Q2 2023 Akoustis Technologies Inc Earnings Call
The.
fiscal 2023 second quarter conference call. As a reminder this conference call is being recorded. At the conclusion of the company presentation, Acoustics Management will take questions. To ask a question please press star 1 on your keypad to be placed into queue. A replay of the call will be available.
and Investigation Section of the Custis website. Thank you, operator, and good morning to everyone on the call. Welcome to Acoustis' second quarter fiscal 2023 conference call.
We are joined today by our founder and CEO , Jeff Sheely, CFO Ken Bowler, and EVP of Business Development, Dave Eichle.
Before we begin, please note that today's presentation includes forward-looking statements about our business outlook. All statements other than statements of historical facts included in this conference call, such as expectations regarding our strategies, operations, costs, plans, and objectives.
including the timing and prospects of product development and customer orders, our expectations regarding achieving design wins from current and future customers, the possibility of entering into collaborative or partnering relationships, potential impacts of the COVID-19 pandemic, litigation matters, guidance regarding expected revenue, and the potential impact of the COVID-19 pandemic.
product orders and milestones for the current and future fiscal quarters and expectations regarding the integration of acquired business operations are forward-looking statements.
Such forward-looking statements are predictions based on the company's expectations as of today and are subject to numerous risks and uncertainties.
The company and our management team assume no obligations to update any forward looking statements made on today's call. Our SEC filings mention important factors that could cause actual results to differ materially. Please refer to our latest Form 10K and Form 10Q filed with the SEC to get a better understanding of those risks and uncertainties.
In addition, our presentation today will also refer to certain non-GAAP financial measures. A reconciliation of these measures to the most directly comparable GAAP measures is presented in our earnings call highlight release available in the investors section of acoustics.com.
I would now like to turn the call over to Jeff Sheely, founder and CEO of Acustas.
Thank you, Tom, and welcome everyone to our Fiscal 2023 second quarter conference call. I am pleased to report that the December quarter was a transformative period for acoustics.
This transformation is centered around our entry into the 5G mobile handset market through the qualification of our new wafer-level packages that were developed and manufactured in less than one year in our upstate New York Fab.
The availability of this disruptive package technology facilitated our first design win, along with a high volume order for the 5G mobile handset market, our largest addressable market by volume and revenue.
In January , we completed the acquisition of privately held grinding and dicing services Inc or GDSI.
A strategic addition to our business model across multiple fronts.
GDSI has been a key part of our back-end supply chain over the past year as we increase the usage of chip scale packaging or CSP and wafer level packaging or WLP in our X-Baw RF Filtered Product Portfolio.
Further, GDSI adds a critical piece to our strategy in 2023 to pursue CHPSAC funding to reshore our back-end packaging supply chain on our existing campus in upstate New York.
integrating and expanding GDSI into our New York operations.
will create an end-to-end domestic semiconductor manufacturing process supporting national security while also creating many attractive high-paying jobs in the Finger Lakes region of New York State.
Finally, for our current RF filter customers, we expect that the integration of GDSI will enable Acoustis to substantially speed up the prototype process and consequently reduce the time to market for our leading X-Baw filters.
This acquisition could not have happened at a better time as demand is rapidly increasing for ball filters that operate at frequencies in our sweet spot above 3 GHz in the 5G mobile, Wi-Fi, network infrastructure, defense, timing control and other markets.
I am pleased to report another quarter of record revenue with 5% sequential growth over the September quarter.
Our X-Baw filter revenue grew sequentially in the December quarter and we expect continued growth on a quarterly basis moving forward.
This revenue growth was achieved despite significant macro headwinds across most of our operating segments.
Looking ahead to the March quarter, we are expecting 20 to 40 percent sequential growth across multiple products and services.
participating in multiple end markets.
The weakening demand in the tech sector, along with several other macro challenges, may impact the rate of growth of our business in the near term, which is consistent with recent commentary and guidance from other semiconductor companies.
During the December quarter, we experienced broad weakness in our soft filter business in end markets such as automotive, IoT, medical devices, and particularly in China and Europe .
We expect strengthening in our saw business in the current quarter. However, in our X-Ball filter business, we expect to see growth increase in the second half of the calendar year as we ramp in mobile and our next generation Wi-Fi 60 products begin to ramp with multiple customers.
While we navigate near-term challenges, we continue to expect incremental sequential growth each quarter throughout this calendar year.
Further, we remain focused on executing our entry into the 5G mobile device market with volume shipments beginning this quarter, providing acoustics with a significant opportunity to grow rapidly in both unit volume and revenue for the foreseeable future. I would now like to give a brief update regarding the chips and science.
of billions of dollars to increase domestic semiconductor manufacturing and science research.
