Spectra7 at a Glance. Spectra7 Product Illustration. Blue-Chip End Users

Transcription

1 Ticker: SEV

2 Spectra7 at a Glance Company Overview What We Do San Jose, CA Corporate HQ Spectra7 manufactures high performance analog chips with patented advanced signal processing technology The Company s chips are embedded in the connector of an active copper cable, enabling it to be ultra-thin with high-speed connectivity The active copper cables are in turn sold to end-users in the data center, VR / AR, and other consumer connectivity markets Spectra7 Microsystems Inc. ( Spectra7 or the Company ) is the leader in highperformance analog semiconductor products for broadband connectivity markets The Company has design centers and offices in San Jose, CA, Little Rock, AK, and Cork, Ireland, and sales operations and outsourced manufacturing in China and Taiwan Ticker: SEV (TSX) Corporate HQ: San Jose, CA Incorporated: 2010 Spectra7 is the leader in the VR / AR market and is commercializing its technology with data center partners Spectra7 Product Illustration Blue-Chip End Users 2

3 Key Statistics Ticker: SEV Share Price $ 0.15 CAD* Market capitalization $ 30.2M CAD* TTM revenue (9/30/18) $ 5.7 M USD TTM gross margin (9/30/18) 54% Insider ownership 5% Est. Shares % Common shares issued 201 M 100 *As of 9/28/18 Market Close 3

4 Investment Highlights I Large, addressable markets in VR / AR and data centers, which in aggregate are expected to reach over $9 billion in 2023 II Market leader in the consumer VR / AR market Spectra7 currently has dominant market share of active copper cable PC-based VR platforms III Significant traction in the data center market leading to commercial revenues later this year and driving long-term growth IV Tier 1 customers and end users include Foxconn, Facebook / Oculus, Luxshare-ICT and Amphenol, among others V Capital light business model enables 60%+ long-term gross margins and nearterm profitability VI New, experienced management team has a proven track record with similar semiconductor companies disrupting the cable industry Source: BI Intelligence, Cisco Global Cloud Index, DigiCapital, Statistics MRC, Wall Street Research. 4

5 Industry Overview Where is Cable Used? Cables transmit audio, video and other data, connect consumer devices to systems, and are ubiquitous across industries Copper cabling, in particular, has a very large end market As content becomes more complex, the ability to receive high quality and high speed data becomes increasingly dependent on cable performance What is the Problem? Short, bulky passive copper cables limit applications at longer lengths, these cables cannot transmit high-speed data reliably Optical cables have the ability to carry a larger amount of bandwidth over a greater distance at faster speeds compared to passive copper cable However, optical cables have high upfront costs and experience energy inefficiencies resulting in high energy costs The Solution Active copper cables are thinner and lighter than passive copper cables, and more energy efficient than optical cables, while still able to transmit high-speed data Spectra7 s proprietary high-speed analog silicon solution is the market-leading technology for active copper cables Passive cable bundle Up to 10x reduction in cable diameter 5

6 Active Copper Is High Performing and Cost Efficient Passive Copper Cable Active Copper Cable Active Optical Cable Lengths 1-2 meters Lengths 2-7 meters Up to kilometers in length Benefits Lowest upfront cost Lower power consumption Lower upfront cost Lowest power consumption High quality data High quality data transmission at high speeds transmission at high speeds Thin, light and flexible Considerations Limited to 2 meters at high data rates Bulky Difficult to route Blocks air-flow Highest cost Highest power consumption High Gross Margin / Single Sourced / Secured by over 50 Patents 6

