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Weebit Nano

ASX :

WBT

Market Cap : $389.41 Million

52 Week Range : $1.55 - $4.48

Share Price : $2.27

Buy

With its revolutionary chips on the verge of production, we upgrade to a high-conviction Buy.

Company Analysis

Weebit Nano (ASX: WBT) is now another step closer to full production. We have recommended it before, and it is one of the most widely covered stocks here at Shares in Value. We are also aware that it is one of the most widely held stocks among our members.

Today, we think WBT deserves another update as there are significant updates to be digested. We have already successfully caught a couple of runs of the WBT share price in the past, with the latest being a Buy recommendation at $1.73 a share in 2021.

At current prices, WBT has returned over 31%. WBT shares have also trended low recently due to the overall market volatility. We believe this is a very good opportunity to secure a position to ride the third run.


Source: Tradingview.com

Here is how the narrative has played out so far:

  • Weebit Nano has been working on innovating a new ReRAM technology set to revolutionise the semiconductor memory market, more specifically, the Flash and DRAM memory market.
  • Their technology is 1000x faster and 1000x more power-efficient than the current memory technology. It is also easy to manufacture as the company claims it is made from common materials found and used within the semiconductor industry.
  • WBT has consistently hit their milestones, filed several patents, and validated its product concept. Following an equity raise, the firm is also optimally positioned to keep progressing.
  • WBT has also signed up its first commercialisation deal with SkyWater and is now looking to add to it.
  • In 2022, Weebit Nano is on the verge of beginning production. At a time when the entire semiconductor manufacturing industry has hit somewhat of a roadblock recently as the demand is way too high for the supply to keep up.

The biggest update is that WBT’s demo chips have performed as expected – a very important milestone.

Demo chips Test brings Optimism

On the road to production, WBT has hit yet another milestone. In early April 2022, Weebit moved closer to delivering a commercial product with the demonstration (demo) chips integrating its embedded ReRAM module successfully and completing functional testing. Weebit received the silicon wafers containing the demo chips from manufacturing in December, and together with CEA-Leti, they sliced the wafers into chips and packaged and extensively tested them.

Testing included set and reset programming and reading the entire ReRAM array using smart algorithms and various data manipulations. Weebit and CEA-Leti also tested the advanced features of the memory module and the operation of the entire subsystem, confirming the demo chips perform as expected.

Customers can use these demo chips to design Weebit’s ReRAM into their SoCs. The demo chips, manufactured at Leti, have now moved to the next step– characterisation and qualification.

Demo chips are an important commercialisation milestone. Once qualified, this is solid proof for customers/fabs that the module is ready for mass production. This qualification update has the potential to be quite the catalyst for the share price.

WBT is looking to Expand its Technology Use

During the recent quarter, Weebit commenced scaling its embedded ReRAM technology down to 22nm – an advanced process node for IoT, AI and 5G applications, which only a few of the world’s leading fabs support.

The company is working with development partner CEA-Leti to design a full IP memory module integrating a multi-megabit ReRAM block targeting an advanced 22nm Fully Depleted Silicon On Insulator (FD-SOI) process.

This new 22nm program follows the achievement of production-level parameters at 28nm on 300mm wafers last October.

Weebit is leveraging its strong balance sheet to accelerate development plans to scale its technology to smaller geometries where existing embedded flash technology is no longer viable, enabling future customers to create new products in advanced geometries. This is an important milestone in the embedded memory market.

Technology transfer to SkyWater’s US fab is on track

Weebit Nano’s first commercialisation deal came through in 2021. SkyWater is a US-based and US-owned, US Department of Defense accredited pure-play technology foundry, specialising in advanced innovation engineering services and volume manufacturing of a wide variety of differentiated integrated circuits.

Weebit’s first commercial deal is a critical milestone for the company, providing commercial validation of Weebit’s ReRAM technology and commencing the growth trajectory for the company’s cutting-edge technology onto customers’ chips.

Weebit’s transfer of its embedded ReRAM technology to SkyWater’s US production fab is on track to tape-out the first demo ReRAM chips by mid-year. While Weebit’s technology uses industry-standard materials, the semiconductor manufacturing process is complex, requiring adaptation to the specific tools used by each fab.

