OIS saga continues as TFT array firm negotiates status with government

Flat-panel developer ordered to resume production

The future of digital detector component supplier Optical Imaging Systems (OIS) remains unknown following a directive from the U.S. Department of Commerce ordering the company to resume production of thin-film transistor arrays. The deal gives some breathing room to those companies to which OIS ships the arrays, such as Sterling Diagnostic Imaging, which uses OIS components in its DirectRay digital radiography systems.

OIS of Northville, MI, announced last month that it was shutting down after its parent company, Guardian Industries, cut off funding to the subsidiary (SCAN 9/30/98). OIS had been trying to find a buyer or investor since earlier this year, but was unsuccessful.

The Department of Commerce stepped in because OIS was the only qualified U.S. manufacturer of the high-resolution flat-panel screens used in several U.S. military systems, including the F-16 advanced fighter aircraft, the Apache attack helicopter, and the M-1 Abrams tank. The DOC issued the order under the Defense Production Act and the Selective Service Act, which authorize the president to take steps to assure the availability of goods considered vital to national defense.

The DOC said that civil injunction or criminal penalties may be imposed for failure to comply with the order, which is contingent upon the availability of funding for OIS. Current OIS customers have agreed to fund OIS until another solution for the company is found, however.

The government's order does not appear to have had much impact yet. On Oct. 1, OIS executives met with Commerce Department officials in Washington, DC, to discuss ways to reopen the plant. But neither OIS president Rex Tapp nor Assistant Commerce Secretary Roger Majak would say how OIS could restart production, according to an Oct. 2 article in the Detroit Free Press. Sterling representatives are closely monitoring the talks.

"As of (Oct. 6), we believe that they have not opened
their doors yet, but as far as we know, discussions are continuing between DOC, DOD, OIS, and its customers," said Jayne Seebach, Sterling's director of global marketing and communications.

Sterling remains optimistic that a new operator will acquire the assets of OIS and continue supply from its facilities, said Ernest Waaser, Sterling COO. A consortium of OIS customers has made viable offers to purchase certain assets of OIS, he said. OIS declined to return calls seeking comment.

In any event, Sterling continues to move forward with discussions with other companies about potential TFT array supply relationships and is moving to begin the qualification process to ensure that components from these companies meet Sterling's criteria. The qualification process for another supplier typically takes six to 12 months, although Sterling would expedite that process as much as possible, Seebach said.

The Greenville, SC-based company has enough TFT arrays to meet its product needs through the end of the year and believes that several hundred arrays are in the development process at OIS. Sterling is working with OIS to confirm the number and production status of the arrays, as well as to complete as many in-process arrays as possible.