AN UPDATE ON THE CURRENT MARKET SITUATION FOR UV/EB CURING AND AN INSIGHT INTO THE DEVELOPMENT OF NEW MARKETS FOR UV/EB PROCESSING

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1 AN UPDATE ON THE CURRENT MARKET SITUATION FOR UV/EB CURING AND AN INSIGHT INTO THE DEVELOPMENT OF NEW MARKETS FOR UV/EB PROCESSING David Harbourne Heraeus Noblelight Fusion UV Inc. 910 Clopper Road Gaithersburg, MD NORTH AMERICA RADTECH SPONSORED STATE OF THE UV/EB INDUSTRY SURVEY MARCH 2013 The survey projected growth predictions for the period 2012 to 2014 of an average annual growth rate of approximately 6%, with a slightly higher growth rate between 2013 and When asked to provide views on current business conditions for UV/EB technology, the majority of respondents indicated an anticipation of improving growth for UV/EB technology. Interestingly, there seemed to be slightly less optimism about the potential for retrofits of UV/EB equipment. Perhaps this was due to the decline in the traditional analog printing markets. (See Figure 1) Figure 1 RadTech NA March 2013 Almost half the respondents (44.4%) responded that sale of UV/EB related products were outperforming other segments of their businesses. Less than 10% (9.3%) reported that UV/EB products were performing less well than other segments of their businesses. (See Figure 2)

2 Figure 2 RadTech NA March 2013 When asked about strategies to drive the growth of UV/EB technology, increasing penetration in existing markets, new products/line extensions for existing markets, and serving new end-user applications for UV/EB were the three dominant preferred growth strategies. Only 27% ranked the development of new technology as a key driver for future growth. (See Figures 3) Figure 3 RadTech NA March 2013 In terms of applications/market with the most UV/EB growth potential over the next two years, inkjet printing continued to be identified as a key growth opportunity within the printing industry and UV curable adhesives and the coatings on plastics were similarly ranked in the UV/EB industrial applications/market segment. (See Figure 4) Over next two years in North America, please express your response as expected average annual percentage growth Inkjet 7.3% Plastic Coatings 7.1% Adhesives 6.5% Metal Coatings 6.1% Wood 5.6% Optical Fiber 5.6% Graphic Arts 5.2% RadTech NA March 2013 Figure 4

3 In response to the question, are you more or less optimistic about the future of UV/EB technology, 66% of the respondents were more optimistic and less than 5% were pessimistic. The pessimists were attributing their pessimistic outlook to factors such as limited investments in new innovation, increasing government regulations, and concerns about the lack of a global economic recovery. The optimists based their opinions on new chemistry developments (functional raw materials), new applications, and the continuing demand for environmentally compliant manufacturing processes. UV LED AN UPDATED OUTLOOK Thanks to UV curing, UV LEDs should become a $270M business by 2017 and could hit $300M if new applications boom. (Pars Mukish of Yole Development 3/11/2013) UV LED is expected to grow at a CAGR of 43% through UV curing is an important component of this growth rate. (See Figure 5) Figure 5 Yole Development March 2013 It is estimated that UV LEDs will represent 34.7% of the UV curing equipment market by the year 2017 an increase from 12.7%. (See Figure 5) Lower total cost of ownership, reduced total energy consumption, smaller footprint, lower weight, compactness, long component lifetimes, and the absence of mercury are seen as the key benefits of the technology. The initial success, early adoption, of UV LED was in the UV inkjet printing market; however, since this early market success, UV LED systems are now being used in the broader printing markets (screen print, offset, and some flexo applications). In addition, UV LED systems are now being promoted for use in the wood (flat) coating and adhesive curing markets. There continue to be challenges associated with the availability and cost of UV curable formulations for use with the narrow band emissions of UV LED technology.

4 Despite this current drawback, 84% of respondents in a recent UV LED survey revealed their opinion that UV LD technology would enable new applications that could not be served by today s conventional UV curing equipment. GLOBAL OUTLOOK FOR UV/EB CURING With a few exceptions, the health of the UV/EB technology industry (supply side) follows that of the general coatings industry, which in turn tracks that of the global GDP. (See Figure 6) Figure 6 The coatings market annual growth with GDP is expected to be in the 4% to 5% range through If UV/EB curing is to achieve growth rates beyond that of global GDP or that of the general coatings market, then investment in innovation is an imperative. This will be a real challenge as some will point out and argue that nothing has changed in the coating industry for 40 years. (Transformational Thinking: Innovating for the Future George R. Pilcher, ChemQuest Group, Inc.) George Pilcher reminds us of the dictum of PPG s late, great Director of Research, Dr. Marco P. Wismer, who stated on numerous occasions that the Six Strategic Goals of the coating industry could be easily and quickly enumerated: 1. Corrosion Protection 2. Elimination of Solvents 3. Conservation of Energy 4. Reduction of Toxic Wastes 5. Cost Reduction 6. Improved Durability (Marco P. Wismer, PPG, 1984) It would appear that the challenges we face today are not so different from those of 40 years ago, however, opportunities within UV/EB abound. A new study shows mega sustainability advantages of UV/EB technology, Rapid Manufacturing Process Offers Operational Benefits [RadTech North America/FocalPoint Consulting LLC, January 2013]. A new study by FocalPoint Consulting LLC finds that UV/EB technologies have

