Investors

10 reasons to invest in SMART Photonics

We have entered a new phase of integrated photonics development. Light has long since left the lamp and has entered a new rapid business creation phase. Foundry’s play a key role in making all this happen faster.

1) Building the smartest business strategy with customers

“Like any high-tech high-growth business, we discussed the different business models we could use to grow the business” Richard Visser explains. “We quickly saw the huge benefits of what’s called the “pure-play foundry model”. We had access to the best tools to manufacture the integrated circuits. But, just as important, we had expertise in the entire production process from a bare wafer through to finished products. On top of that, we had access to a lot of market intelligence and a customer network who had a clear need for photonic solutions.”

“This approach meant we have had customers from our first day of operation in July 2012. And that’s because we’ve built our business on trusted partnerships.”

2) SMART Photonics only makes products using designs from our customers

“We have always been pure-play and independent. The fact that we don’t make our own products is a deliberate strategy.”

“We assumed, correctly, that small companies working at the forefront of technology would be reluctant to work with large foundries. They expressed concern that their intellectual property could be adapted slightly and then used to compete against them in the market. Likewise, large foundries were not keen to share their key technologies because external customers could become competitors. We could see a stalemate situation was actually slowing down the tipping point of Photonics, rather than building a trusted network which is the way it should be.”

“We also learned to master the complete process of a chip manufacturer, including building close relationships with Europe’s best photonics designers and understanding the challenges of the packaging steps after the chips are made. We’re also seeing the development of hybrid chip solutions, which is why we work closely with colleagues at LioniX International who have complementary skills and facilities.”

3) Open Foundry Model is the Best Way to Scale

“We have modelled SMART Photonics on the Taiwan Semiconductor Manufacturing Company (TSMC). They started in 1987. Today they have grown to be the world’s largest independent pure-play semiconductor foundry with sales of NT$763 billion (approximately €21 billion) in 2014.”

4) Apple supports Open Foundry Model

According to recent reports in DigiTimes Asia, Apple has selected TSMC to exclusively build its A-10 chip. That’s the new proprietary chip designed by Apple and which powers the iPhone 7 and 7PLUS.  Apple has changed its dual sourcing strategy that it employed for previous iPhone models, dropping Samsung and switching to TSMC as a single source for their A10 chip. TSMC’s 10-nanometer manufacturing technology is reportedly among the main reasons why Apple did the deal with TSMC.

“We think there are other strong advantages to the pure-play foundry approach.” continues Visser. “TSMC only make chips for others. We believe that Pure-Play is the only way to build trust with customers, especially when you’re working with highly complex designs and Intellectual Property worth billions.”

5) How big can this market be?

“We already have over 50 customers across the world, some in the late prototype stage, others well established. I cannot name them since I’m bound by NDAs (non-disclosure agreements). But I can say they’re very, very large. Many are preparing the technology infrastructure that our global society will use in around 2020. It takes time and clear vision to make these giant leaps.”

These days no-one talks about optical Fibre to the Home (FTTH). In the communications business, they have replaced it with “Fibre to anything”-  FTTX. When you add an extra 3 billion smartphone subscriptions expected within 5 years, alongside the gadgets, sensors and associated cloud storage services, significant changes are needed in traditional telecom thinking and network architecture.

6) Strong backing from the rest of PhotonDelta

Foundries are an important part of the end-to-end ecosystems that are forming, like PhotonDelta. You can’t build high-spec, high-performance applications unless the chips inside perform the way they were designed. Their growth is a flywheel to drive other parts of the supply chain since the photonics chips are critical to other industries including semiconductors.

“Of course, exact data is commercially sensitive,” says Visser. “But let’s say our chip is worth €5, it will be packaged into a module worth €50. Several will be installed inside a system that retails for €5,000 and that is part of an equipment rack in a datacenter worth €100,000. Without high-performance photonics as the key enabling technology then other businesses cannot grow as fast.

7) Over 20 billion IoT Devices

“Photonic systems on a chip” are the key to solving the exponential need for very fast broadband – as well as drastically reducing overall IT energy consumption. Analysts like McKinsey believe that the Internet of Things (IoT) will consist of between 20-30 billion devices by 2020. Gartner believes it is more like 21 billion. Whoever is right, these are still very big numbers. As Africa and Latin America come on line, their prosperity is linked to exponential growth in services that require instant connectivity.

8) Photonics will scale 10x faster

“It took semiconductors 50 years to get to the level we have today – over 2 billion transistors on a single chip inside the current iPhone. But the new breed of Photonics InP can scale 10 times faster. That’s because we can profit from the “lessons learned” from the semiconductor production infrastructure and supply chains already in place.”

