Weebit Nano (ASX:WBT): Interview with CEO Coby Hanoch

Weebit Nano

We spoke with Weebit Nano (ASX:WBT) CEO Coby Hanoch about the company’s first commercial deal with US foundry SkyWater Technology. We believe this pivotal deal puts WBT on track for its maiden revenues.

 

Disclosure: Pitt Street Research directors own shares in Weebit Nano Ltd.

 

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Transcription

 

Marc: Hello, and welcome to “Stocks Down Under.” Today, we’re talking to Coby Hanoch, the CEO of Weebit Nano. Good morning, Coby.

Coby: Hi, Marc.

Marc: First of all, congratulations on the deal with SkyWater. It was a long time coming.

Coby: Thank you.

Marc: It’s finally there, but it’s a huge deal for your company, right? What does it mean for Weebit, and talk a little bit about how this deal came into being.

Coby: Well, this is probably the most important milestone a semiconductor company can have in its history. It happens only once that you have a first commercial deal, so, you know, it basically signals the transfer from being a pure R&D company, developing a technology, to a company that is now working in a production facility, and moving into the commercialization. So it’s really a major milestone after many years of development, and I would like to clarify, because I realize that not everyone understands just how difficult this whole thing is. I talked in the past about the fact that we really have a triangle here. Weebit is providing a technology which customers will then embed into their chips, and then they need to manufacture it in a fab.

The challenge is that when you have this triangle, every time I talk to a customer, they say, “Oh, you know, it looks great, but which fab will we manufacture it in?” You talk to a fab, they say, “Oh, it looks nice, but we’re not gonna waste time on adapting our environment for you when there’s no customers out there.” And what this deal actually, shows, we broke this triangle. We broke this deadlock. We are working with a very, you know, a very high-quality fab. SkyWater is a well-known U.S., DoD-accredited fab. So this is really a very important step forward, and now, together with them, we will go to get the customers on board.

Marc: Right. So, you sort of broke through the vicious circle, basically.

Coby: Yes.

Marc: If I look at the announcement, there’s a number of elements there. You’ve got the licensing deal. You’ve got the tech transfer you’ve just talked about, you know, your future revenues into the royalties. Can you talk a little bit about these different elements, and how they sort of fit together?

Coby: Yeah. So, since we have here both SkyWater and customers, the licensing agreement is between Weebit and SkyWater, and SkyWater will be paying Weebit a license fee, according to this agreement. In parallel, we’re working with them to transfer the technology and qualify it, so that customers will be able to manufacture. And SkyWater will be offering this technology to their customers, Weebit will be bringing potential customers also in, and when the customers come in, they will be paying, for each product that they do, basically, they will be paying a license fee to license the technology, they will be paying us royalties, and these products normally run for many, many years in production, so you have a constant flow of royalties coming in.

And some of those will actually want to do adaptations to the technology, so they’ll also be paying us engineering fees for all of that work.

Marc: Right. Okay. So, could you talk a little bit, or clarify the timeline, I should say, for that qualification process, and how does it relate to the test chip tapeout you did back in July?

Coby: Okay. So, yeah, there are several terms here that need to be clarified. The first step right now is transferring the technology to the SkyWater facility. We talked many times about the fact that we use fab-friendly materials. It’s very easy for us to go to a new fab and transfer the technology. Nevertheless, you know, different fabs use different tools, or, you know, and actually, the term used is we’re transferring “the recipe,” and, you know, just like in the kitchen, when you bake a cake, we’re talking about ovens, you know, a key part of the manufacturing of semiconductors. So, you know, they use different ovens and so on.

We need to transfer the technology adapted to their environment. That’s the first phase. That will take us a few months, probably. And then we need to go through qualification. Qualification means that you need to run a lot of wafers through the fab, and verify that all of the dies on all of the wafers…the die are basically the chips, what we end up calling…all of them meet the technical criteria, all of them perform uniformly, they all work the same, they’re all… Because in mass production, you can’t have any deviations. Everything needs to be the same between wafers, on the same wafer, everything needs to work the same. That’s a long process of just running a lot of wafers through the fab.

We expect to finish the qualification process about a year from now, towards the end of next year, so that towards the end of next year, we will be ready to start volume production. In parallel, there’s the R&D work. That never stops. Okay, actually, even when you’re getting into production, well, you even have to accelerate R&D so that you keep improving the product. The test chip that we announced is part of the R&D work. So, we did that with Leti, it’s been taped out in the Leti facility, you know, before we signed this agreement with SkyWater. We will get the results from Leti, and whatever we learn there, we’ll actually be transferring, also, of course, to SkyWater, to improve the technology.

Marc: Right. So, is this qualification process something that every new customer or foundry that you work with needs to go through, or is it a one-off? It sounds like it’s something that every customer needs to go through.

Coby: So, actually not. What we do is we need to qualify the technology. So, once the technology is qualified, even if different customers want, you know, somewhat different modules, the base technology is the same, so you don’t really need to do a re-qualification. If they want major changes, there will be some additional testing done, etc., but the qualification is basically, once you have the technology qualified, you don’t need to re-qualify all the time.

Marc: Right. Unless you wanna go into a different fab? Different company?

Coby: Oh, for sure. And by the way, it’s important to clarify. This licensing is non-exclusive. Weebit will be actively working with other fabs to bring more fabs on board. You could say even that now when we have this first agreement, it will put the pressure on other fabs to sign up, because nobody wants to be left behind. You know, everyone’s using the older flash technology. Nobody wants to be left behind when others are moving forward with a more advanced technology like ours.