5 the potential to reduce energy demand and greenhouse gas releases by up to 90 percent, an added benefit to well documented significant reductions in volatile organic compound (VOC) and hazardous air pollutant (HAP) emissions. According to Ronald Golden, Ph.D., founder and principal of FocalPoint, Based on RadTech data for 2011 North American shipments of UV and EB curing formulations, the annual benefits from the use of UV/EB instead of thermal curing are estimated as a savings of 60 Billion Cubic Feet of Natural Gas; 620 Thousand MWh of Electrical Energy; 3.75 Million Metric Tons of CO2 Emissions; and 220 Thousand Gallons of Diesel Fuel Consumption. The decline in conventional printing markets leads to opportunities in the digital print market. (See Figure 7) Figure 7 NPES March 2013 Since 2007, there has been an overall decline in printing equipment shipments; however, since 2009, there has been steady growth in the shipments of digital print equipment, much of which is equipped with UV curing conventional and UV LED. The Global Radiation Cured Products Industry market report, produced by Kusumgar, Nerlfi & Growney, Inc. in the spring of 2013 seems to suggest that new applications such as inkjet, field applied floor coatings, and water-based UV could stimulate growth beyond modest growth prospects. UV/EB to become China Centric -- It seems likely that during the next two to three years, we will likely see a continuing consolidation of suppliers and the continue emergence of China as a key supplier of UV/EB chemistry and as a source of new innovation, particularly in the fields of chemistry, formulations, and applications.

6 The drive for safer, greener, lower cost, and products with higher functionality will not cease, and as such, these demands will continue to provide the momentum for the expansion in the use of UV/EB technology and associated manufacturing processes. The following is a sample of some application-driven growth opportunities: Flexible Barrier Films/Coatings The long-term success of flexible OLED applications requires significant advances in thin film encapsulation barrier technology, this because OLED performance and longevity is adversely affected by both oxygen and moisture. By 2023, the market for flexible barriers will already be over $240 million (from $34M in 2011) with display technologies accounting for over a third of that value. (Dr. Harry Zenos, Senior Technology Analyst, IDTechEx) Research studies at the University of Mississippi have demonstrated that thiol-ene network formulations can have excellent oxygen barrier properties. Similar activities have been undertaken at the Politechnico di Torino in Italy. Clearly, more research and development is required before there is a commercially viable UV curable solution. It is also now evident that there may well be UV cured barrier coatings for these applications in the future. Conductive Films The growth in the market for conductive films will transition from uses in the display markets (smart phones, tablets, smart TVs), with the advent of OLED/PHOLEDs, to the general lighting market by Lighting consumes over 22% of all the electricity produced in the USA. There are, therefore, significant energy efficiency, cost and environmental drivers for more energy efficient lighting sources. OLEDs and PHOLEDs have the potential to fulfill these requirements. As with display technology, UV curable conductive films will have a major role to play in this development. Stretchable Electronics (Stretchable Transparent Electrodes) This is an emerging class of electronics that can be bent and/or stretched with potential applications that include skin sensors, wearable electronic devices, robotic devices, implantable bio-devices, and folding displays. One of the major challenges with this technology is maintaining full functionality of the electronics under the stress of stretching. One solution under investigation at the University of California Los Angeles (UCLA) is the development of a UV curable silver nanowire polymer composite electrode. Display Markets (TVs, Monitors, Tablets, Laptops, etc.)

7 Whilst many regard, from a UV curing perspective, the display market as mature, there are continuing opportunities for growth. The total area (of displays) to be processed using UV curing is forecast to grow from 535M m 2 in 2011 to 1,200M m 2 in 2021, a compound annual growth rate of 8.4%. (See Figure 8) Shifts in technology; e.g., OLEDs and geographic centers of production to China will provide additional opportunities for growth. Figure 8 Functional Films/Film Coatings Source: Prismark The developing trend to deliver functionality or properties by way of controlling surface structure rather than by formulation additions or multilayer coatings will provide new and innovative future growth opportunities for UV curing. (See Figures 9 & 10) Figure 9 Source: RadTech

8 Figure 10 Source: Kimoto Tech Inc. Future growth for UV/EB technology does not have to be derived from the innovative technology that creates entirely new concepts (which are often few and far between) but looking at the familiar and doing it in a different way. Viewing what is and imagining what could be