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Investor Webinar 4 January 2023: Happy New Year to all Weebit Nano holders!
January 4, 2023
China, ReRAM, WBT, Weebita Nano
In this first Investor Webinar of 2023:
- We talk about Weebit Nano (ASX:WBT) that hit another milestone on the dot.
- And China …. The Dragon awakens, but has a stiff cold.
See full transcription below.
Disclosure: Stocks Down Under/Pitt Street Research directors and staff own shares in Weebit Nano.
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Marc: Good morning. It’s the 4th of January, 2023. Morning, Stuart, and Happy New Year.
Stuart: Happy New Year.
Marc: And Happy New Year to all our viewers. So, we’re kicking off today’s or this year’s webinars with good news coming out of Israel with Weebit Nano. And we’ll also have a look at what’s happening in China because in essence, it’s good news. The country’s opening up, but there’s a lot happening in the background with big, big numbers when it comes to COVID infection.
So, we’ll have a look at that as well, but let’s kick it off with Weebit Nano because they announced something yesterday that we think is really good news for shareholders because the company just keeps kicking goals on the dot each and every time. So, what did the company say or announce yesterday? It’s announced a tape out of a demo chip in a 22-nanometer FD-SOI process. Well, that’s a mouthful.
Stuart: I love it when you talk dirty like that, Marc.
Marc: Let’s break it down for you, Stuart. Let’s make it a bit clearer. So, what does it mean? So let’s look at the individual components here. So, tape out basically means that you’ve got the final technical design of a chip that is complete now, and the chip is ready to be manufactured in a commercial production facility. So, that’s what tape out means. It’s nothing else. And, yeah, look, we’ve got the design ready. It’s all in very big files that can be sent over to the fab, and they can start using that to make the masks and to start producing the chip.
Stuart: Why do they call it tape out? Because when I think of tape out, I think of this.
Marc: Yeah. So, tape out is a very old term from decades ago where you had these chips and when you say tape out, you know, they’re stuck to a literally a piece of tape, a very long piece of tape.
Stuart: Right. Like one of these, right?
Marc: Yeah. But then industrial grade and they would stick on there when once they’re carved out and then they would be moved to the final stage, which is the packaging in the so-called backend process. But that term is really old. So, today they still call it tape out, but it’s much more earlier on in the process, basically, where the technical package is ready to be manufactured.
Looking at resolution. So, a 22-nanometer resolution, what does that mean? Well, resolution is basically the line width of the circuitry. In this case, it’s 22 nanometers, and 1 nanometer is 1 billionth of a meter. So, it’s really, really small or 1 millionth of a millimeter. And just to give you an idea, 22 nanometers is about the amount that your hair grows in two seconds, so you can imagine how small that is, 22 nanometers.
And obviously today’s chips, the most leading edge chips are being done at 4 nanometers by TSMC and Samsung. That’s a lot smaller, obviously, but it just, you know, goes to show how small this scale is that these chips are manufactured on.
Now, a fully depleted silicon-on-insulator FD-SOI. What does that mean? Well, FD-SOI is a process that delivers the benefits of smaller resolutions, but the production, the manufacturing, is simpler than with for other chips, for other processors. So, there’s fewer steps, there’s fewer masks, so there’s also less room for errors.
And FD, fully depleted, means basically that the transistor channels don’t have to be doped because what the layer that is put on the wafer, it’s a really small, really ultra-thin, as I call it here, a layer of buried oxide. It’s insulator on top of the wafer. It’s so so small and so thin that the properties are already very good electrical properties. And normally what the chip manufacturers would do, they would introduce some impurities, so-called doping, which enhance the electrical characteristics of the chip. In this case, they don’t have to do that, which means that’s why they call it fully depleted. So, there’s no added impurities to the layer.
Stuart: That’s business manufacturing steps, right? To not have to dope something and then go source some really rare metal or like galium, for example. That’s a big deal.
Marc: So, yeah, that in itself is cheaper, although the wafers, the SOI wafers are typically more expensive than CMOS. It depends a little bit on what you’re building, what sort of chip you’re making, whether or not it’s cheaper in the end but overall FD-SOI is simplified. Fewer steps. So, that in itself is good, obviously. So, it’s a lot of explanation. And if you go to the Pitt Street Research website, you can check out the full report on this specifically when Weebit announced this earlier in 2022. There’s some explanation there.
So, what does it all mean? Weebit can now offer embedded memory blocks, and these are 8-megabit blocks at 22 nanometers. And that’s a big deal because up till now, if you wanted embedded memory, you can’t scale Flash for embedded below 28, for instance, 28 nanometers. And NOR Flash is basically, it’s slower. It’s more energy inefficient, and you can’t scale it down as much. So, ReRAM is a big game changer in this respect and it’s faster as well, by the way, and less current leakage. So, there’s so many benefits to ReRAM, that it’s almost a no-brainer for the entire industry, especially for embedded memory to move this way and later on also discrete memory. So, standalone large memory modules, but that’s a few years down the line.
