Material Change

From New Jersey to California, thieves are cutting catalytic converters out from under cars, while others are trafficking in beer kegs stolen from patios and behind liquor stores. And still others are breaking into basements and crawl spaces at night to strip copper plumbing, leaving homeowners wondering why they can't take their morning shower.

The common denominator? A booming worldwide market — both black and legitimate — for precious metals, including the platinum ($1,298 per ounce), palladium ($375), and other precious metals inside catalytic converters. That market is one of the reasons why AV vendors are considering alternatives to several raw materials found in products such as displays.

A prime example is indium, a malleable, silver metal that's a key component in LCDs. In late 2003, indium cost about $120 per kilogram. Today it goes for more than $1,000. That spike couldn't come at a worse time for vendors because competition in consumer and pro AV over the past few years has beaten profit margins to the point that it's increasingly difficult to absorb or pass on increase costs. As a result, vendors have focused on finding ways to improve the efficiency of their manufacturing processes.

“They basically take what they know and optimize the heck out of it,” says Paul Glatkowski, vice president of Eikos, a Franklin, Mass.–based company that's developing alternatives to indium. “That's what happened with the current materials.”

But that strategy eventually gets dragged down by the law of diminishing returns, where more effort put into optimization starts to produce less and less efficiency. That situation is prompting AV vendors to consider materials that have lower costs.

“Most of the display manufacturers and materials suppliers to the display manufacturers recognize that the status quo isn't going to keep driving down prices,” Glatkowski says. “So now there's far more acceptance of entirely new materials.”

Small Amounts

Indium is in increasingly short supply largely because it's a by-product of the mining of other materials, mainly lead and zinc. Many lead and zinc mines around the world are closing because of their impact on the environment or because of new regulations, including the Restriction on Hazardous Substances (RoHS), which has been in effect in Europe for more than a year, to name a few reasons. Each mine that closes further tightens the supply of indium, to the point that some market-watchers —such as the U.S. Geological Survey — say that the supply could run out in about five years.

“The problem with indium is that there's no way to convert it from something else,” Glatkowski says. “You can't mine indium for indium. It would cost more than platinum.”

Indium is used in displays because it's conductive but still transparent, which is a rare combination. It's used in the form of indium tin oxide (ITO), a compound that's coated onto a display's TFT and color layers. Each coating is only about 100–150 nm thick, which works out to 1 gram or less for even a large LCD display. Even in that small amount, ITO still represents a cost for each display.

“Right now, it's probably around 1 percent,” says Paul Semenza, vice president of the displays practice at iSuppli, an El Segundo, Calif.–based research company.

Although 1 percent might not sound like much, it can be significant in the competitive display industry, where every little cost affects margins and market shares. So why are most display manufacturers still just kicking the tires on indium alternatives rather than implementing them as quickly as possible?

“There's a very active hunt for a replacement, but nothing has jumped out in terms of everybody being comfortable enough with it to use it as a full-scale replacement,” Semenza says. “[ITO] is such a key and ubiquitous thing that if you were to make a change, and it doesn't work, it would be a huge problem.”

Cracking an Opening

But ITO itself is a huge problem, and not just because indium keeps getting more expensive. ITO is difficult to work with, to the point that some display manufacturers — such as those that sell into the cell phone market — routinely discard a lot of screens.

“On those devices, we've been told by several of the larger manufacturers that the throw-away rate is 40 percent to 50 percent due to the cracking of the ITO in the factory,” Glatkowski says.

That situation helps open the door for companies developing alternatives. In Eikos' case, that's carbon nanotubes, which are microscopic cylinders roughly 10,000 times thinner than human hair. Carbon nanotubes can conduct electricity, an attribute that Eikos leveraged to create a conductive yet transparent material that's essentially printed onto the display substrate in place of ITO.

Carbon is dirt cheap compared to indium, and the price has fallen by about half each of the past few years. That trend helps companies such as Eikos and Mountain View, Calif.–based Cambrios Technologies, win over skeptical display manufacturers. (Cambrios executives weren't available for this story.)

But the material itself is only one cost. The other is related to working with the material during the display-manufacturing process. The potential savings there — such as reductions in cracks and other defects — is something that Glatkowski says his company doesn't have to spend much time on when making presentations to display vendors.

“The moment you get to the slide [discussing] brittleness, deposition cost, scalability, they say, ‘Just skip over that. We know that,' ” Glatkowski says. “You don't have to sell them on the downsides [of ITO].”

More Alternatives Ahead?

So far, no display vendors have made the switch from ITO to carbon nanotubes, although Glatkowski says Eikos is “working with numerous companies.” Meanwhile, manufacturers — such as ViewSonic — contacted for this story either declined to comment or said that they're still mulling the ITO issue.

Although display vendor interest is important for encouraging development of ITO alternatives, government funding also is playing a role. One example is Japan, the world's largest user of indium.

“They see that [shortage] as a strategic threat to their economy,” Glatkowski says. “This year, they've offered federal money — $60 million, I believe — to their national labs and universities to find alternatives to several metals. One of them is indium.”

There are plenty of other raw materials used in AV that also are in short supply, prompting governments, universities, and companies to look for alternatives. One example is copper; its price is skyrocketing due to the building boom in countries such as Asia.

“Copper prices are just ridiculous,” says Eric Pratt, senior director and principal analyst at iSuppli. “It's certainly affecting the printed circuit board manufacturers, and we're seeing some price increases.”

Another is aluminum, which is used in components such as capacitors. Some companies are exploring alternatives that include ceramics and tanalum.

“The aluminum raw material can be as much as 15 percent to 25 percent of the overall cost of the component,” Pratt says. “The manufacturers have taken a pretty big hit, and they've been successful in passing on some raw material costs, [mainly in] Q3 and Q4 last year.”

For many materials, AV is competing with other industries over what's available. One example is polysilicon, which is used in both a variety of AV products and in solar cells, also known as photovoltaics. Over the past few years, the solar market has mushroomed, thanks to consumer, government, and corporate concerns about the price and environmental impact of fossil fuels. That trend has tightened the worldwide supply of polysilicon.

“My understanding is that more than half of the demand now is for photovoltaics,” says iSuppli's Semenza.

Unlike ITO, polysilicon has a brighter future, partly because manufacturers are ramping up production to meet demand.

“Right now, there is a shortage of it,” Glatkowski says. “But the Department of Energy has said that within two or three years, silicon is going to be so cheap, it's not going to be an issue anymore.”