This article is the fourth in a six-part series examining the critical challenges faced by companies attempting to bring the first wave of smart glass technology to market. Despite the first shipments of smart glass nearly two decades ago and multi-billion dollar investments, the technology has struggled to achieve significant market traction. At NEXT Energy, we are delving into the root causes of these challenges to better position our innovative BIPV technology for success in this evolving landscape.
Unpacking the Challenges:
At the core of the smart glass commercialization struggles were issues related to manufacturability:
Overwhelming Capital Expenditures (CapEx) to build a line
High Operational Costs (OpEx) to make the product
Problematic Production Yields
Low Throughput on Production Lines
In this article, we'll take a deeper dive into these challenges
Capital Expenditures (CapEx)
Building on insights from the previous post in this series, it's clear that the underlying technology and product specifications heavily influence both the go-to-market (GTM) strategy and the capital requirements for these technologies.
Consider View and their use of sputter coating technology. Establishing a production line for their factory required an immense capital outlay, with the coater alone costing around $100 million. When you factor in the costs for the building and supporting equipment, their total capital expenditure reached approximately $200 million before they had even sold a single smart window. This staggering upfront investment is a significant barrier to entry and underscores the challenge of scaling such technology.
HALIO, on the other hand, utilized slot die coating for thin glass, which required a less costly initial setup. However, their supply chain was almost entirely based in Asia at the heart of the display industry. While they managed to keep initial capital costs lower, they faced substantial logistical, product development, engineering, and quality control challenges due to the distance between their factory and primary markets.
Operational Expenditures (OpEx)
Once the factory is up and running, the financial challenges continue. Both HALIO and View encountered production costs that far exceeded their selling prices. For instance, View's publicly available financials revealed negative gross margins—spending around $1.50 for every $1.00 of revenue generated. This resulted in significant net operating losses once all operational expenses were accounted for.
HALIO's financials were not publicly disclosed, but as a former employee, I can attest to a time when the operations team was completely blind to production costs. By the time they had a handle on it, unit costs were well above $100 per square foot. The use of borosilicate thin glass and conductive coatings accounted for nearly 50% of HALIO's bill of materials (BOM), making it extremely difficult to lower the cost profile.
Furthermore, the complex infrastructure required for powering, connecting, and controlling the tint states added another layer of expense for both View and HALIO. The tech/product stack for these controls played a significant role in escalating system costs.
Another often-overlooked cost driver is the nature of the façade business itself. Projects typically require custom-sized glass, and orders are released based on a highly variable project schedule. This unpredictability forces factory managers to either pay staff during idle periods or risk the challenges of rehiring for the next project surge—further driving up operational costs.
Yields and Throughput
Production yields and throughput are equally critical factors that have hampered the scalability of smart glass technology. At HALIO, yield losses, particularly with their fragile thin glass laminate, presented a major barrier to achieving profitable operations.
Yield losses were a recurring issue at several stages of the production process:
Building the electrochromic (EC) device in Asia
Laminating the EC device
Insulating the smart laminate (IG)
Installing the smart window
When 50% of your product BOM cost is tied up in the substrate and conductive layer, any yield loss can have a devastating impact on profitability—like a breach in a ship's hull that grows ever larger.
Throughput issues further compounded these challenges. For instance, one of HALIO's fabrication partners reported that they could build four standard insulated glass units (IGUs) for every one HALIO IGU that went down the production line. Although I don't have specific data from View's operations, similar stories emerged from those who visited their factory—highlighting the contrast between the massive facility size and the relatively low number of units produced. The slower production speed compared to standard IGUs significantly affects the overall cost structure and competitiveness of smart glass.
Looking Ahead
As we continue to explore the barriers to smart glass commercialization, it's evident that challenges related to CapEx, OpEx, yields, and throughput have played a significant role in hindering widespread adoption. Understanding these challenges is essential as we at NEXT Energy strive to bring our novel BIPV technology to market, leveraging lessons learned from the past.
Stay tuned for the next article in this series, where we will explore Root Cause # 3: High Prices, High Risk, and Low Value.
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About the Author:
Jonathan Hafemann is the Vice President Growth and Commercialization at NEXT Energy Technologies. He is an expert at developing scalable go-to-market strategies for early-stage property and climate technology solutions. His focus on sustainable solutions for the built market accelerates the transition to a net zero future. Follow Jonathan on LinkedIn
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