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It's completely outside of their control but with trust in the board already low it would be hard not to view previous guidance as overly optimistic.

Agreed also.

If I were Hamoodi I'd hold fire on an EGM until the end of the year. There's very little chance of getting the board out right now, but if commercial production is delayed again I think there's a decent chance.

For what it's worth, I do think we will get orders this year. The closer we get to "end of calendar year 2023" the less chance of a further delay.

I guess my point is that if you develop e.g. software you could sell it for £5 or £50,000 depending on a whole host of factors. Manufacturing generally has more predictable and accepted profit margins.

But I do agree that we're stabbing in the dark to a large extent.

I wouldn't call the pricing arbitrary. BT has said previously that when they start pushing towards decent volumes they'll be aiming for 25% cost of materials with 40-50% gross profit margin. That kind of margin is standard in sensing manufacturing so any increase in costs should be able to be passed on quite easily. You could then be looking at operating margins of 30% plus which is generally speaking very good.

Anyway, I don't want to sound like a ramper so I'll leave it there. I have a strong residual doubt that we'll get to commercialisation after everything that's happened this year.

Also Nanonano, just to go back to your point about the price per sensor. If the facility can cover a "few hundred million devices" and the 24/7 revenue is c. £100m, that surely checks out at 30p per sensor?

Thanks Nanonano, happy to stand corrected.

BT answered that question through the lens of how many shifts a low or high volume production would need, which then produces a revenue total in that a major mobile handset would require a full shift immediately. I wouldn't infer from the answer that it wouldn't require more than a full shift, but rather that a full shift is the base level.

That £15-20m figure for a 'major' mobile handset has only ever come from Edison, not the company, as far as I am aware.

It also hasn't been explained what 'major' means. Apple and Samsung sell about 3x as many phones as numbers 3-6. For that reason the £15-20m figure is ridiculously narrow. I'd say more like £10-80m.

Some more clarity on our production capacity would of course be helpful, but they are cautious about divulging too much commercial information.

What they have said though is that Runcorn can accommodate a few hundred million devices and in revenue terms c. £100m per annum. So that works out about 30p per device.

Runcorn was built to accommodate capacity for every iphone (230m) and iPad (40m).

Also, this tech blog says that the current iphone 14 and the iphone 13 had a face ID sensor supplied by ST Micro.

https://www.techinsights.com/blog/apple-iphone-14-image-sensor-preliminary-analysis

Don't the pundits only focus on new features though? A next gen Face ID sensor isn't something customers would get excited or really care about.

Ah ok sorry didn't mean to mislead anyone about that, shouldn't have indicated it was a fact.

That said, I think my point is still valid that STMicro wouldn't get out of bed for 3 million low cost sensors. Given that they supply sensors to the iphone (don't ask me which!) it's fairly plausible the material will be used in an iphone.

This is my take on material set A (not being a technophile it's based on attempting to connect dots rather than knowledge of tech):

- ST Micro have been supplying Apple with Face ID NIR sensors since the iphone X (fact)

- It's great tech but its weaknesses are (a) not being perfect in poor light (b) high battery consumption (c) quick, but could definitely be quicker (fact)

- Quantum dots can improve all of those points hence why Apple started working with Nanoco (fact about QD)

- During that work, Nanoco worked closely with ST Micro as the party above in the supply chain (fact)

- The cost per sensor was too high so Apple decided to cancel the contract. However, Apple said to ST Micro - if you can get this sensor down to $x we'll put it in our devices. Hence the relationship carried on between ST Micro and Nanoco.

- This is consistent with BT insisting that the ending of the Apple relationship wasn't about them not liking the tech but about them changing design (i.e..because it was too expensive). The implication is that Apple could well incorporate it into a future design.

- It is also consistent with presentations by Jonny Steikl at ST Micro who is keen to emphasise the low cost of QD sensors being a priority.

- Back in 2021 Nanoco were saying the ST Micro roadmap indicated production in 2023. It's likelier that the initial product ST Micro were designing it for a had a very fixed production window i.e. the iphone rather than a VR headset.