“Thanks to the recently concluded European Paradigm research project, we’ve now reached a stage where the SMART Photonics Process Design Kit can be used by any chip designer. You don’t need an in-depth knowledge of the underlying technology or the fabrication process. All you need is a clear understanding of the end goal.”

“Our links to the recently established Institute for Integrated Photonic Integration in Eindhoven and the surrounding research cluster are very strong. They have just been granted funds to embark on a €7.2 million refit to the NanoLab@Tu/e. That’s essential to the further advancement towards putting ever more optical components onto a single chip.”

9) Big financial returns are now within reach

“Our next phase is to build and design a high capacity photonics chip facility so we can scale with our customers. Everything is in place, including both the research and manufacturing expertise. The Universities in the PhotonDelta region are already turning out brilliant students who would be ideally qualified for our global expansion.”

“The equipment to do all this at volume isn’t cheap – think in the region of €100 million. That’s because you’re working with nanotechnology in cleanroom conditions. And the machines to grow and calibrate this new generation of chips have to be built to order – you can’t order them from a catalogue. They also require regular maintenance. But, in the end, it is a tiny fraction to invest for the huge markets of applications that this technology is already making possible. We’ve done the math, so contact me directly if you want to find out more!”

10) Knowing the market like no other

“We know from our customers what their market projections are because of intense contact with them. Because we’re a trusted partner, there is extensive market intelligence available. We know how the integrated circuit markets have evolved with Moore’s law, our customers make market forecasts so they can plan sales and inventory.”

“We have a first-mover advantage in this sector. Our prototyping has been validated by and we’re able to offer a product design kit to customers so we can do Multi Project Wafer runs that produce chips of high performance and reliability.”

11) Tipping Point Reached

“We’ve now reached a point where we are ready to ramp up, building facilities to handle the predicted volume from these independent forecasts and customer feedback.  All this data is used to shape the size, scope and staffing levels that we need in the coming 3-5 years to build on our existing successes. When machines in our business can cost up to €3.5 million each, optimal timing is very important. Our key is being able to quickly adapt to market demand as it ramps up.”

SMART Photonics entered a new phase last year on September 24th 2015 by opening their pilot production facility on the High Tech Campus Eindhoven. This was part of their second phase of their carefully scheduled “path to production”. Another epitaxial MOPVE reactor has been added to their equipment inventory. The “genes” of an integrated photonics chip are made in this reactor. Photonic components like lasers, amplifiers, phase-shifter are all formed at this stage; in effect you’re turning a piece of Indium phosphide into a component that has functionality.

“We’re busy “industrializing” the processes”, continues Richard. “We want to create new- and improve existing building blocks that customers are asking for. That cleanroom can meet a certain volume. But we know we will need a much larger facility within the next 3 years in order to meet customer demand.”

“This piece of equipment allows SMART Photonics to plan and implement scale-up production. Indium Phosphide wafers form the base material on which the photonic components are made of. In the research facility at the NanoLab at TU/e they work with 2-inch wafers. Our pilot production works with 3-inch wafers and the new Fab scheduled for 2018 will be running “state of the art” 4-inch, or even 6 inch wafers. So, chip designs that have been tested and validated in the Nanolab research centre at Eindhoven University of Technology can now be produced in larger quantities, and at a cheaper unit price.

Road map towards 2018 and beyond

“Following the start-sign last year, we commissioned a top-level engineering company to draw up detailed plans for the full production facility. Those schematics are ready and we know what equipment what we need to build to house the equipment that we need to order to meet the anticipated capacity by a specified deadline.

The A-team of Photonics Chip Manufacturing

“We were particularly fortunate to have very experienced people with a long history in photonics on our team. They are world-renowned specialists in both epitaxial growth, processing as well as the new generic integration technology. As well as research knowledge, we have now assembled business expertise so we can accelerate the process of turning designs into operational devices.

Making best use of the great opportunities ahead

“We have been approached by foreign investors who want us to build a similar facility in their country. That doesn’t work, because just building the machinery isn’t enough. The practical high-tech expertise we have on board is just as valuable. That’s an important part of the relationship we have built over the years with our customers. So whereas others work FOR their clients, we believe it is more like working WITH them. And, when you’re working with designs that could create business worth billions, each party needs to have 1000% confidence in the reliability of the other. And, yes, I do mean 1000%!”

Robert Feelders CFO

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