As some of you may recall, Senator Schumer has personally visited and toured the Acoustis Fab in upstate New York twice, once in June 2021, and again this past September .
He was pleased with the growth in manufacturing capacity and new jobs that we have delivered over the past year.
Acoustic senior management is working closely with the local regional and state government of New York along with Senator Schumer's office to support implementation of CHIP's act opportunities in upstate New York, which we expect will present a significant opportunity for the revitalization of upstate New York semiconductor presence.
and in particular the Greater Rochester area where Acoustis RF Filter chip manufacturing facility is located.
Over the past five years, Acoustis has proudly manufactured its innovative RF filter chip products in the USA. We believe the chip's funding is meaningful to Acoustis and its shareholders and that we perfectly fit Senator Schumer's blueprint for the future.
to make New York the global innovation and semiconductor hub. We plan to apply for funding under CHIPS Act shortly after the submission window opens to add multiple new 8-inch silicon wafer manufacturing lines at our New York site.
In addition, given the supply chain delays, energy shortages, and constraints associated with our Asia packaging partners,
We hope to secure CHIPSAC funding to leverage the back-end expertise of our GDSI business to build a US-based Advanced Packaging Center for the purpose of reassuring our packaging supply chain to reduce product costs and deliver our filter products with shorter time to market.
This U.S. packaging facility would support Acoustis X-Ball filters as well as be offered to GDSI's 250 plus customers requiring back-end services.
With respect to the possible magnitude of the funding for Acoustus,
We previously indicated the magnitude of our proposal could be a multiple of the current market cap of ACUSTAs.
Of course, there is no guarantee that we will receive the amount of funding in our proposal, and it is noteworthy to say that the requirements and processes of the proposal are not
for submitting a proposal for funding under the CHIPS Act is yet to be published.
The project financed by such funding would position Acustis to manufacture and deliver billions of X-ball filter chips annually and to serve both Tier 1 and Tier 2 mobile device companies for 5G smartphones, as well as other multi-billion dollar end markets, including 5G,
network infrastructure, high-frequency Wi-Fi devices, and other wireless markets.
I would now like to provide a little more color on our primary target market.
We recently achieved one of the most important milestones in company history allowing us to participate
in the 5G mobile market.
With the completion and qualification of our internally developed wafer level packages or WLP,
This new package technology is significantly smaller than our legacy technology and is the key that has allowed us to enter the 5G mobile device market.
where miniature size is a gating factor.
Our new packages are pin-for-pin compatible with rival ball filter competitors and enable Acoustis to compete strictly on performance.
where we believe we can pair quite favorably.
Bringing the WLP process in-house enhances substantially our ability to control the quality, cost, and customization of our advanced packages.
The successful development and qualification of our new WLP.
solutions, facilitated our first 5G mobile design win, and follow on high-volume order, both of which we announced in the last two months.
This new filter solution will be incorporated in our customers' multiplexer for 5G mobile handsets and other portable devices.
The multiplexer supports a major 5G mobile chipset reference design that is planned for introduction in the first half of calendar 2023.
We expect to begin shipping to this first 5G mobile RF component company customer in the current quarter.
And finally, during the December quarter, we delivered the first of two filters, one of which will be down selected after both have been completed and tested, to a Tier 1 RF front-end module customer that is targeting a production ramp in calendar 2025. The customer is leveraging our leading X-Baw technology to...
business.
During the December quarter, we announced three new design wins in Wi-Fi 6E for carrier-class applications.
We've received two of the design wins from a leading European Wi-Fi OEM that will be using Acoustic's 5.5 GHz and 6.5 GHz standard X-Ball coexistence filter solution.
As well as, our 5.6 gigahertz and 6.6 gigahertz standard X-Ball coexistence filter solutions that allow for greater usage of the Uni-4 band.
The first Wi-Fi 6E router entered production at the end of calendar 2022, and the second router is expected to begin ramping by the end of March 2023 quarter.
The third design win is from a global network communication solutions provider that will be using Acoustics 5.6 GHz
and 6.6 GHz standard X-ball co-existent solutions.
and a Wi-Fi 60 extender for its carrier partner with a production ramp expected by late summer 2023.
In October , we announced new Next Generation Wi-Fi 60 and Wi-Fi 7 filter solutions.
designed to meet the stringent rejection requirements enabling coexistence with the Uni 1-3 and Uni 5-8 frequency bands.
