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The question that was actually asked was: "You mentioned that there’s a handful of companies that can execute design, manufacturing and delivery of chiplets, who do you see as the main competitors in this space and also in Optoelectronics?"
Tony's precise answer was: "So, great question. Look the five companies that I mentioned in my talk that are able to manufacture chiplets are companies like AMD, Intel and Nvidia. They implement chiplets for their own products. There is no-one today that is developing and deploying chiplets to the broader market, so there’s no competition today for that. That’s where we’re laser focused enabling the rest of 150, 250 semiconductor companies to be able to implement chiplets, not just the five stalwarts that are able to do it today. In terms of who else has great connectivity technology I think I’ve already mentioned that. The only other player that can implement PAM4 and Coherent at leading edge is Marvel. Broadcom has great PAM4 technology but not really a player in Coherent. So for us it’s Marvel and you know what, I love that competition, because Marvel is a great company with extremely long lineage and I’m honoured to be at the table with them but look, the world needs more than one player in the space especially with the explosion of AI, we need competition, we need a robust ecosystem and we’ve invested to be a strong player in the space over the next decade."
So in correct context, Tony was saying that only Marvel can implement both PAM4 and Coherent at leading edge.
I think this is arguably correct and still remains the case today. That said, Credo earlier this year announced plans to collaborate with a Dutch company called EFFECT Photonics to develop coherent DSPs. So eventually, they too will likely be a player in both PAM4 and Coherent at the leading edge .
Mmm...
When asked at the interim's "Who are AWE's main competitors in the opto electronics space?"
Tony Pialis responded "Who else has great connectivity technology? The only other player that can implement PAM4 and coherent at leading edge is Marvell."
Was this
a) incorrect ?
b) correct at the time but no longer correct ?
c) correct at the time and still correct ?
d) 'An answer' to an imprecise question ?
As far as I know Credo build SerDes based on so called N-1 process technology and they can achieve similar or even superior power/performance because of their architecture and feature. They used to have expertise designing SerDes using extensive analog and mixed signal, and therefore have power advantage as compared with DSP+ADC approach. Besides, rather than supporting both PCIe and Ethernet, their SerDes only focused on Ethernet/optical protocols with selective frequency range so that they can optimize power further. (Of course, this can be their weakness from IP business pov.) Using N-1 process technology can make their products more cost competitive while claiming comparable power and performance.
Besides, their AEC (active ethernet cable) is unique to the market. It provides an low-cost yet more reliable alternative than optical fiber and passive cables. Credo AEC is tailor-made for cloud customers and has many different forms. This is by far their cash cow, followed by copper PHY products.
Credo’s last quarterly report indicated that they generated $44 million for the quarter ending 28 October 2023 and $79 million for the last 6 months. So broadly equating to an annual revenue of about $160 million and which is less than half of what AWE are on track to generate for 2023.
And yet, Credo have a market cap of $2.8 billion compared with AWE market cap of $1 billion.
So Credo are valued at 2.8x that of AWE for less than half the total annual revenue.
Moreover, Credo are currently loss making with an annual net loss of around $36 million.
Their cash & cash equivalents position at the end of October was nearly $129 million.
Credo’s share price surged about 27% to $18 in the last couple of months and amazingly had absolutely no difficulty whatsoever in doing another public offering last week to raise a further $175 million at $17.5 per share merely for working capital! Clearly, on the US markets Credo are perceived to be highly investable.
Credo are presently ploughing money into R&D at more than $60 million per year.
Credo’s products, as far as I can understand, when I last checked are what you call n-1 grade products. This means one step behind the latest generation of technology, and therefore essentially less superior to the range of products and IP on offer from AWE. If Credo are fair value today, then you might argue that AWE are at least worth 3 times more.
The AI bandwagon rolls on with Google's Gemini announcement. One small step for Google (allegedly), one giant leap for mankind (allegedly).
Regardless as a 'pick and shovel' play for the AI gold rush things should be looking rosy from AWE's point of view (at their interim's presentation they stated "approximately 2/3 of our pipeline comes from AI or AI related opportunities" - https://www.youtube.com/watch?v=07A8Bpy4iMM )
Can we assume that all steps have been take to ensure that all Banias assets are secure from any collateral damage that may arise as the IDF pursue it's 'Final Solution' to the 'Palestinian problem' ?
