Weebit Nano (ASX:WBT) aims to sign multiple new customers in 2023

Weebit Nano (ASX:WBT)

We caught up with Weebit Nano (ASX:WBT) CEO Coby Hanoch to talk about WBT’s commercial and technical progress.

• The company aims to sign multiple new customers this year and also expects to generate maiden revenue in 2023!
• It also just qualified its ReRAM module at 125 degrees, which opens up the vast Automotive, Robotics and Industrial semiconductor markets for ReRAM.

Full transcription below.

Disclosure: Pitt Street Research / Stocks Down Under directors own WBT shares.

 

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Transcription

 

Marc: Hello, and welcome to “Stocks Down Under.” My name is Marc Kennis, and today, we’re joined, once again, by Coby Hanoch from Weebit Nano.

Coby: Hi. Good morning.

Marc: Coby, good to have you. So, we’ve done many of these interviews, and each time we do another one, Weebit, the company, is further down the track. So, right now, I guess the question on everyone’s mind is, what’s happening with the conversations and negotiations with your…? Basically, you know, what could be the second commercial customer for Weebit? Can you update us on that? And you also mentioned in your 4C that things might have taken a little bit longer than people were hoping for, but maybe give us a feel as far as you can, of course, for how complicated these conversations are.

Coby: Yeah. Well, they are complicated. Yeah, these are very complex types of discussion. And I think it’s important to remember we’re talking about… So, there are two types of deals that we’re trying to pull in parallel. You know, we’re trying, not trying, we are working with the foundries, on the one hand. We want to get more foundries on board. We want to transfer the technology to more foundries. At the same time, we’re trying to get some customers, you know, product companies on board. So, I’ll talk about each one separately. You know, in terms of the foundries, you know, the leading foundries in the world, there are not that many of them. You know, in terms of companies that can manufacture below 22 nanometers, I think the number is something like 7 or 8. You know, it’s definitely less than 10.

So, it’s not like we have hundreds or thousands of customers that we can pick whoever we wanna work with. We need to work with these guys. These guys made investments of billions and billions, tens of billions of dollars in their facilities, and they’re always very concerned about, you know, anything. Even though, you know, we are standard material, standard everything, you know, there’s always this, you know, concern that they wanna check and recheck and make sure that everything is fine and ready for their facility. So, we have to go through all of that.

And then, you know, you always have the things that you never can expect, you know. And one of the companies, you know, you have a lawyer suddenly quit, and, you know, they need to find another lawyer, and they need to ramp them up, and they need to do these kinds of things. You know, with another company, they come and they tell you that, you know, everything is standard, but what can they do? One of the tools that we need is already fully booked, and they need to find a solution for that, for more capacity and stuff. And so, I mean, it just goes on and on with a few fabs that we’re working with, you know.

So, we’re making good progress. You know, I have to say everyone that we’re working with, we’re continuing to work with, we’re pushing forward. But it takes time. You know, unlike the previous milestones that we had where it was mostly under our control, technical milestones, and so on, now we’re talking about milestones, you know, you have a partner, and they have their priorities, they have their internal politics, they have, you know, all these other things. And so, we’re working on it. I’m still very confident that we’ll get a deal done in the next several months. And that’s a big focus for us.

You know, on the customer side, again, I gave the analogy in the past on, you know, building that bridge and having a bungee on it that we go to people and say, “Hey, you’re the lucky guy. You’ll be the first one to jump, you know, on this bungee,” and stuff. And obviously, everyone’s hesitant. You know, they have a product that they plan to make hundreds of millions of dollars off over the next few years or whatever. And, you know, now they’re going to be betting it on a technology that, you know, they ask us, “Well, is there any other product in the world that has it that’s in mass production that we can see, we can get that confidence?” And so, there’s always that chicken and the egg situation.

Now, we’re making good progress, and we’re now qualified on SkyWater, which is a major milestone. And, of course, that is giving people a lot more confidence. We’re working, obviously, with a lot of SkyWater customers and making good progress. And, you know, these things will come. It’s hard work. You know, you just can’t give up. You just need to keep pushing all the time, and we’ll be getting these deals.

Marc: All right. Awesome. And so, you mentioned that the first revenue is still expected in 2023. Is that from SkyWater or SkyWater customers, or would you expect that to be from a second sort of foundry or IDM customer?

Coby: So, you know, first of all, we need to distinguish between, you know, closing deals and getting revenues. But we do plan. I do believe we have several potential sources of revenue. So, I believe that, you know, at least one of these sources will materialize. You know, it needs to be clear we’re not talking about huge amounts of money right now. You know, it’s the initial small payments, you know, these first deals because of all of this hesitance of everyone, you know, from something new. It’s human nature. You know, everyone’s always concerned about using something new when you have to bet so much on it.