This technology, by the way, can also be scaled down well below 20 nanometers. So, we’re talking 16 and 12, and who knows what else down the line. So, it basically opens up a massive market for Edge devices. And Edge devices are basically anything connected to the internet that at some point needs a connection to that either, you know, ongoing or intermittent. But it’s processing at the Edge, basically, which in itself would limit the amount of data that would need to be transferred across the internet. So, that’s a big deal. Edge processing where the device, whatever it is, it could be a sensor, it could be your garment for your bicycle, it could be your phone. Most of the processing is moving to the Edge, so there’s less traffic required across the internet. So, that’s where all this comes into play.
Now, if you look at who is doing this, FD-SOI, Samsung has been doing it for a few years, TSMC, Global Foundries is a big one in this space in IBM. Of course, TSMC has got its own ReRAM that they will be looking to embed in this in this market, but now this technology is available for everyone else who wants to use it. So, yeah, these four companies there. One is doing it themselves. So, there’s three suspects left in terms of, you know, who Weebit might be working with. So, take your pick there but, yeah, it’s a big deal for Weebit.
Stuart: So, Marc, is this like Roger Banister running the first four-minute mile? No one has done 22 nanometers before our Israeli friends, Weebit.
Marc: Well, TSMC is working on this as well, obviously, and we don’t know exactly where TSMC is, but at least as far as we know, Wbasieebit is the first, or one of the very first, or one of only two, basically, doing this with ReRAM at this resolution, right? And look, I think they’ll be moving really fast in scaling it down further because, you know, the real application areas are 22 nanometers and below, right? As these embedded devices get smaller and smaller, yeah, the embedded memory component needs to keep up, basically. So, there’s a lot of there’s a big rush to get this done.
And then looking at looking out saying, you know, six months or a bit longer milestones are new slow that we expect to come is qualification of the chips that Weebi got back from SkyWater. Hopefully, we get this back by the middle of this year. Additional commercial deals that Weebit’s been talking about hopefully also by the middle of the year, but you never know. You know, stuff could be pushed out, could be because of all sorts of reasons, but let’s hope the middle of the year. And remember, the company’s talking to a lot of the top 10 chip manufacturers, right, So, the Fabs in this world, so hopefully at least one of them will move forward.
And then there’s progress reports on the discrete memory. Discrete means standalone memory chip, so it’s not embedded into a bigger, a broader system. It’s just standalone memory like flash memory on your phone or flash memory in data centers. So, it’s standalone memory, and we expect some progress reports on that including the combination of a selector with discrete memory. And this is really for the bigger you know, 256 or maybe higher one-gigabit memory chips. That’s where you’ll need the selector because these chips will need to scale down a lot, and the bigger the memory gets, the more the requirement for a selector comes into play. So, they’ll need that for the very big memory sales.
So, in a nutshell, don’t go anywhere because I think there’s a lot of good news slow to come for Weebit in the current year. So, that was a bit technical. It’s certain stages too, but let’s have a look at something that’s maybe, you know, a lot of people have been following over the last sort of six months hoping that it would happen, and now it’s finally happening. China’s opening up.
Stuart: Yeah. We never thought we’d live to see this day. It seemed to drag on and on, but basically, I think 2023 is gonna be a good year for markets generally because of what’s just happened now in China. And that’s why I’m saying the dragon is awakening and the rest of the world’s about to benefit from that. So, what’s happened? They abandoned their zero COVID policy. China foolishly thought they could keep a lid on COVID. The rest of the world proved that you really couldn’t do that, so they’ve abandoned the zero COVID policy. You can now isolate at home rather than having to go to a state facility if you have mild symptoms but importantly no quarantines for travelers for January 8, which is four days from now.
Now, in return, travelers that are leaving China are required to be COVID tested before they’re admitted elsewhere, but basically, this is the first time in three years this country is truly open to the rest of the world. And I’m excited by that because it means no end of good for the world economy in general.
So, let me explain. China is the world’s second-biggest economy, $18.3 trillion. That’s a heck of a lot of GDP, which then goes out to the rest of the world to benefit it in various ways. Doesn’t matter what commodity you’re looking at, China seems to constitute a big slab of either demand or supply or both. So, as a major commodity-exporting country, Australia and China are pretty much joined at the hip. In addition to which we get a lot of Chinese tourists. I’m kind of forgetting what Chinese tourists look like Marc, but we used to see a lot of them in Sydney. We’re about to see a lot of them again, I think.
And equally students at our universities, these are major export earners for Australia, in addition to all the commodities that we ship up to China. When you add it all up, about 30% of our trade with the rest of the world comes through China. So, for China to be operating more or less as normal, like the rest of the world, is a huge deal.
