OIS throws in the towel

NORTHVILLE, Mich. - OIS Optical Imaging Systems Inc. (OIS), one of the premiere U.S. suppliers of active-matrix liquid crystal displays (AMLCDs) for military avionics applications, shut its doors and began selling off assets Sept. 18.

Oct 1st, 1998

Chris Chinnock

NORTHVILLE, Mich. - OIS Optical Imaging Systems Inc. (OIS), one of the premiere U.S. suppliers of active-matrix liquid crystal displays (AMLCDs) for military avionics applications, shut its doors and began selling off assets Sept. 18.

The demise of OIS is a big blow to hopes among U.S. government and industry representatives to establish a viable domestic flat-panel industry. The OIS failure would affect deliveries on the U.S. Army Boeing AH-64 Apache attack helicopter, U.S. Air Force Lockheed Martin F-16 jet fighter, U.S. Air Force Lockheed Martin F-22 advanced tactical fighter, and several other programs.

The troubles of OIS, based in Northville, Mich., elevated to a crisis point last month. Company leaders had been unable to sell their display operation or find new investors. As a result, they are shutting down the facility, dissolving the company, and liquidating assets, according to a company announcement.

The crisis precipitated when Guardian Industries, OIS`s majority stockholder and principle investor, informed the OIS board of directors that it was seriously considering the discontinuation of funding to the company. Since OIS reported a $15.5 million loss for the nine months ending March 31, the effect would be a closure of the plant.

OIS has also been the recipient of $50 million in U.S. government funding to establish their manufacturing line, and a number of Title 3 contracts to produce displays for specific military programs. As word of this development spread, it`s impact overshadowed events at the recent 5th Annual Strategic and Technical Symposium, which was organized to discuss the strategy, markets and technology for the U.S. flat panel display industry. Keynote speaker Rex Tap, OIS`s beleaguered president, canceled his appearance. But other industry veterans participated in a spirited discussion of the events.

For example, Richard Van Atta, now with the Institute for Defense Analysis in Alexandria, Va., saw little possibility for a government buyout of OIS. "That would be about the worst scenario," said Van Atta, referring to the government`s inability to run such a facility with efficiency and the lack of any political will to undertake such a venture. Van Atta was formerly a DOD assistant deputy, and a big force behind the aborted National Flat Panel Display Initiative, which helped get OIS started.

Van Atta, Bruce Gande, a key DARPA/ETO program manager, and Darrel Hopper, display branch chief at Wright Patterson Air Force Base in Dayton, Ohio, all seemed to agree on one thing, however. The best way out of this situation would have been for the major display system integrators - Allied Signal, Kaiser Electronics and Honeywell - to sit down together to find a way to keep OIS alive.

Hyundai-backed Image Quest, and Canadian government-backed Litton Systems Canada have already called it quits as manufacturers of avionics display glass. With the failure of OIS, the last remaining U.S. AMLCD glass producer is dpiX of Palo Alto, Calif., with display module integration being provided by Planar Systems, of Beaverton, Ore.

While dpiX may have the manufacturing capacity to meet demand should OIS fall, the panelists raised questions about the company`s ability to ramp-up manufacturing. Hopper noted that about two years ago, planes were sitting in assembly hangers waiting for the displays to arrive from tardy domestic producers. Third-party integrators stepped into the void and developed ruggedized offshore glass, solving delivery problems.

What is unclear however, is if this scenario is possible again. For example, none of the Asian producers currently has a 1:1 aspect ratio flat panel display that is appropriate for the 3ATI and 5ATI form factors. Some Asian producers have shown a willingness to produce custom-sized panels, but they often piggyback several designs onto a single substrate to maximize production efficiency. So can or will they respond to the puny needs of the military display community?

As one source noted, "some of these Asian producers have more scrap in a single day than OIS has produced in the last 5 years." That pretty well sums it up. OIS has not found the volume markets needed to reach economies of scale and achieve profitability.

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