Kopin’s process fuels soaring stock

Tracing the sharp upward slope of Kopin Corp.’s stock chart for the last couple of months, it’s understandable that some investors might mistake the Taunton, Mass., company for the latest rocket-fueled Internet initial public offering. In fact, the run in Kopin’s stock from $6 a share last spring to a peak of nearly $100 earlier this month began in the 1970s in the august halls of Massachusetts Institute of Technology.

It was there that Kopin President and Chief Executive Officer John Fan and his colleagues were inspired by genetic engineers splicing genes in a nearby laboratory. They applied similar techniques to combine semiconductor materials in a process that came to be called wafer engineering. ”That’s not allowed in the traditional conventional wisdom, but, of course, conventional wisdoms are meant to be broken,” said Fan, who was born in Shanghai, China, and raised in Hong Kong. He came to the United States in the early 1960s to study electrical engineering at the University of California, Berkeley.

After earning a master’s degree and doctorate in applied physics from Harvard University in 1972, Fan began researching semiconductors at MIT’s Lincoln Laboratory. Semiconductors are crystalline materials that are about halfway between being electrical conductors and insulators. They can be chemically manipulated to control the flow of electric current in transistors and other electronic components.

In 1985, Fan and several colleagues left MIT to form Kopin in the hopes that they could develop marketable products based on the wafer-engineering technology.

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“We had a vision,” Fan said. “We would like to get the technology into products people use.”

Now, 15 years later, they have done just that. The company’s wafer-engineered transistors, which are three times smaller and require less power than conventional transistors, have been built into about 50 million digital mobile telephones, Fan said.

Kopin’s other main product is CyberDisplay, a tiny version of the liquid-crystal display, or LCD, screen found on a laptop computer. CyberDisplay is a quarter of the size of a thumbnail, but when viewed through a magnifying lens its image appears to the viewer as the equivalent of a 20-inch screen viewed from 5 feet away.

The viewer sees a large image, but the display can fit almost anywhere and requires very little power–100 times less power than a laptop screen, according to Fan.

IBM Corp. used Kopin’s CyberDisplay for a prototype portable computer that can be worn by the user.

Fan foresees a new generation of digital mobile telephones equipped with the displays. Although several companies now offer wireless Internet access, the displays are limited to a few short lines of text. Fan said his company’s displays will make full-color computer graphics available to wireless subscribers because the displays are small, light and require very little power.

“There’s a convergence of appliances–the PC, the telephone, television,” he said. “They are all going to converge into one thing. It’s going to be a little portable appliance that can give you all this information.”

Chris Chinnock, editor of the trade newsletter MicroDisplay Report of Norwalk, Conn., foresees this convergence as well. He’s not sure what form the coming information appliances will take, but, he said, “Somewhere in that mix there will be personal high-resolution viewers that will have much more resolution than you get in a typical Palm Pilot.”

In the meantime, Kopin already has lined up two big-name customers for CyberDisplay.

Kopin began shipping its displays to camcorder giant Victor Company of Japan Ltd., commonly known as JVC, last July. And the company began shipping the displays in volume to Matsushita Electrical Industrial Co. in Osaka, Japan, late last month. Matsushita is using the displays in its Panasonic camcorders.

Kopin’s stock price, which had risen steadily to around $40 per share in early January, took off around the time the Matsushita shipments were announced. The stock topped $80 per share before the month ended. After hitting a new high of $99.75 on Feb. 10, the company’s shares settled back to trade at around $90 a share last week.

“We are very satisfied it is now coming to market and people are using them,” said Fan, who admits to checking the label for the JVC or Panasonic brand when he sees somebody carrying a camcorder in Taunton. “That the stock has been successful does not hurt. Everybody is very happy.”

But there’s still much work to be done. As it plows millions into research and development and increasing its production capacity, Kopin has yet to turn the corner into profitability despite the sky-high stock price.

The company posted a loss of $353,785 for the third quarter, dropping its results for the first nine months of last year to a minor loss of $1,395. During the same nine-month period in 1998, the company lost $331,677.

Through Oct. 2, Kopin had accumulated a deficit of $57.5 million, according to company reports filed with the Securities and Exchange Commission in Washington, D.C.

And Kopin’s potential customers are demanding still smaller products that use even less power as a host of competitors are trying to do the same. Among them are heavyweights such as Fujitsu Ltd., Hitachi Ltd., Sony Corp. and others.

MicroDisplay Report’s Chinnock estimates that as many as 40 companies around the world are working on microdisplays, although some don’t necessarily compete directly with CyberDisplay.

“There are a ton of people working on microdisplays. That’s why it’s such a hot segment,” Chinnock said, predicting the technology would quickly move from camcorders to video headsets, or so-called virtual reality goggles.

“Those have been around for a while, but, frankly, they have been pretty crappy,” he added. “You’re going to see a new variety that are going to knock your socks off.”

Fan knows other companies are trying to duplicate Kopin’s success.

“This is a very high-growth area so a lot of people are trying,” he said. “But it’s not easy. We started this project in the mid-’70s at MIT, and we left MIT in the ’80s. It took us 15 years or so to get it right, and it’s not going to be overnight that competitors can catch up. We believe so, yeah.”

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