By Aashika Jain and Roshni Menon
(Reuters) - Nanoco Group Plc said commercial production of quantum dots, used to make vibrant screen displays, is expected to begin in the first half of next year at a plant in South Korea being built by its partner, Dow Chemical Co.
Shares of the British nanotechnology company rose more than 27 percent on Wednesday to their highest in more than 10 months.
The launch of quantum dot production, which analysts said was probably linked to a supply agreement with a big display manufacturer, signals a major breakthrough for Nanoco and the quantum dot industry.
"Nanoco is today on the threshold of major growth in its revenues, earnings and cash flows," Liberum analysts Eoin Lambe and Janardan Menon wrote in a note.
Quantum dots are semiconductor nanocrystals, 10,000 times finer than a human hair, that can convert electrical energy into light and be manipulated to produce precise colors for display.
They are cheaper and consume less power than organic light-emitting diodes (OLED), their rival technology at the sharp end of the display business, but cannot yet be produced in the same quantities.
With demand expected to soar, the handful of companies able to make quantum dots are partnering with big display makers to set up industrial-scale manufacturing.
Dow Chemical, which holds exclusive worldwide rights to sell Nanoco's quantum dots for use in electronic displays, said on Wednesday it would begin construction of the manufacturing plant in Cheonan, South Korea.
Unlike those produced by competitors, quantum dots using Nanoco's technology do not contain cadmium, a toxic metal, the use of which is restricted in many countries. Cheonan will be the world's first large-scale, cadmium-free quantum dot plant.
'MILLIONS OF TELEVISIONS'
Quantum dots are already in use. Amazon.com Inc's Kindle Fire HDX 7 and Sony Corp's Triluminos TV, for example, already use them in their screens.
It is their wider adoption in television screens as a much cheaper alternative to OLED technology that promises growth.
Touch Display Research, a market research and consulting firm, forecasts that the global market for quantum dot displays and lighting components will rise to $9.6 billion (5.85 billion pounds) by 2023 from $508 million in 2014.
Dow Chemical said the new plant would "enable the manufacture of millions of quantum dot televisions and other display applications to meet growing consumer demand."
Analysts at Liberum and Canaccord Genuity said Dow would have been unlikely to build a plant without the commitment of at least one large customer.
Among the largest South Korean display makers, Samsung Electronics Co Ltd declined immediate comment and a spokeswoman for LG Electronics Inc said the company had not decided whether or not to release quantum dot TVs.
For Manchester-based Nanoco, founded in 2001, the start of construction of the plant triggers an unspecified "milestone payment" from Dow. The Liberum and Canaccord analysts estimated this payment at about $2 million.
The Liberum analysts forecast Nanoco's revenue could rise to 51 million pounds by 2017. The company reported revenue of 3.93 million pounds for the year to July 31, 2013. The company has yet to turn a profit since listing in May 2009.
Nanoco's shares were up 25.4 percent at 148.3 pence at 1023 GMT (11:23 a.m. BST).
(Additional reporting by Se Young Lee in Seoul; Editing by Gopakumar Warrier and Robin Paxton)