They offer what we believe is the best out-of-band rejection capability available today.
and add a significantly reduced size given our new chip scale packages.
We expect to fully qualify these next-generation Wi-Fi 60 and Wi-Fi 7 products and ramp production in the first half of the current calendar year.
Switching from legacy packaging to our new advanced WLP and CSP products is expected to greatly improve our gross margins over the next 12 to 24 months.
and supports our effort to achieve cash flow breakeven in the first half of calendar 2024.
The Wi-Fi market continues to experience significant disruption from the supply chain issues we have discussed previously, as well as new headwinds in the retail market that have emerged with the impact of inflation on consumer spending.
Overall, this market is characterized as performance-driven but competitive.
Nonetheless, we continue to increase the number of design wins in high-frequency advanced Wi-Fi, given that we were an early-entrant in Wi-Fi 6, 6E, and Wi-Fi 7-Ball filter solutions.
today have one of the most extensive high-frequency Wi-Fi portfolios that address the enormous challenges of difficult dual band coexist wide bandwidth operation within the five to seven
gigahertz frequency spectrum. While near-term macro supply chain issues remain, the
We are executing on design wins, new production ramps.
new product development at a higher pace than ever before and we expect the outlook will improve quickly once the broader supply chain issues improve.
And now I would like to discuss our network infrastructure business highlights.
During the December quarter, we received an order for the development of an ultra-high-band demonstrator from a Tier 1 5G network infrastructure customer.
If the demonstrator is successfully received.
Our customer plans to develop a 5G massive MIMO XBALL filter solution for a multi-element array.
Recently, we have engaged an additional Tier 1 OEM for the same frequency and end application.
We continue to ramp production with three Citizens Broadband Radio Service or CBRS infrastructure companies in the December quarter.
We expect these three customers to continue to ramp throughout calendar 2023 and beyond.
We started to ramp our 3.5 GHz 5G network infrastructure filter with a new network infrastructure customer in the December quarter. This is the second design win we have received for this filter. Our customer is targeting both small cell and MIMO applications.
with our Ex-Ball filter in the European and Asian network infrastructure markets.
We are sampling the first iteration of our 3.8 GHz X-Baw infrastructure, our Filter, for the US 5GC band market, with multiple OEMs and expect to see greater small cell adoption beginning in the second half of calendar 2023.
And now I would like to provide an update on our other business segment.
As mentioned at the beginning of this call, we concluded the acquisition of GDSI, which closed on January 1, 2023. The acquisition brings a new cash flow positive services business to Acustis with 250 plus customers.
Significant technical expertise in back-end services and alignment with our strategy to leverage the CHIPSAC to create new jobs and reassure core packaging technology for Asia.
In our defense contract business, we continue to progress on our existing multi-year, multi-million dollar contracts with DARPA to further enhance our X-Baw PDK and scale our X-Baw technology up to 18 GHz.
We achieved a critical milestone during the December quarter and are making excellent progress toward scaling our technology to 18 GHz for our customer.
The milestone achieved was enabled by our patented single crystal piezoelectric nanomaterials, which are unique to Acoustus in the ball filter industry.
During the December quarter, we completed and shared new X-Ball resonator data targeting X-band frequencies for a Tier 1 Defense customer.
Our next step is to simulate two X-Ball filter designs utilizing the resonator model for this X-Band application. And we expect to move toward product development upon successful completion of the design study.
Our RFMI business experienced challenges in the December quarter that we believe will be short-term in nature. These include a decline in the automotive market in China due to COVID lockdowns.
general softness in its European business, which was impacted by the economic realities associated with the Russia-Ukraine war and rising inflation, and overall weaknesses in the medical market.
While January will experience the expected seasonal headwinds associated with Chinese New Year, we do expect revenue from this segment to increase sequentially in the current March quarter and return to a more normal run rate as calendar 2023 progresses.
We continue to make progress with our two XBAR timing control products and expect to complete the qualification of the first two solutions in the first half of this calendar year.
The timing RF market represents a significant new opportunity for Acoustus in both unit volume and revenue.
Our primary customer is developing products that could be disruptive in the timing RF component market.
looking to display older analog technologies with ultra-low jitter and phase noise devices. We are extremely excited that our leading X-Ball resonators can offer our customers disruptive performance.
And now I would like to hand the call over to Kim to go through our financial highlights.
Thank you, Jeff.
For the second quarter, it ended December 31, 2022. The company reported revenue of $5.9 million, which is an increase of more than 5% over the prior quarter ended September 30, 2022, and representing an increase of 160% year over year.