So, you know, obviously, we’re more flexible in the initial deals, and we enable more payments and things that we normally would ask to be paid upfront. Sometimes we have here conditional payments and things like that. So, you know, the revenue will be slowly ramping up, but I believe we will probably be getting some initial payments before the end of the year.

Marc: Right. So, that will be either sort of a license income or non-recurring engineering fees that you could charge, one of the two, or maybe both?

Coby: Yeah, I don’t think I can go into the details because there’s, you know, several potential sources. I’m kind of working the probabilities of things and saying, you know, at least one of them should happen. So, you know, I’ll leave it at that.

Marc: Right. No, that’s fine. So, here’s a question. You said you’re talking to a number of sources, what’s the potential for more than one coming in before the year’s up?

Coby: Well, obviously, that’s my goal. So, we’re pushing for that. You know, with the foundries, there are so few foundries, and, you know, we’re trying to get more than one on board. We’ll see how much we can do that. Also, you know, a foundry project is a big project. Once we sign with someone, that’s going to be a big project that we launch with, you know, a lot of resources from our side that we need to focus on that foundry. With the customers, it’s easier. There are more customers and more people you can ramp up. And my goal is definitely to have more than one. So, we’ll see.

Marc: All right. And so, the talk has always been about foundries, IDMs. In that whole scheme of things in the ecosystem, you’ve got the fabless companies as well. I’m not sure if you can talk about that at all. What’s the percentage, if any, of fabless companies that you’re talking to out of the sort of total pool of prospects?

Coby: So, yeah, when I say customers or product companies, I’m actually talking about the fabless companies. And, you know, I try to generalize a bit for our shareholders who are not experts in the field. Maybe I should explain just so that everyone understands the terms. So, fabs are where you manufacture semiconductors. They are very expensive to set up, as everyone knows already. So, there are a few companies, which are called foundries, that have their own fabs, and they offer manufacturing services to the world. So, basically, they are a service provider in that sense of just manufacturing services.

There are a few companies, or, yeah, not many, that have their own fabs and manufacture for themselves, and those are called IDMs. So, you know, Intel manufactures its own Pentium processors, for example. But very few companies can actually do that. And then there’s the fabless companies that don’t have a fab that are developing the products, mostly, you know, systems on a chip, SOCs, as we call them, and they need the foundries to manufacture at the foundries.

Marc: All right. So, I think that’s very helpful in that explanation. One part of companies that do have their own fabs, you mentioned Intel. A very big chunk of those would be companies that are active in the automotive space or analog devices, that sort of products. What’s gonna really help you with that is a qualification that you just announced at 125 degrees. Talk us through the significance of that because that opens up a vast addressable market for you.

Coby: So, yeah, we’re very proud that we announced today that we managed to qualify at 125 degrees. Those are already higher temperatures. You know, it’s 125 degrees with 10 years retention. So, it’s very significant. And there are several applications where this is very important. Automotive is obviously a key one. You know, inside the motor, you have high temperatures. Industrial IoT. You know, different machines on the manufacturing floor of different factories can reach pretty high levels as well, and they need to know that the chips that are in there will operate at these high temperatures. So, this shows the robustness of the technology. It shows that, you know, it really is working well. Obviously, if it works so well at 125, you know, whoever’s working at room temperature, we’ve already qualified there, but, you know, it really shows the robustness.

So, you know, there was an announcement I think about a year ago, or I don’t remember exactly when, Infineum, one of the leading automotive companies, announced that from now on their automotive products will be based on a ReRAM. They’re working with TSMC, but nevertheless, the fact that they announced that they wanna focus on ReRAM shook up the automotive market. You know, suddenly, people said, “Wait a minute, you know, if Infineum is doing that, we need to take a close look at it.” And so, there’s really a lot of discussion now and more and more contacts with automotive companies that want to check the option of using ReRAM in their chips. And this is a very important step forward.

Marc: All right. Good stuff. Then shifting focus a little bit to staff, personnel, you announced in the last couple of…well, actually very recently, you announced a new appointment in Israel, I think, but you also have a salesperson in the U.S. since six months?

Coby: Since the beginning of the year.

Marc: Yeah. So, you’re expanding the team. Talk us through the focus areas for that. Is it mostly business development? Is it on the technical side? Is it all of the above? Help us understand where Weebit is expanding at the moment.

Coby: So, we have a very strong R&D team. You know, obviously, everyone knows we have that strong R&D team in France working with Leti, both on the device and the process side. And we have a very strong design team which is in Israel. Now, I am very cautious about hiring. I don’t want to hire too many people before I know that I have the actual contract in my hand. On the other hand, I don’t wanna be in a situation where I close a deal with a major foundry and suddenly I don’t have enough people. So, we’re kind of doing a balancing act. You know, the probabilities of closing the deals are very high now. I’m feeling very confident about it. So, when we see very strong people, we go and hire them.