- It's also unlikely that ST Micro would invest so much in a sensor if the initial product was going to sell c. 3m devices if that. Would be hard to break even at that point. The iphone on the other hand...

Any thoughts?

Looks like we wouldn't be manufacturing any QDs under this agreement but licensing our IP and working together in development - does that sound right?

Interesting.

This will be an RNS tomorrow. Let's see if it moves the market at all.

Unlikely, but possible that ST MIcro have moved messaging to "by end of 2023" to avoid the risk that Nanoco give hints to the market that it could be the iphone.

Thanks Nanonano.

ST Micro have said that their NIR and SWIR global shutter sensors were designed with smartphones in mind. But who knows, any product would be good.

Actually, listening to the Q&A on the latest Investor Meets presentation it seems like any orders will be towards the end of 2023 rather than in July/August. But could be well be in future iphones.

One more post about this. If you look back at the RNSs I don't think there has been a delay in the guidance for commercial orders. You have to distinguish between "visibility" of production orders and actual production orders. There has been a bit of inconsistency on the "visibility" bit; some RNSs say HY2 of 2022, others say HY1 of 2023. None however have said actual commercial orders have been expected in H1 of 2023 or earlier.

I think the first RNS to refer to visibility of commercial production orders in H2 of 2022 was on 3 November 2021 based on published customer roadmaps. On 16 August 2022 the RNS said validation was expected in H1 of 2023 with visibility of commercial production orders shortly thereafter. The messaging has moved on to "anticipation" of orders in 2023 so ST Micro must have told Nanoco there are very likely going to be orders this year.

My point is that these facts are consistent with production of a new iPhone model. Iphones have a 2 year design to production cycle, so in November 2021 they were in the early stages of designing the iphone 15 models. The finalisation of those designs took place in November/December 2022. Final validation and testing is from Jan 23-June 23, and then from July onwards Apple puts in orders to all its suppliers for the parts and the iphones are assembled. As a result, it seems to me fairly plausible that the first device could be this year's iphone. It certainly doesn't seem likely to be the VR glasses, firstly because I doubt they knew back in Nov 2021 that they would release this year, and secondly because that product release in June would likely mean production orders already. If anyone has any counter arguments or can see any holes in that analysis please shout.

As for potential revenues, it would depend on a number of factors. The Runcorn facility can produce materials for a few hundred million devices which equates to c. £100m revenue, so we get about 30p per sensor. Apple sell 230 million devices a year, but they have different specs for different models. ST Micro can also produce some sensors in-house or get them from another supplier, although Nanoco would get license fees for those. In any case, it would be a dream if the iphone were the first device, no matter what the quantities.

Although I'd still be inclined to vote the board out!

The obvious critique of what I've just written is that we can't trust a word Brian Tenner says anymore, a point of view I have sympathy with.

If Hamoodi does call an EGM I'm torn on whether I'd abstain or vote the board out. For those saying that to vote them out could risk commercial production, that sounds like absolute nonsense as the new directors will hardly close down the organic business if it turns out there is real merit there.

I don't exactly trust Hamoodi, and his presentation was fairly ridiculous in parts, but ultimately the board have lost all trust after getting the comms so bad on our settlement chances (bad but forgiveable) and then gaslighting shareholders into thinking it was in line with prior guidance (really bad and completely unforgivable).

It just seems the mostly likely product to enter first, especially since the material was originally designed for the iphone.

It's also worth mentioning that the next iphone design is finalized in November/December. The final validation and testing happens in May/June and the product is manufactured en masse and shipped in Q3/4. That is consistent with the messaging we've had so far. H2 of 2022 we got told there would be production visibility by the end of CY22. Now we're told production orders are expected in CY23.

I don't think we would have received such confident advice if the product was a first gen, like the Apple VR headset. The chances of its production being delayed are way too high. Whereas with the iphone there is absolutely no way Apple can't bring out a new model.