On a GAAP basis, operating loss was $12.9 million for the December quarter, mainly driven by revenue of $5.9 million.
offset by labor costs of $8 million, depreciation of $2.6 million.
and other operational costs to a link 8.2 million.
As a result, gap net loss per share was $0.19.
On a non-GAAP basis, operating loss was $10.6 million.
and non-GAAP net loss per share was 18 cents.
Reconciliation of these amounts to the corresponding GAT measures is available in the press release issued this morning, available on the Investor section of our corporate website.
That backspend for Q2 was $3.2 million, a decline from $4.8 million in the prior quarter, reflecting the approaching completion of the capacity expansion and equipment redundancy project in the company's New York fab.
Cash used on operating activities was 11.2 million, down 25% from 15 million in the prior quarter. The company exited the December quarter with 46.6 million of cash and cash equivalents versus 60.7 million at the end of the previous quarter, primarily resulting from cash needed to fund operations and cap expending.
Subsequent to the end of our fiscal second quarter, on January 24th, we closed an underwritten public offering of approximately 12.5 million shares of common stock at a price to the public of $2.75 per share, partially used to cover the acquisition of GDSI.
Net proceeds to accuse this after deducting the underwriting discount and estimated offering expenses payable by accused us were approximately 32 million.
In the current March quarter, we expect multiple new Wi-Fi 6E and network infrastructure customers to ramp production, along with our recent GDSI acquisition, and therefore we expect to see record revenue, with revenue up between 20 and 40 percent sequentially from the December quarter. And based upon our growing backlog of design wins, we anticipate that top-line growth will continue into our next fiscal year and beyond.
Now, now turn the call back over to Jeff to discuss a third fiscal 2023 Quater Performance and future milestones.
Thank you, Ken. We are expanding our market share in CBRS and now 5G infrastructure, experiencing strong demand for our next generation Wi-Fi 6E and 7 products that are expected to ramp production in the June quarter.
The big news, however, is that we have developed and qualified new wafer-level packages.
which have led to our first design win in high-volume order for 5G mobile filters from a Tier 1 customer.
The customer's module, powered by our XBAR resonators, is on a leading 5G mobile SOC chipset, reference design, and we are excited to be positioned to penetrate what is our largest market by units and revenue for the first time in calendar 2023.
Looking ahead, our anticipated March 2023 milestones include in our Wi-Fi segment
We expect to announce our first Tier 1 Wi-Fi 7 SOC reference design win.
Further, we expect to ramp a recently announced Wi-Fi 6E win with a leading carrier class customer, and we expect to secure our first Wi-Fi 7 design win.
For our 5G mobile segment, we expect to begin shipping filters to our Tier 1 RF component company customer against our 5G mobile high volume order.
In addition, we expect to deliver the second iteration of a XBOF filter solution to our third Tier 1 RF front end module customer.
And we expect to complete the second of two filters.
to our second Tier 1 RF Module Maker customer for testing and down selection.
Next, in our 5G network infrastructure segment, we expect to receive an order for an N77 5G Massive MIMO Infrastructure Received Filter Solution.
We expect to sample in the first half of calendar year 2023.
a new Band 41 5G filter solution for small cell base stations targeting the US market.
And finally, in our other market segment, we plan to sample a new CV2X X-Baw filter solution for the automotive market.
And finally, we expect to complete the qualification in the first half of calendar 2023 of two resonators for the timing market from our first customer.
In conclusion, we believe the market opportunity for our patented high-frequency X-Ball filters is substantial. As of January 27, we now have 80 issue patents and 127 patents pending as we continue to build a substantial IP mode around our technology.
We continue to work diligently to achieve each of our stated objectives, and we will continue to provide updates on our execution against these objectives going forward.
Finally, I would like to thank our employees for their hard work, passion, and dedication, which accounts for multiple design wins across the Wi-Fi, 5G network infrastructure, and defense markets. We have also experienced exceptional momentum in the 5G mobile market.
driven by our leadership and filters that operate above 3 GHz and our new and expanding wafer-level packaging capabilities.
I also wish to thank our shareholders who continue to support our company.
And with that, I would like to open the call for questions from the investment community. Operator, please go ahead with the first question.
At this time, we will be conducting a question and answer session.
If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants, use the speaker equipment and may be necessary to pick up your answer before pressing the star keys.
Our first question comes from the line of R. Skumar with Piper Sandler. Please proceed with your question.
as I was muted. Jeff, congratulations to you and your team, some excellent news here on a lot of different fronts. The first question I had, Jeff, was on the 20 to 40% sequential roads and kind of the drivers. I wanted to understand if this is, I know there are a couple of areas you mentioned that are going to be soft associated with macro and China, but...
