Great write-up, I'm curious if you've looked into moonshots for SOI and III-V compound based technologies? I think it's relatively hard to quantify, but once you start thinking about the potential market size it's hard to crawl out of the rabbit hole. If the following is even slightly directionally correct, Soitec & IQE can be 100x baggers:
Solar (yes, the horror story): Thermal PV adoption (think solar farms, nuclear plants, etc), transparent PV adoption (think cars, buildings, green houses etc), special-use solar (think EV, or special conditions like space)
MicroLED: CMOS backplane for headsets, other consumer products
Photonics: co-packaged optics entirely based on SOI, with III-V LD/PD integration, complete phase out of copper, quantum computing lasers
Sensing: LiDAR for cars/smartphone/headsets, LD/PD for health sensing
III-V based ICs
These are all valid potential markets (many with high volume/huge die size) once III-V epi can get cheap enough, with throughput fast enough. Not sure if Smart Cut can play a role on saving substrate cost for III-V.
"The power struggle is thus in Soitec’s favor: it can always leave and find a new supplier albeit at a slightly higher cost and lose less than 2% of sales by not renewing the Smart Cut™ licensing agreement in 2023, the next scheduled date. Shin-Etsu cannot afford to lose that technology as it allows it to operate at a cheaper cost in a booming and important market for a company that only recently reached double-digit growth again."
My main concern is that this might be an understatement of this risk. From the annual report:
"SEH obtained an operating license for the Smart Cut™ technology in 1997 and renewed it in 2012. This license entitles SEH to operate the technology independently and requires no operating interaction beyond declaring their sales;
Could this mean the technology is already in the hands of the Chinese? Relations are still polite because they own a little stake and a board member, but could Shin-Etsu perfectly leave Soitec without its business being affected?
- SEH is a Japanese conglomerate, so this part of the story does not have an impact on Soitec potentially transferring technology to the Chinese.
- In my view, the statement you quoted only means that Soitec is not required to help SEH operate the technology that it licenses from Soitec, meaning that licensing the tech requires essentially no capital / costs for Soitec. The "independent" aspect does not mean SEH can do whatever it wants with the tech, but that it can use it for certain business purposes without needing Soitec behind it.
"The power struggle is thus in Soitec’s favor: it can always leave and find a new supplier albeit at a slightly higher cost and lose less than 2% of sales by not renewing the Smart Cut™ licensing agreement in 2023, the next scheduled date. Shin-Etsu cannot afford to lose that technology as it allows it to operate at a cheaper cost in a booming and important market for a company that only recently reached double-digit growth again."
My main concern is that this might be an understatement of this risk. From the annual report:
"SEH obtained an operating license for the Smart Cut™ technology in 1997 and renewed it in 2012. This license entitles SEH to operate the technology independently and requires no operating interaction beyond declaring their sales;
Could this mean the technology is already in the hands of the Chinese? Relations are still polite because they own a little stake and a board member, but could Shin-Etsu perfectly leave Soitec without its business being affected?
Great write-up, I'm curious if you've looked into moonshots for SOI and III-V compound based technologies? I think it's relatively hard to quantify, but once you start thinking about the potential market size it's hard to crawl out of the rabbit hole. If the following is even slightly directionally correct, Soitec & IQE can be 100x baggers:
Solar (yes, the horror story): Thermal PV adoption (think solar farms, nuclear plants, etc), transparent PV adoption (think cars, buildings, green houses etc), special-use solar (think EV, or special conditions like space)
RF: smartphone & base stations (lower growth), space-based (higher growth, Starlink terminals)
MicroLED: CMOS backplane for headsets, other consumer products
Photonics: co-packaged optics entirely based on SOI, with III-V LD/PD integration, complete phase out of copper, quantum computing lasers
Sensing: LiDAR for cars/smartphone/headsets, LD/PD for health sensing
III-V based ICs
These are all valid potential markets (many with high volume/huge die size) once III-V epi can get cheap enough, with throughput fast enough. Not sure if Smart Cut can play a role on saving substrate cost for III-V.
Hi! Thanks for your comment!
I had not dug deep into moonshot ideas, but some of these do sound compelling!
Very good job and very interesting, thanks.
There's just one big thing that squeals.
You say:
"The power struggle is thus in Soitec’s favor: it can always leave and find a new supplier albeit at a slightly higher cost and lose less than 2% of sales by not renewing the Smart Cut™ licensing agreement in 2023, the next scheduled date. Shin-Etsu cannot afford to lose that technology as it allows it to operate at a cheaper cost in a booming and important market for a company that only recently reached double-digit growth again."
My main concern is that this might be an understatement of this risk. From the annual report:
"SEH obtained an operating license for the Smart Cut™ technology in 1997 and renewed it in 2012. This license entitles SEH to operate the technology independently and requires no operating interaction beyond declaring their sales;
Could this mean the technology is already in the hands of the Chinese? Relations are still polite because they own a little stake and a board member, but could Shin-Etsu perfectly leave Soitec without its business being affected?
Hi, thank you for commenting!
So a couple of things:
- SEH is a Japanese conglomerate, so this part of the story does not have an impact on Soitec potentially transferring technology to the Chinese.
- In my view, the statement you quoted only means that Soitec is not required to help SEH operate the technology that it licenses from Soitec, meaning that licensing the tech requires essentially no capital / costs for Soitec. The "independent" aspect does not mean SEH can do whatever it wants with the tech, but that it can use it for certain business purposes without needing Soitec behind it.
All the best!
i don't trust the french government board members :/
great analysis tho!!!!
Very good job and very interesting, thanks.
There's just one big thing that squeals.
You say:
"The power struggle is thus in Soitec’s favor: it can always leave and find a new supplier albeit at a slightly higher cost and lose less than 2% of sales by not renewing the Smart Cut™ licensing agreement in 2023, the next scheduled date. Shin-Etsu cannot afford to lose that technology as it allows it to operate at a cheaper cost in a booming and important market for a company that only recently reached double-digit growth again."
My main concern is that this might be an understatement of this risk. From the annual report:
"SEH obtained an operating license for the Smart Cut™ technology in 1997 and renewed it in 2012. This license entitles SEH to operate the technology independently and requires no operating interaction beyond declaring their sales;
Could this mean the technology is already in the hands of the Chinese? Relations are still polite because they own a little stake and a board member, but could Shin-Etsu perfectly leave Soitec without its business being affected?