Following tape-out of the demo chips, technology qualification will begin, which entails extensive testing of manufacturing processes to ensure the repeatability of Weebit’s embedded ReRAM at scale. SkyWater will then add Weebit’s ReRAM to its 130nm Process Design Kit, enabling SkyWater customers to license Weebit’s technology and embed it within new product designs they develop and mass-produce at SkyWater’s fab.

Further Commercialisation in the Pipeline

The commercialisation of ReRAM technology will provide enhancements to a range of new electronics in industries such as automotive, which require high-temperature performance. Weebit’s ReRAM allows semiconductor memory elements to be significantly faster, less expensive, more reliable and more energy-efficient than existing embedded Flash memory solutions.

Given the broad applicability of Weebit’s technology, it can be scaled to several other technologies like SkyWater’s 90 nm and carbon nanotube platforms. Because it is based on fab-friendly materials, the technology can be quickly and easily integrated with existing flows and processes without the need for special equipment or large investments.

The agreement with Skywater is a typical IP licencing revenue model wherein an upfront license fee will be paid to Weebit, and an ongoing royalty also is paid based on the production volumes. This is a crucial first step for Weebit as it brings in first revenue and cash flows into the firm and accelerates commercialisation deals with other manufacturers. The deal with SkyWater ensures that it is a non-exclusive license to Weebit’s ReRAM technology, and Weebit will actively look for other commercialisation partners to further boost their revenues.

Outlook

Technical evaluations and business discussions with potential customers and partners are ongoing. The functional demo chips enable Weebit to demonstrate its embedded ReRAM to potential customers, supporting adoption before qualification by enabling potential customers to test and evaluate the technology within their applications and designs.

Weebit remains focused on commercialising its embedded ReRAM memory technology and is on track to achieve further milestones by the end of CY22:

  • Technology transfer of its technology to SkyWater’s US fab and being in advanced stages of qualification;
  • Demonstrating the functionality and performance of its embedded ReRAM module;
  • Signing new licensing agreements with partners and customers; and,
  • Continue scaling its embedded ReRAM to 22nm.

These milestones range from product innovation and improvement to commercialisation. In parallel, Weebit continues to work with CEA-Leti to develop a solution for the discrete memory market.

In Q3 FY22, Weebit Nano received $8.5 million from exercising options. A further $300K was raised by issuing Placement shares to three directors, following shareholder approval as part of last November’s capital raising. R&D expenses were offset by a GST refund in France, totalling $1.9 million, resulting in a cash inflow from R&D of $759K. Payments to related parties over Q3 FY22 were $752K, including fees paid to directors and the CEO’s cost of payroll and bonus for the period.

At the end of the March quarter, Weebit Nano reported that it held $53 million in cash on its balance sheet – a considerable amount given that Weebit Nano’s average annual cash burn is less than $10 million. We can thus conclude that WBT is well funded and positioned for growth activities and the next steps of commercialisation and production.

Weebit Nano is Targeting High Growth Markets

While their technology and process allow WBT’s chips to be used in various industries and applications, WBT is focused on delivering its chips to 5 different markets in particular. All 5 of these markets are of extremely high growth and are responsible for shaping the future.

Analog & Mixed-Signal Power Management:
Analog Semiconductors 2019-2022: $55B to $83B (10.8% CAGR)

Automotive Applications:
Automotive Semiconductors 2020-2026: $34B to $78B (14.75% CAGR)

Internet of Things:
IoT Semiconductors 2020-2025: $33B to $80B (19% CAGR)

Edge AI Applications:
Edge AI Chipsets 2021-2028: $8B to $28B (28% CAGR)

Aerospace & Defence:
Aerospace & Defence Semiconductors 2019-2027: $5.8B ◊ $8.6B (5% CAGR)

The growth across all 5 of these sectors is extremely high, and the level of innovation is pushing the boundaries in each of them. WBT’s technology will allow for these innovations to take shape and play an integral role in the overall growth of industries.

The Verdict

Weebit Nano is positioned exceptionally well. The industry needs a non-volatile memory solution, and WBT is giving them one. The product innovation has taken shape, and WBT has even signed its first commercialisation deal. Product testing has also yielded positive results – the latest milestones as WBT gears up for production. The firm’s Board & management team have extensive semiconductor commercialisation experience. WBT also has enough cash in the bank to support its operations and is currently in the works to secure additional new commercialisation agreements.

At current subdued prices, our analysis suggests that WBT is undervalued. We upgrade our Buy to a “High Conviction Buy” for investors with exposure and investors looking to enter positions in WBT for the first time.

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