Weer een mooi sprookje naar de 'verdoemenis'.:
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I will not repeat my POET analysis from last week's article. But the short answer is even if we are completely wrong about POET being able to compete with Si logic devices, POET's new licensing business model of passing high-volume production and market risk to potential licensees has a very slim chance of success.
POET's claimed dual p-type/n-type transistor advantage over GaAs peers could help POET penetrate certain GaAs niches. It will take time and capital, but this strategy would have a better chance of success than going after the logic market with a GaAs optoelectronic IC. Market niches that may make sense are certain military (where POET has already established a beachhead) and RF CMOS applications.
This will not be a cakewalk. The GaAs semi market is currently growing, reaching $5.9B in 2013, of which POET's specific addressable market of military and RF CMOS would be a subset of that amount. However, the GaAs device market is expected to decline over the medium term, according to Strategy Analytics:
We expect another year of strong growth in 2014, but new architectures and competing technologies will gain traction and slow the market… The biggest weed in the compound semiconductor garden is RF CMOS. I'm sure we've all been to conferences in the past couple of years where one of the topics of discussion was some aspect of the "death of GaAs". My latest forecast anticipates that the rate of growth in revenue in the GaAs device market will slow and eventually turn negative in 2018. CMOS devices, primarily PAs, will be a large part of the reason for this declining growth. Even with this declining growth, GaAs will still be the largest RF semiconductor technology, by a wide margin in 2018.
The problem is GaAs semiconductors are starting to lose market share to other materials. GaN (gallium nitride) is encroaching on GaAs for power/LED applications, due mainly to GaN's higher bandwidth performance. Si and Si-on-Sapphire are taking a bite out of the GaAs RF sector. Moreover, the area of greatest decline is RF CMOS, a core competency of POET.
Also, two leading GaAs companies - RF Micro Devices (NASDAQ:RFMD) and TriQuint Semiconductor (NASDAQ:TQNT), recently merged to form Qorvo, which along with Skyworks Solutions (NASDAQ:SWKS) and Avago (NASDAQ:AVGO), will dominate the GaAs market with economies of scale. This will make it harder for small start-ups like POET to break-in.
In last week's article, I concluded that it is hard for me to see much value at all in POET shares. I will now rephrase that statement by saying it is hard for me to see much value at all in POET shares under its current unrealistic GaAs optoelectronic IC (OEIC) logic business plan. POET may create value if management goes through a catharsis, discontinues its GaAs OEIC logic business plan, focuses on more obtainable GaAs market niches, raises capital, builds a team, and manages to actually capture part of that GaAs market.