Are the core markets generally speaking on track or is this pretty broad based revenue growth or is this coming from one or two specific areas? And then I had a follow up as well. Good morning and I appreciate your question.
Let me get Dave to start in here and Ken may want to comment, but I'll certainly end with a couple of comments as well. Thanks.
Yeah, morning, Harsh. The growth is pretty much broad-based. We had good distribution of revenue across all sectors in last quarter with Wi-Fi based station and the mobile picking up defense and the contract, government contract.
So it's pretty well spread. We are seeing this quarter the growth coming from those sectors as well as picking up more in the mobile as we start to ship that high volume orders that was mentioned in the script.
Great guys. And then, yes. Great. And then to that.
This quarter, the March quarter will also include our current acquisition of GDSI's revenue.
So we have previously guided there about one and a half million in additional revenues for this quarter with With the March quarter typically being the lowest quarter for them in the county year
Of course, great. And then, Jeff, you also kind of went out and mentioned that this will be a year of growth generally speaking that you don't expect a downquarter as such. And I know there's a lot of good stuff going on in the design inside, but maybe help us frame the cadence of the quarter or the linearity, if you will. Do you expect a much better second half?
But that business is, we're expecting that business to kind of get back to normal levels in the second half. But if you look at kind of the core business of the company, we do expect ramping in the mobile. They've talked to touch on that. That's going to, and we touch on that in the script. That's going to begin.
later this quarter and we expect to continue adding orders to that for that particular customer and continue a
You know volume production on that throughout the year in addition. We mentioned some other things in the script Which I want to point our investors to we mentioned in Wi-Fi Significant activity if you look at the dominant activity in the design wins. It's in 60 and Wi-Fi 7 if You know for investors that may have been at the seat
this quarter and particularly beginning of next quarter. We continue to grow in the network infrastructure. We talked about activity increasing. We mentioned specifically two customers in the massive MIMO area that we're currently working on solutions so we expect.
continue growth there. And then really in the other class, we've got activity really in all segments, but we mentioned the timing market, we would expect that to complete this qualification and then begin ramping.
in that market as well. We continue to execute and also in the other segments market on our contract business with Dartmouth. There, I think this year could be a pretty significant year along the contract front, particularly in the second half. Both not only we've mentioned in the script that our proposal.
I hope that gives you some context. No, it does. Thanks Jeff. And my last one I'll get back into is typically when we hear of design wins on the mobile side, we hear of a platform not just – companies don't – OEMs don't give out just one phone. So I was curious if you could provide some color. Is this a whole platform that you're winning or won or –
Is it bigger than that or smaller than that? Just any kind of color would be helpful and anything to the magnitude of ASBs would be great if you can. Yes, Dave, if you'd start there all, I'll certainly get some colors one.
Yeah, and we've commented on this in the press release with the design win. It is in a RF component manufacturer that's doing a triplexer, and they are designed into a tier one major SOC provider, so it is a typical reference design.
that you would see go to multiple customers. So the pickup rate, we're working with our end customer to understand who their end customers are going to be once it gets designed into the platforms. This is mainly targeting the China mobile market, so even though the China mobile market is depressed.
And we'll hopefully pick up a lot of part of this year. It's still a new opportunity for us going into new platforms. So it's a pretty significant growth opportunity for Acoustus. And it's our first design win that will leverage to multiple opportunities in the future is the target. So that's a short summary on, and Jeff, do you have any other additional?
and WIFI 6, 60, and 7. So if you take a generation look back at 4G, and we're all opposed distance problems, it's where you can all these bands stacked up against one another. And I think it's what our solution address is.
is the coexistence challenges in the high band, particularly in the bands I just mentioned. So in addition to the reference design that David touched on, focusing on China Mobile, I think it also would be safe to assume not only the...
We believe the product is being marketed on a reference design, but also to some large direct customers in the Tier 1 market. So that gives you a little bit of color. I would also add that, you know, the product is being marketed on a reference design, but
The one project that we publicly announced, there's significant R&D that's going on behind that product for a potential new business which will keep investors updated on a move
Thanks guys, thank you. Thank you.
Our next question comes from the line of Anthony Stoss with Craig Hallam. Please proceed with your question.