I had Acorn shares at 8p
Life changing.
If anyone knows the history of Arm then you'll know what I mean.
However, AWE investors probably aren't that sophisticated so have no idea what I'm talking about.
Lol!
Cheers
Barcap
AWE closest peers are on NASDAQ and yes they have similarly increased.
In the last month, Broadcom has risen approximately 18% and Marvel 20%.
Credo has risen about 35% in the last month. Credo is similar in market size and does high end connectivity like AWE except that it generally offers "N-1" products meaning one step behind the latest generation tech. Credo has more cash in the bank as it has not splashed out on acquisitions like AWE and is not yet profit making territory.
Take note that AWE had suffered a retrace of approximately 44% since the H1 interim results as the market perceived the cash flow stats unfavourably. Assuming AWE keep on top of their cash flow management then their future growth should exceed their peers by considerable margins.
This stock has risen 20 per cent in the last month. Anyone out there with information to share? Is it rising along with the other semi conductor stocks?
When does it go ex divi.?
Funny thing that Arm, etc came up 🤣
"Company tops competitive Deloitte Canada’s Enterprise–Industry Leaders award winner list, sees 15X growth over four years after strategic acquisitions, technological leadership growth"
https://www.businesswire.com/news/home/20231108634227/en/Alphawave-Semi-Named-One-of-Canada%E2%80%99s-Enterprise%E2%80%93Industry-Leaders-Winners-in-Deloittes-Technology-Fast-50%E2%84%A2-Program
Interesting interview with Alphawave's CTO Tony Chan Carusone.
https://www.youtube.com/watch?v=-RpHEBy2_L4
He makes the point that where AI was originally happy to piggy back off more general processing and network h/w, over time it has been migrating to more domain specific solutions. We have already seen this on the processing front with NVIDIA's AI chips. However such chips with their massive parallelism need to be able to suck in data from everywhere at once which creates new data transfer challenges.
Cue Alphawave's leading edge data transfer capabilities. Cue Alphawave's leading edge ability to develop and package chiplets.
A positive indicator in the trading update is in pages 29 and 30 of the corporate presentation, were I note that Licence and Non Repeating Engineering bookings are described as essentially USA EMEA and APAC and Royalties and Silicon 75% China 25% USA. Even without adding back the $20M deferred orders this implies the China business at about 31% and reducing. Assuming the rapid increase in USA business continues the earlier heavy reliance on China will soon be history.
"The trading statement was much as I expected and was largely moribund.
I look forward to the analysis by BlueRaphus."
Barcap has provided his two-word conclusion of his personal analysis on the trading statement.
Perhaps his conclusion was reached on the basis of the only main negative in the statement and that is that the year-on-year comparison of new bookings shows a fall of 9%. In particular, the Licence and NRE bookings part has fallen by more than a quarter amounting to almost $15 million less than what they reported in Q3 of 2022.
The company however, pointed out that this does not include the fact that they won a further $20 million in custom silicon NRE bookings during Q3 but was not signed until the 3rd week of Q4. Had it been signed within the period this would have meant a 16% rise in bookings. They are sticking to playing by the book which is fair enough.
Moreover, if you look at their Q1 & Q2 trading updates, the bookings there were 312% and 196% up respectively compared with previous year on year bookings. The Q3 update also states that there is a very strong pipeline of opportunities expected in Q4. If you total up the 2023 bookings so far for Q1, Q2 & Q3, these add up to $260.1 million which already exceeds the total annual bookings achieved in 2022 of $228.1 million.
Given the strong pipeline forecast for Q4, they are on track for more than $300 million in bookings annually and quite likely to be around the $350 million mark which is similar to their guidance revenue for the year, therefore they are at least maintaining their backlog.
The design win rate is such that it is now heading toward exceeding 30 wins a year.
Only around 11% of new Licence & NRE bookings for the year to date has come from China, meaning that the company are effectively reducing their reliance on China revenue while still being able to scale up the business.