7 Targeting High-Growth Markets Virtual / Augmented Reality The VR / AR market is in the early stages of broad commercial adoption Key catalysts for the industry going forward will be lower pricing and improved content selection Today, Spectra7 holds dominant market share of the PC-based VR active copper interconnect market Spectra7 s growth will be driven by increasing adoption of active copper cable in the PC market, penetration of the console market in 2019 and inroads into the mobile tethered market in 2020 and beyond Massive High-Growth Market Expected Total Market Size in 2020 ($bn) $6 VR $42 AR/MR VR Interconnect Market Size Global VR HMD Interconnect Market ($mm) $27 $15 $33 $20 $40 $27 $46 $33 $59 $ E 2019E 2020E 2021E 2022E PC Console Enterprise analytics, IoT devices and online video are driving the need for greater computing capacity Data Center Growth Hyperscale Data Center Forecast Large Addressable Market Global Data Center Interconnect Market Size ($bn) Data Centers Over the course of E, Cisco forecasts that the number of hyperscale data centers will nearly double Interconnector cables represent a key component of the success of data centers Spectra7 estimates its technology can be utilized in up to 90% of hyperscale data centers $4 $ E 2019E 2020E 2021E E Source: BI Intelligence, Cisco Global Cloud Index, DigiCapital, Research and Markets, Wall Street Research. 7

8 Data Centers: High Growth and High Margin Opportunity The Global Data Center Interconnect Market is Expected to Reach $9.8 billion by 2025 Global Data Center Interconnect Market Size $9.8 billion $4.0 billion E Source: Research and Markets. 8

9 Data Center Interconnect Options Active copper cable solutions utilizing Spectra7 s chips are used to connect servers, racks and computing infrastructure within a data center. Over 90% of hyperscale data enter interconnects require cables between 2-7M and can be addressed with Spectra7 s GaugeChanger technology. 9

10 Spectra7 Interconnects: Lower Power Usage at High Speeds As data center connection speeds approach 400G-800G, Spectra7 s chips offer up to 10x reduced power usage compared to optical cables OSFP (1) 30W 24W QSFP-DD (2) 10x 7x QSFP-DD (2) & OSFP (1) 2.4W 3.0W 1G 10G 100G 400G 800G (1) Short for Octal Small Form Pluggable. (2) Short for Quad Small Form Factor-Double Density. Data Center Connection Speed 10

11 Power Savings For Data Centers Add Up Power Savings 22W ~800W ~4.4MW Each cable using Spectra7 s chips reduces power usage by 22W Spectra7 can save almost 800W per Tomahawk 3 Switch with SpectraLinear Technology For a hyperscale data center with 100k servers, this can add up to 4.4MW Translates into $20 million of electrical savings per year* * Source: (Annual cost of $5,000 per KW) 11

12 Compelling Efficiency Gains and Economics Driving Adoption of Spectra7 Technology in the Data Center Spectra7 s data center chips first introduced to cable manufacturers in 2017 The Company has worked with cable manufacturers and potential end users since then to work through prototyping and extensive testing Recently culminated in interconnect partnerships with: Key achievements and expected milestones include: Nine additional new customer design-ins in Q3 18 Q3 18 data center prototype revenue nearly doubled sequentially 12

13 Spectra7 s VR / AR Market Leadership Advantages of Spectra7 s chip technology compared to passive copper cable solutions include: Lighter, flexible cable Lower power consumption results in lower energy costs Higher performance Spectra7 designed into 100% of PC-based VR platforms Typically three Spectra7 chips per cable Significant gaming content expected for Windows10 MR with Steam VR 13

14 New Design Driving Growth: DreamWeVR Spectra7 s chips featuring SpectraLinear technology enabling AR, VR, and MR devices to drive resolutions of 4K / 5K with low latency over an ultra-thin unified interconnect. Spectra7 s ultra-thin wearable interconnects enable: UHD video resolution Data control Gesture recognition Up to 50 Gbps Gyro interface 14

15 Investment Highlights I Large, addressable markets in VR / AR and data centers, which in aggregate are expected to reach over $9 billion in 2023 II Market leader in the consumer VR / AR market Spectra7 currently has dominant market share of active copper cable PC-based VR platforms III Significant traction in the data center market leading to commercial revenues later this year and driving long-term growth IV Tier 1 customers and end users include Foxconn, Facebook / Oculus, Luxshare-ICT and Amphenol, among others V Capital light business model enables 60%+ long-term gross margins and nearterm profitability VI New, experienced management team has a proven track record with similar semiconductor companies disrupting the cable industry Source: BI Intelligence, Cisco Global Cloud Index, DigiCapital, Statistics MRC, Wall Street Research. 15