All right guys, my congrats as well on the continued progress. Jeff, if you wouldn't mind, I know, and maybe I missed this on the call, you're shipping to 15 different customers now, maybe can you share your thoughts on where you think you'll be exiting this year, and maybe going forward, and then maybe a tougher question for you, but I like the fact that you highlight, you expect to be
Cash will break even the first step of 2024 on a large uptick and gross margins Maybe help us think about where gross margins could be in 2024 or 2025 considering different revenue rates
So, along the customer front, let me bring in Dave and maybe I'll add some color, but on the cash flow breakeven and gross margin front, I'll pull Ken in for that. I'll make some comments as well. Dave, if you start on the customer, kind of how you see that expanding. Yeah. Good morning, Tony. So, there's 15 customers, a large percentage of those right now.
longer secure rate than what we see in the Wi-Fi side. And we're pretty well spread across the Wi-Fi between enterprise and carrier, and also retail. And we continue to engage with those customers. And with our opening of the Taiwan sales office, it's given us a greater...
visibility and the opportunity to work closer with the ODMs as well. So I expect that we're going to continue to pick up one to two customers, you know, every three to four months. So by the end of the year, along with the base station, you know, we should be north of 25, north of 15, somewhere around close to 20 customers. And
We'll continue to work on the other sectors as well with our RFMI acquisition, getting into IoT, also the medical and more activities happening right now around automotive, which is good, but that's a little bit longer cycle time to get designed in as well. RFMI is doing what we had targeted by opening up the doors with the automotive.
activity. So, you know, it's robust. The opportunity funnel is very large and we expect the activity to be pretty quick on moving these things forward.
And Tony, let me add to that. On the Wi-Fi front, as Dave mentioned, some of the platforms on Wi-Fi 6 going obsolete. And so the Wi-Fi 6E, Wi-Fi 7 segment is what's being replaced with it. And the ASPs are a little bit better there.
And then as Dave mentioned on the base station front, I just wanted to point out that in that particular end market the ASPs are on the order of four to five times higher for that market segment. And that can – and those can be – and it can be even higher than that depending whether you're talking about small sales or – definitely – running welcome. Daniela Oo SHE F?
So, clearly we want to mix into higher ASP opportunities, but it's a little color, at least on the segments there.
So clearly we want to mix into higher ASP opportunities, but it's a little covered, at least on the segments there.
Tell me, let me touch a little bit on the Rose margins. So as we're modeling out here, our marsh towards operating cashflow break even the next 12 to 15 months, we are looking to also prove our margins significantly through the 33 different levers. One is increased vacuumization.
Also, some laminated size reductions for some of our existing products, which will to definitely cut our back end costs. Certain price negotiations with suppliers and our newer products have a smaller quarter factor and are more cost effective even than additionally. And then, last but not least, we mentioned WLP in the December quarter. That is the lowest back end costs of all our packaging.
So we expect significant improvement as we go through the next 12 to 15 months. In 2024, we're marching towards approximately 30% margins and then up to 40 and 50% plus as we move forward through the odd years. And let me add to that Tony, you know, I think Ken gave a good, you know, the size reductions on these packages.
You know, you're talking about four to five times smaller and really is up to ten times smaller depending on the part. Moving from what we historically had was in chip and wire, getting over to CSP and WLP. The other aspect of it, when you hear us talk about mobile, you hear us talk about WLP.
is a portion of that package, which we hope to eventually bring all of that in house, but a portion of that package today is actually fabricated inside our chip fab. So we're absorbing that back in cost internally at really our marginal cost to produce at the full wafer level. So that's a little bit more color on that.
Just a follow-up for you, Jeff, related to, I guess, more on the mobile side of things for Acusis and your opportunity. On the ASP side, it's clearly a lot more competitive on cellular mobile than on the Wi-Fi side.
Where do you think you'll fit in? Are you able to get a little bit more premium pricing for your better performance? Or do you have to match up kind of with current pricing? It is a, for the customers we're engaging with, it's a performance-driven market. With that, you have to be cost-sensitive and you have to be able to drive cost savings.
I think the true benefit to us, if you look at all the puts and takes here, is that predominantly, as I previously mentioned the comments on the WLP being able to be produced inside our chipfath, that's a better cost structure for us, number one. Number two...
which is kind of what I look at, it's significantly higher, more favorable for us than what we're seeing in Wi-Fi. So it is a favorable mix for us to move into. So even though it's a more aggressive market and we obviously have to be aware of the cost savings, we've got to extend.
If you look at the premium filter, you know, demand in the 5G market, it is continued to grow, you know, year of a year. If you look at the major tier 1 OEMs on the smartphone side, the percentage of ball designs that are going into the fence and into the applications are higher. And where we're playing is, you know, where applications are demanding that coexist.
even up to the higher frequencies, which is where technology is leading performance, but also down at lower frequency as well, where you got the carry aggregation demand that's pushing for really high performance filters that don't have modes that give you that good coexistence and also the high rejection. And also, being more important is being able to handle the higher powers as you're going up in frequency.