Marc: Yeah. And so, talking about the technology, the 130-nanometer node is relatively old. What did working with SkyWater at these nodes specifically bring into the advantages for you guys?

Coby: Well, the fact that this technology has existed for many years doesn’t make it anywhere near obsolete. Many products don’t need more advanced nodes, and more advanced nodes are just more expensive, so if you don’t need the specific technical features that more advanced nodes give you, it’s better to stay on 130, and 130 is actually one of the most popular nodes today in the industry. So it’s not, you know, kind of old, obsolete, or something like that. It’s actually very, very active. This is the most active node at SkyWater today, and many, many products are manufactured at 130. So for us, this is good because it’s less challenging. It’s a faster path to revenue. I always have in mind our investors want to see us bringing in revenue. There’s no need for us to make bigger effort, and go through much more difficult qualification processes on smaller geometries when we can do it here with SkyWater on 130. There’s a big customer base waiting for it. And after that, we can continue to the smaller nodes, and we are obviously working on smaller nodes.

Marc: Yeah. All right. And, yeah, and I think SkyWater’s got a 90-nanometer line as well, in Florida, one of their other facilities. But, in terms of…

Coby: Yeah. They have 90, they’re working on even smaller ones. They’re making big investments now. SkyWater…by the way, SkyWater has been making big investments, and now, with President Biden’s $52 billion USD fund set up to boost semiconductors in the U.S., they’re going to be one of the key benefactors of that fund. They’re gonna have a big boost of investment, and I think you probably saw the picture of President Biden holding a SkyWater wafer. You know, it’s not a surprise for me that he was holding the SkyWater wafer and not other wafers in his hand when he was talking about semiconductor infrastructure in the U.S.

Marc: Yeah. Look, I think there’s less than 100 companies accredited under that program, right, so if a foundry like SkyWater’s part of that, that’s a very big deal. In terms of their customers, so, Infineon, from Germany, is one of their bigger customers, I’d say, in terms of company size. They acquired Cypress a little while ago, two years ago, I think. So, that’s U.S.-based. But if you look at the product categories, and the verticals, I should say, so you can talk about automotive, or defense, or industrial, or consumer, whatever it is, where do you think Weebit’s products will end up the fastest, in terms of where do you see it end up in commercial products?

Coby: Well, we’re starting to work now with SkyWater on approaching their existing customers, because that’s the lowest-hanging fruit. And presenting this to them, many of those customers are more in the defense, in aerospace, and so on, so that’s going to be the first customers we talk to, but of course, they also serve already, and they’ve been expanding into automotive, into cloud computing, into consumer, so we’ll be working with them, and approaching more and more potential customers. There’s gonna be a very intensive work here.

Marc: All right. Looking at that process that you just described, the qualification, by SkyWater, together with you guys, but in a broader sense, onboarding new companies, new customers, it’s a huge undertaking. Given Weebit is a relatively small company still, what is the capacity to onboard multiple new customers at the same time, or simultaneously? How many could you handle at one particular time?

Coby: So, we’re starting off totally focused on making the qualification with SkyWater a success. And by the way, one thing that I didn’t mention, you know, but I had some people ask me, “Well, what exactly is SkyWater investing here? I mean, is this just Weebit investing or whatever?” You know, and I have to make this small comment. Everyone, I believe everyone already knows there’s a huge shortage in chips, in semiconductors in the world right now. Fabs are, you know, producing as much as they can, as fast as they can, 24/7, getting as much revenue as they can. The fact that a fab is going to allocate time in their production, line for working with us to transfer the technology and qualify it, that’s a huge statement by SkyWater, and I think it’s very important that people think about it for a second.

They could have been running production wafers, generating revenue through the fab. So, that’s a key comment that I would like to make. We’ll be very focused with them to make this as efficient as possible, and get this out there. We’re gonna be bringing customers on board. I wanna make this a big success for Weebit and for SkyWater, so have multiple customers, with multiple products, being manufactured there. And we can handle, once we ramp up, once we get this qualified, we can handle many customers. And in parallel, as this qualification process moves forward, we will be talking to other fabs as well, so we’ll be broadening this. We can broaden it to many, many customers.

Marc: Right. So, yeah, that brings me to my last question, really, and you partly answered it, because the question, of course, on investors’ minds right now is, okay, so what’s next? So, they know what’s coming next with SkyWater, but what’s next in terms of, you know, potential new foundries. I’m not saying customers specifically, because that could relay to SkyWater customers, but foundries or production partners, what should they be expecting in terms of timelines? Can you talk a little bit about what is on your horizon in, say, the next 12, 18 months.

Coby: I would say there are a few parallel paths happening here. We have an incredible technical team that’s gonna be working with SkyWater, of course, on the technology transfer and qualification and so on. That’s one path. We have an amazing VP, marketing, business development, that I’ll be working with on the business side, bringing in more customers, getting…talking to SkyWater’s customers, and getting this whole thing moving forward, so that we can get to revenues as fast as we can. And, the third activity, as I mentioned, we have to keep pushing the R&D activity full force ahead, to keep improving the technology. In high tech, if you don’t run forward all the time, you’re basically falling behind. So, these are gonna be three parallel paths that are going to be the key focus in the next 12, 18 months.

Marc: All right. Well, thanks, Coby, for taking the time out of your busy schedule. You must have been flat out in the last couple of weeks, and it sounds like a lot of work cut out for you in the next 18 months. So, thank you very much.

Coby: Yeah. Thank you.