considering the unique value of additive technology, Uni- As Pixel accounts for a higher proportion of product and market risk, Pixel has grown. Uni-need to clarify further the financial and operational impact of Kodak Pixel, this will be very helpful, especially since Kodak is becoming Uni- Business strategy of pixels. CONCLUSIONUni-Pixel\'s low- The production process of cost metal mesh has great influence in the market with high price sensitivity and fierce competition. Measurable progress in production generated an initial PO from pc oem and two other POs from Asian manufacturers -- Important success The production risk is greatly reduced. After a delay of about 4 months from our initial expectation, Uni- Pixels are now moving to the position of the volume-driven 2014. The manufacturing success achieved so far will be reflected in the valuation, as confidence and visibility in the company\'s ability to build an order book has increased, and recent confusion about production and pricing has disappeared. Looking ahead, we believe that some of the key catalysts will be: additional capacity validation; Order delivery; Additional order announcements from existing and new relationships; And the engineering fees paid by Dell and Intel during the fourth quarter, 2013 and first quarter, 2014. Any of these payments will indicate that the company has successfully reached a higher total capacity milestone ( More than 1 million units/month) To the satisfaction of its level- 1 partner/customer. At the same time, the expected success must be balanced with the resolution of the SEC investigation, and the fate of the SEC investigation is not yet clear. Uni- Pixel is a small-cap stock with inherent risks and drastic fluctuations in its emerging technology position. The stock has been trading for $12 to $20 since June 2013. 2014 of earnings expectations are also very wide, revealing the company\'s controversial views. These views are ingrained in short positions as of November 15, 2013. 3 million shares- This is the largest stock in history, with a total of 12 stocks. 2 million. At a time when the mood in the market is highly negative, it is dangerous, even reckless, to stick to our neck, and the investigation being conducted by the SEC. However, we believe that it is important to recognize where the problem exists and not to be magnified. issues. We believe that based on the opportunities created by the transition to the non-metallic wire mesh market ITO materials, the company\'s ability to do additional material printing, the progress made so far, intellectual property rights, 2014 of the profit potential, more than $3. $25 in cash per share, for Uni- Higher than the valuation obtained so far. At a 52- Close at $11. 47, with a market value of about $0. 14 billion, the risk/return ratio is favorable for the \"long\" position. This assumes no disruptive disclosure from the SEC investigation. There is a risk of such speculation and reasonable concerns. But some production-related concerns announced this year are at least wrong or misleading. Uni- Pixels maintain their capacity plan to a large extent. Implementation of innovative technology. The story is still unfolding. The pendulum can only be pushed to one side so far before swinging on the other side. this time, the momentum has been supported by improved fundamentals, reduced production risks, reduced shipments, and increased production capacity and order quantity. The first few articles of our university Pixel series can be found here- The first and the second Statement: If you decide to invest, do your due diligence first. Don\'t use this view in your investment decision. There is no guarantee of the accuracy of the above information and do not rely on it for investment. As our views evolve, we can add or exit at any time without notice. We have no obligation to inform readers of our views or update this article in the future. We don\'t have UNXL holdings in our model portfolio, but in the past, and possibly in the future. Disclosure: I am long UNXL. This article was written by myself and expressed my views. I received no compensation ( In addition to Seeking Alpha). I have no business relationship with any stock company mentioned in this article.