Perhaps one of the more interesting highlights is that they have received a design award for next generation chiplet-based AI with a view to a definitive agreement during Q4. As part of this design award the customer is replacing one of their long-standing semiconductor vendors with Alphawave. That on its own should tell you where Alphawave’s future is likely heading and I think there are plenty of polar-opposite words to moribund that can be used to describe this trading update.
The trading statement was much as I expected and was largely moribund.
I look forward to the analysis by BlueRaphus.
Cheers
Barcap
Barcap,
Why is it shambolic?
Under current London Stock Exchange rules there is no obligation for listed companies to issue trading updates except when they are in possession of price-sensitive information. I'm sure Alphawave will issue a Q3 update but they are not obligated to do so and are free to determine its timing as suits them.
Agreed.
I wish I'd sold now at £1.50 when I was considering it.
Unfortunately the move above £1.60 kept me in, and then the loss declaration nose dived the stock .
Part of the living and learning curve i suppose......
Standard for this company to be honest.
Shambolic
Probably will be on Monday. You're right though it should have been this week.
AWE had declared that they would publish their "Q3 Trading Statement 2023" this week ?
https://awavesemi.com/investors/financial-calendar/
it is now listed under 'PAST EVENTS' even though nothing has appeared ?
Am I missing something ?
There's a press release out today regarding the Arm Total Design ecosystem which Alphawave has joined.
This effectively integrates Alphawave's most advanced high-speed connectivity IP and chiplet-enabled custom silicon platforms with Arm's Neoverse Compute Subsystems. In other words it gives Arm's customer base access to Alphawave's connectivity solutions.
https://awavesemi.com/press-release/alphawave-semi-elevates-chiplet-powered-silicon-platforms-for-ai-compute-through-arm-total-design/
https://www.arm.com/company/news/2023/10/arm-total-design-ecosystem
Hi Corissant, yes, the revenue of $315.5m shown on SimplyWall.st is the annual revenue made up of H2 2022 & H1 2023. H2 2022 revenue = Total 2022 revenue (185.4m) - H1 2022 (57.1m) = 128.3m. Therefore, annual revenue covering H2 2022 & H1 2023 = 128.3m + 187.2m = $315.5m.
So, in fairness to you, you were right to say the China portion of revenue for that 12-month period would have been around $200m.
As explained in my previous post the China portion of the revenue is expected to be reduced going forward in line with their 'simplified China go-to strategy' while revenues from all other regions start ramping up.
The decision to change the policy direction was influenced by the recent change in both the geopolitical attitudes and macroeconomic factors toward China over the last couple of years. The gradual withdrawal from the commitment to invest in Wisewave, has inevitably skewed the investment performance in what was the 'China Product Partnership'. The replacement revenue now coming from other regions nevertheless appears to be gaining some traction.
Q3 update expected this week.
Yes you are right by saying "this year" it should mean 2023 H1 only.
The data I was referring to is from simplywall.st and I suppose that contains estimation for whole 2023.
"I saw there is around 200m revenue from China this year. This 2/3 of total. What a big portion. ([LINK REMOVED]"
When you say this year, you should note we only have the interim report for the first half of this year.
The total revenue for the 6 months period was $187.2m, of which about $124m (2/3) has come from China.
Take note also that the company secured the same amount in bookings and have therefore maintained their backlog at $365.4m.
The License & NRE bookings for H1 was $114.9m of which only 9% comes from China.
The remaining $72.2m of bookings is royalties and silicon coming from both North America and China. The split for that part is not stated. What is clear is that the portion of revenue coming from China is intentionally being reduced fairly rapidly and they have stated that in the near future the level of revenue coming from China can be expected to be below 10%.
"Also AW seems to bear losts from WiseWave involvement".
The company intends to exit the Wisewave venture as quickly as they can and in the last investor call they said
they will do that in the second half of next year. You can read the Chairman's statement under the heading
"Simplifying our China go-to-market strategy" near the bottom of page 7 of their 2022 annual report.
"Any discussion on their China involvement and WiseWave investment?"
Hopefully what I have said above should be sufficient to answer your questions.