Good morning, Jeff. Dave, congrats on the progress from you as well. On the mobile side, guys, you have four customers, I think. What's the timing of when, maybe, all four of those are ramping? Just to understand how far out this is. And is the revenue opportunity here contingent on the CHIPSAC funding and bringing the back end-in-house or is that not really required to get the ramp for these folks?
So, good morning, Suji. I appreciate your kind comments. Dave, start with addressing his questions and I've got a couple of things I'm going to follow up on.
So let me step back a little bit to G, you know, with respect to mobile, you were categorizing. Two areas, one is, you know, the smartphone, and then the other one is non-smart phone mobile. So with the non-smart phone mobile, you know, these are, you know, good opportunities for Christus that.
we're introducing the diplexer technology, which is also of interest to the smartphone market once it starts looking at Wi-Fi 7 and the multi-link operation. But the volume opportunities there within our capacity, but they're very attractive for the RDR market, the PC modem market. With respect to the smartphone side, you know this first...
design when as we talked about is good volume targeting the China mobile market and it's within our capacity and there are potential other opportunities with this tier one RF component supplier that would stay in that similar vein of volume and the other guys that we're talking to they're targeting more of a tier one OEM market.
multiple pathways that we're pursuing right now to stay engaged and continue to grow in a mobile market. And, Suji, let me add to that because I want to be clear on this point. You mentioned the CHIPS Act and supply chain for the backing manufacturing. As we've mentioned, we've been very vocal on our wafer-level package, which is used for these mobile customers.
That process and manufacturing process is fully qualified. It currently uses a combination of both in-house as well as outsourced manufacturing, but we're dealing with very large OEMs on what we're outsourcing. So we don't think we're constrained at all in terms of supply chain being able to service that market.
What the CHIPS Act does for us potentially is, as we kind of mentioned, is to be able to in-source that back-end manufacturing to not only control the quality of that, control the cycle time more tightly with that, but also scale that up as well.
As we also had mentioned on our, you know, scaling up our weafers up to 8-inch diameter would be a substantial expansion for us using that legislation or leveraging that legislation. So that's, I just want to be clear that the supply chain is already qualified for mobile. What we're talking about with chips is scaling it up.
to address multiple Tier 1 opportunities. Okay, that's very helpful guys. And then my other question is on Wi-Fi. I'm curious about the supply chain constraints, how that's impacting the transition from Wi-Fi 6 to newer 6e.
seven designs if they're being end of life, you know, faster because of the supply tightness or if they're being kind of held longer because of the supply tightness. Curious how that transition is happening a la supply chain constraints. Thanks. Dave, you want to touch on that? Yeah, it's a 2G on that. The Wi-Fi 6G activity is still good, but it's still good.
What we're seeing is a shift on platforms that would have been Wi-Fi 6E holding back and going into Wi-Fi 7. More on the retail side. And the carrier side is still pretty robust on the 6E side. The enterprise is, you know, they've launched and they've released their 6E products.
and now they're working on Wi-Fi 7. So it's a mix, you know, the 60 is, you know, there were more programs that we were targeting that are, you know, being put on hold and being shifted over to 7 because of those constraints on components and so forth. And it seems that, you know, the leaders on the S-16 side have been pretty aggressive getting their Wi-Fi 7.
chips out. So yeah, we're enjoying all the activity, you know, across all fronts. And what we see though is a lot of transition of programs going to tri-band and then actually increased amount of opportunities on quad-band, you know, with either 2x2 MIMO or 4x4 MIMO. So the dollar content, you know, in the existing...
Wi-Fi 6e programs and particularly in Wi-Fi 7 is going up pretty significantly. You know as Jeff mentioned earlier also with a little bit higher ASP for these platforms as well.
The only other thing to add to that is we mentioned in the script, and I think it's a good point to reiterate it, they talked about carrier flask customers. So we're expecting to ramp here in the first half with a leading carrier flask customer. Thanks for watching!
And we'll see some of that this quarter, but predominantly most of that's going to come in the second quarter of the calendar here. Okay, thanks Jeff. Thank you. Thank you. Thank you. Our next question comes from the line of Craig Ellis with B. Riley Securities.