So, we’re very happy to hire Lilah now in Israel. She was managing a fab. She actually grew in Tower from being a very young engineer through the ranks, all the way to being the fab manager. And she has a lot of experience there. So, I’m very happy to have her join us, and she’s going to be overlooking the activities with the foundries, the IDMs, and getting those deals going. There was a company, an EMRAM company in Grenoble, in France that, unfortunately, I guess for them, lucky for us, they went bankrupt. And so, we kind of looked at their engineers, we knew a few of their engineers. We knew that they’re really stellar, top-notch engineers. So, we ended up hiring them, and they’re going to be starting in September.

So, we’re slowly expanding the team. We’re really not willing to compromise on the quality of the engineers. So, we’re looking for those really good engineers with very good experience, you know, in the memory space. We’ll obviously be hiring also younger engineers once the big projects kick off. You know, we’ll be hiring more, but there’s a very big focus on the quality and on not just going crazy, hiring too many people, and then finding out you have such huge expenses all of a sudden. So, I’m very proud of the team, and I think, you know, the addition of Lilah and now the few engineers in France is going to be a very, very important one for us.

Marc: All right. Excellent. And in your 4C, you mentioned you’ve got $88 million in the bank at the moment. So, that’s a big pool of money for a small company that is sort of at the cusp of commercialization. How does it help you expand in certain areas? Obviously, you know, you have more money to spend on staff, for instance, but where do you see that money being spent? Your staff is one of them. It could be more R&D work, it could be more collaboration with, say, Leti, for instance. As you ramp up, where do you see that money being spent?

Coby: So, the money, you know, it sounds like a lot, and you can run through it really fast, and we’re extremely cautious about that. You know, we wanna make the best use of it. And there are several, maybe two, three key places. So, first of all, R&D never stops. We’re constantly pushing to improve the product. I think we have maybe the strongest, I don’t know if to say the biggest, but definitely, the strongest team working on ReRAM right now in the industry, or one of the top teams.

I can hardly think of anyone who has such a strong team continuing to develop ReRAM, and that’s a key point. You know, you want to continue to improve the quality of the product, you want to improve… You know, we’re talking about going into mass production. We’ll constantly need to improve the yield to get to better and better quality in the manufacturing and in the different parameters. We’re going to continue to qualify at higher temperatures, better endurance, etc., etc. There’s going to be continued work on qualification. So, there’s a lot of R&D work going on. That’s on the one hand.

On the other hand, getting the deals with the foundries, with customers, we need to invest quite a bit to make these deals happen. And we need to remember, you know, we’re talking about some of these initial revenues, you know, small amounts, maybe this year. Next year there will be some ramp-up. It’s important, again, that the shareholders understand the design cycle here. When we engage with a customer, you know, there’s the license fee that normally you get upfront. Now, in some of the deals, we’ll be getting them in conditional payments and so on.

The customer, when they engage with us, they’ll start designing their product. An average time to design a semiconductor product is about a year, you know. And then after that year, they need to go and manufacture the first round, and that will take them, you know, four, five, six months, potentially even a little more, so, you know, another half year. And then they need to test it and then qualify. So, to get to mass production, to get to the point where we get the royalties and start seeing the ramp-up of royalties, you know, this is something that takes time. And, you know, as we start bringing customers on board, you know, obviously, with that delay of order of magnitude of two years, that’s when we’ll start seeing the royalties.

So, it’s important for us to make sure that, you know, we use our funds wisely during the next two, three years that we can get to the point where we don’t need to raise money now, and by the time we will need to raise money, we’ll be able to show the customers ramping up and getting closer to royalties, and so on. So, we’re very cautious with the money.

Marc: Yeah. All right. Lastly, Coby, and you’ve touched on a number of things already, but what do we have to look forward to in the next, say, 6 to 12 months?

Coby: Well, the big focus is, of course, getting these initial deals done, you know, the first, the second, you know, getting a foundry, a big foundry, and that’s a major focus for us, getting a big foundry on board. Getting some initial customers, you know, showing the market that this is real, showing the market that, you know, people are actually willing to commit their money to this technology. I think that’s the most important thing for us, and that’s our top priority.

Beyond that, continuing always to improve the technology, showing everyone in the industry that this is the strongest ReRAM team, this is the team that can really take the technology to the next level. We’re looking at ways to improve the technology, not just, you know, on a step-by-step basis, but, you know, we sometimes have ideas about how we can even do things that are, you know, more creative to really improve the selector, even when we’re using transistors to try to do some things to improve that. So, there’s a lot of R&D work, and we will be announcing as we progress also on that front.

Marc: All right. Exciting times. Thank you very much, Coby.

Coby: Thank you.