The market turned vicious over cadmium-free quantum dots technology developer Nanoco (NANO:AIM) today, slashing the share price by more than 16% to 115p. Investor jaws might well drop. There's no profit warning but there is negative newsflow with the UK-based company apparently losing out to Silicon Valley-based peer Nanosys as a key supplier to Samsung (005930:KS).
The pair have signed a multi-year technology deal that will see Nanosys supply displays technology to the Korean electronics giant, including cadmium-free quantum dots. This is a major blow since the market has long anticipated that Nanoco would secure Samsung as a partner, as it has recently with LG Electronics (066570:KS), Korea's other major electronic gadgets maker.
But all is not necessarily lost. A major trend to emerge over the past few years across the global technology space is one of dual-sourcing of key components, in other words, buying the same stock from two or more suppliers to de-risk the supply chain.
Disruption to a global manufacturing giant like Samsung could cost millions if a sole supplier suffered a shutdown and couldn't deliver vital components, say from a flood or fire. Which may leaves the door open a crack for Nanoco. If I were on the Nanoco board I'd be on the phone to Samsung quick sharp, flagging this point. Nanosys does, after all, operate out of the earthquake zone in northern California.
In the meantime, Nanoco's tech will get its fair share of fanfare at the consumer electronics show (CES) in Las Vegas which officially kicks off today thanks to its agreement with electronics giant LG. The Korean manufacturer has already confirmed that its entire range of 4K ULTRA HD TV line-up in 2015 will include Nanoco's cadmium-free technology, under the LG banner 'ColorPrime' (see image below).
True, Nanoco has a lot of work ahead. Operating losses last year to end July totted up to £9.2 million, chewing trough £6.6 million of cash. But this is early stage stuff and the company is rapidly closing in on meaningful revenues that will produce profits thanks to large-scale quantum dot production during the first half of this year thanks to Nanoco's deal with Dow Chemical (DOW:NYSE). That could kick start a rapid revenue stream build over the coming few years and a profits breakthrough, presuming it can manage to live without Samsung for now.