We foresee you with your question. Yeah, thanks for taking the questions and guys, it's great to be on the call after all the years of conversation. And I'll just echo the congratulations on the huge development with mobile over the last couple of months. So I wanted just to start on that theme, you know, with that.
module maker volume design when really targeting the China market? And this may be more of a question for Dave. Dave, how should we think about the potential for that to sample into what would typically be product releases for the big golden week selling season in October , product that that customer set and customer set could have around Singles Day?
And then year end holiday and in lunar New Year, it seems like the initial volume timing would take you up well there. Is that how you see it and what would be the milestones leading towards those new product release windows. Yeah, that's exactly how we see it Craig and thanks for your comments. The activity with the our end customers been very active for the last year, particularly as we were getting WLP release that was a critical milestone and it also was verified in their platform as well with their reliability.
of the target, as you mentioned, in the Q3 timeframe, and we're basically aligned with them on delivering the volume, demand, and also get line of sight to what that ramp's gonna look like starting really end of Q2 into Q3 and Q4. So everything's aligned with what you mentioned model wise. That's really helpful. The second question, I wanted to follow up on some of the earlier inquiries on,
on Wi-Fi 6E, and do it in the following way. So if we look back to mid-January when Apple released its new Mac offerings, one of the things that they offered on some of the platforms was 6E. And our checks in Asia show that helped really ignite a lot of interest, not just in 6E, but with the transition to 7. So you've been clear on all the customer engagement. I was wondering if you could just talk about the color you're picking up from the consumer and enterprise router market over the last month or so regarding the...
The following on activity that the supply chain would have in response to Apple's announcement since they tend to be a technology trend setter and a customer that really pushes the market to next gen technologies. That's a good question. From our standpoint, we are actually very well engaged with all the two of you guys now. We've built a good reputation out the market as having leading technology, leading performance both filters, particularly as the systems are shifting from a dual band to a tribe band and looking at quad band. So we have pretty good line of sight to all the platforms that are in development.
Jeff mentioned with the Wi-Fi 6E, carry class service provider, ramping, utilizing the Uni4, we see things like that. Those guys are the ones that we're talking to now on the carrier side. Multiple platforms are also talking to the enterprise guys and we're also talking to the retail guys. And the carrier guys are starting to...
launch RFPs that are doing Wi-Fi 7 that are looking at quad-band architectures. And the enterprise guys are doing RFPs out for Wi-Fi 7 looking at not only quad-band architectures but also dual-mode operation, you know, where you can get up to 24 filters, you know, per system, you know, with multiple times and so forth. So these infrastructures, you know, both in, you know, enterprise and also.
and retail and home, they are getting out there. So that means that the UE side is going to start adopting. I think we've mentioned that we're working with tier one OEMs on non-smartphone mobile related devices that would utilize Wi-Fi 7 and need that infrastructure in place to support it.
So they are aligned fairly well. The fix is going to be in the market and end this year, early next year for Wi-Fi 7. And then I expect that they will start seeing some of the UE devices coming in the latter half of next year, maybe mid-part. That's not fully fleshed out timing wise, but that's just some of the stability we've got. Got it. Yep.
solutions to help drive the gross margin improvements in the company. So it kind of feeds full circle, those performance improvements, we're also capturing these new product packages in those to help on the gross margin improvement. I just wanted to add that to color. Yeah, thanks for checking on there, Jeff. My last question is to follow up on an issue that's come up earlier in this call and in prior calls.
benefit immediately, but are you seeing any signs from the ecosystem that you're interacting with that we could see better Wi-Fi, SoC supply in the back half of this year? And if so, to what extent are those indications moving up, if at all? Thanks guys.
Okay, thanks Dave. You want to tackle that your closest to the customer once you're in? Yep, so Craig on that we are seeing a little bit of loosening on the at least the major two SOC providers. It still is long lead items. There's still inventories that are over there, the turns with the distribution market is still pretty high both on the famine and also on the ...
less constrained as well, depending on who the SOC is and what boundary that they're operating in which node. So it is softening, but still is a pretty long lead time and so forth, and we do expect it to improve over the next six to nine months.
We're keeping our finger on the pulse and making sure every platform we look at in our funnel, we look at who the chipset is as well as the ramp scheduling program just so that we're not being held on inventory levels and so forth over in Asia as well. Thanks so much, guys. Thank you, Craig. Thanks, Craig. We have reached the end of the question and answer session. I'll turn it back over to management for closing remarks.
Yes, I'd like to thank everyone for your time today and joining today's call. We look forward to speaking with you during our next update call to discuss the current quarter execution against our milestones as well as future expectations. Have a great day. This concludes today's conference and you may disconnect your line at this time. Thank you for your participation. Thank you, operator.