Now, the market had a bad day yesterday. Basically, we were expressing a certain amount of skepticism about what would happen, and no surprises there. If a country’s been silly enough to try and run a zero COVID policy, then then they might just backflip and go back to back to the old days, but I think this is for real.
And what does it mean? Well, the travel sector’s important. You’re gonna see a heck of a lot of people leaving China to go see other parts of the world. People going to China. In New Zealand and Qantas, for example, are gonna be big beneficiaries there. The iron ore producers, a lot of the iron ore we produce gets shipped up to China. That’s gotta be good for them. Copper. China’s a major consumer of copper, and that’s why I put BHP on the list just here. Lithium, a lot of the lithium that gets produced here and elsewhere gets processed up in China, so that’s gotta be good. I’d flag other players as well.
Marc, you and I have talked about Star Entertainment Group recently. That’s a company that just cannot win a trick. The stock was down heavily just before Christmas because of some extra taxes the New South Wales government is levying on casinos. One of these days, that stock is gonna turn around in a serious way. And the biggest block of people who go to that casino in a normal year are visitors from China. So, I’m expecting that this will be good for that stock once the market’s absorbed all the other bad things that have happened to that one over time.
So, doesn’t matter where you look, the China reopening is important, and there’s a great opportunity here. The market as a whole is not believing that it’s real. If it turns out to be real, if for example, suddenly the testing on travelers gets ended at the destination end so, you know, no more testing required before you come to Australia or U.S., or Italy or whatever, that’ll be an even bigger deal. It means the world has truly returned to normal in a way that it hasn’t been for the last three years.
Marc: Yeah. So, there’s a lot of good news in there, but there’s also some, well, let’s call it question marks, right, because the flip side of all this is that with China sort of letting go of most of the restrictions, COVID cases are spiking, or skyrocketing is actually better word. So, I was reading some numbers this morning where it said that the peak of infections may reach up to 5.6 million infections a day at the peak, right? So, you’ve got this massive wave of COVID infections across the country with the Sinovac vaccine not really doing what it’s supposed to do, as opposed to sort of the western vaccines that have proven fairly effective, right?
Stuart: There you go. You’ve picked on another beneficiary of this whole sector, Marc. The biotech sector, the western biotech sector that developed the efficient vaccines that you and I got in our arms several times. They now get to sell into China, basically. And it’s a further, pardon the pun, shot in the arm for that whole sector to suddenly have to have to support China after they lost a bit of face in terms of their development.
Marc: Yeah. So, look, I’m not sure if China’s going to allow that. Potentially, what is happening now…
Stuart: They’re already doing it now. As in, there are vaccines coming from elsewhere.
Marc: Right. So, what I’m noticing, Stuart, is a friend of mine’s got her parents coming over. They’re are here now in Australia from China. And what she’s doing is basically keeping them here for longer and getting them the western vaccines before they go back. So, it’s also happening outside of China, right?
If I sort of can bring it back to the near-term effects, what I think will happen is, so there was some talk that airlines would get more competition from the Chinese airlines once China opened up. I think though that a lot of travelers in Australia, New Zealand, and in Europe, for instance, that most of those could go through China if they wanted to are still a bit reluctant, right, because of the prospect of a plane potentially full of COVID patients that’s not very attractive.
So, I suspect that even though China may bring more planes back online, I don’t think it will necessarily lead to lower price at air travel fairs in the very near term because a lot of people will still want to go direct to, you know, with through the Middle East, with Emirates for instance rather than go through China. So, let’s see what happens there. And the other flip side is, of course, tourism. Yeah, that will come back, but only if you’ve got a negative test, right? So I’m optimistic about the prospects for China in the medium term, so to speak. So, a little bit later this year, but in the early, in the next couple of months, I think it could be it could still be very, very, it will still be very choppy, I suspect.
Stuart: Right. But since markets tend to discount the future by a certain amount, I think investors should be looking fairly carefully now at the big shot in the arm that China has just given the whole world economy, and by extension the markets as well.
Marc: Yeah. Markets look ahead six to nine months, right? So, from that point if you’ve got airlines yesterday that took a bit of a hit like Air New Zealand came down, it’s now below 70 cents, that’s clearly a stock that could benefit given, you know, given enough time with this COVID wave passing in China. So, overall, yeah, I agree with you, Stu. I’m bullish on the markets in 2023 because I think most of the bad news has been priced in, including interest rates that might still go a bit higher, but I think that’s been sort of priced in my market, and energy prices are coming down. It seems Ukraine, Russian War is not over but it seems to be the initial shock is behind us, as in, you know, what the hell is happening, war in Europe?
So, overall, I think you need to look at six to nine months towards the second half of ’23 and then conclude that things are likely to get better. And, you know, as a consequence should look at selectively buying certain stocks again in certain sectors. And, yeah, definitely travel is one of them, I think. I think that’s all we have time for today. So, thanks everyone for joining us on this first webinar. Tune in next week and happy investing in the meantime.
Stuart: See you soon.