ParkerVision 2006 AeA
November 11, 2006
Jeff Parker, CEO ParkerVision
Cynthia Poehlman, CFO ParkerVision
Jeff Parker: Good morning, I am Jeff
Parker, the Chairman and CEO of ParkerVision. Thanks for taking time from your
AEA schedule to spend with us. This is Cindy Pelman, our Chief Financial
Officer, and this is Paul Henning, our Investor Relations Counselor from
Cameron and Associates out of
Good morning. ParkerVision is a company headquartered in
If we have to sum up ParkerVision in a single sentence‑who are we, who is this company‑this is how we do it. ParkerVision is a wireless technology company focused on developing and licensing intellectual property in the field of RF transport for cellular communications.
What does that mean? Our current business discussions are focused exclusively on licensing arrangements. For those of you who were maybe visiting with us at AEA last year, one of the things you heard at that time is a little more of a two‑pronged approach. We expected, yes, we might be licensing, but we also speculated that we might be an IP supplier as well. What we've learned over the last year is that the discussions we are in with the customers we'll talk about shortly, they are really interested in licensing IP, not in sourcing chips from the company. Our arrangements today are focused exclusively on licensing.
We've invested over $100 million in our intellectual property portfolio, and today we have over 90 patents issued‑both
You may ask, "what in the world is RF transport?" We'll talk a lot more about this later in the presentation. Just to sum it up, RF transport is the process of taking data from the base hand processor to the antenna in the form of an RF signal that conforms to the appropriate cellular standard. We also have a technology, our D2P technology, which we'll touch on a little bit, which does the reverse. It's taking the data from the antenna to the base hand processor. But our focus today and our business model today is really built around the transmit function.
Our target market is the cellular industry, specifically the mobile handset providers and their suppliers.
Before we get into ParkerVision and our technology benefits, we thought it would be helpful to talk just a little bit about the dynamics and challenges within the cellular handset industry. We thought it might be helpful to do that from the standpoint of what others are saying about the industry as opposed to what ParkerVision is saying about the industry. As you guys know, the cellular industry is migrating to the next generation standards 3G and beyond. GSM association, in a press release last month, talks about their "3G for All" campaign. They're requesting proposals for a 3G mobile phone that can not only support the advanced services that you would expect in 3G, high speed Internet browsing, instant messaging, but also costing significantly less than today's 3G solutions.
As companies migrate to 3G, carriers, mobile handset providers, their IP suppliers, they are all facing the same challenges. We'll talk a little more about some of these. One thing you hear a lot about is power consumption. As you're adding these faster data rates, what's happening is it's sucking down the battery life in your phone. We'll talk a little bit more about that in just a minute. Compatibility convergence; how do I take all of these separate hand‑held devices that I have and converge them into one single hand held device? Obviously, component integration, the size and cost is a challenge. Increasing performance, which again ties back to "how do I increase that performance without giving up battery life?"
A gentleman's mail log on devices last month we think coined it best in terms of the power consumption issue; less power consumption equals higher efficiency. One of the things he said is, "we can't all be expected to drive a car battery around with us to power these additional devices." Yes, there are advances in power management and battery technology that's helping to extend the battery life, but it's only part of the equation. He says, "the real trick is making integrated circuits more efficient." This is a very important point that we're going to come back to when we visit on the benefits of our technology specifically.
Convergence is another key challenge. There's a term that you hear more and more out there today, Software Defined Radio. That's been deemed one of the solutions to get to how you converge all these different devices into a single device. Software Defined Radio is a category, really, but it's how you translate and understand any kind of radio wave signal. We are going to talk more about that as we get to the benefits of our technology.
So, where do we fit into this puzzle? ParkerVision has developed a unique RF transport technology called D2P, or Direct to Power, and it's a compelling solution for the industry challenges not only of today, but also what they see looming in the future. D2P represents a brand new approach to RF. It is truly a clean sheet of paper approach. We sat down with no preconceived notions on how this was going to be done with the goal of developing the optimal solution for next generation RF networks. It is not a twist on past ideas, it truly is a new approach.
As a result of that, we've been able to reset efficiency expectations. Competing solutions, you see announcements out there all the time, they're eking out incremental gains in efficiency, and they're doing that by optimizing old architecture. As a result of our new architecture, our D2P efficiency exceeds the most highly optimized design, even in its infancy. D2P is better than multi‑mode. It is truly a software defined radio transmit chain. I told you we'd come back to that terminology. D2P is waveform agnostic, or waveform independent.
As a result of that, not only does it provide a solution for 3G, it provides a very clear migration path to 4G and beyond. D2P enables greater levels of integration. We support every mode for single transmit chains. I'll flip to the next slide and show you what that means. This is a simple black diagram of a typical radio, here is your base hand processor to receive your transmit area. What you'll see here is what we call the transmit chain. Typically today, it has a transceiver, power amplifier, filters and other supporting components. In a multi‑mode phone it may have several individual transmit chains. We've been able to bring all that down in a single unified step through our D2P circuitry.
We've been able to funnel down the benefits of our technology into what we call three core technology benefits; mode independence, efficiency, and integration. I'd like to let Jeff speak for a little bit and go through in a little more detail some of the benefits of this technology.
Jeff Parker: Thank you. When we're
visiting with OEMs what we really focus a lot of our discussion on are these
three key benefits.
Mode independence being, if you're looking at adopting a new architecture, a company you haven't done business with before, or making a significant change in your product, what you want to know as an OEM is how far can this new technology take me. What we're showing OEMs is that we truly have an architecture that can do any mode through the same circuit regardless of their transmit needs; 2G, 2.5G, 3G, and beyond. We'll show you more about that.
The efficiency story is probably the aspect that gets us invited in to speak to OEMs at the beginning. Everybody in the industry today is looking at "how do I extend talk time, how do I make my product work longer?" With more devices operating within a phone, MP3 players that are going in, a bit more sophisticated video cameras, other power consuming devices. So people are looking at, how do I increase efficiency?
And integration is something that, of course, OEMs are always trying to figure out. "How do I keep the form factor where I want it to be while I'm adding more devices? How do I bring my cost down?" The carriers obviously want to subsidize less and less as the networks become more pervasive.
In all three of these areas, mode independence, high efficiency, and high integration, we help them achieve in very significant ways. On mode independence, in a little bit more detail, as Cindy mentioned earlier, our technology would fall in to the category of Software Definable Radio, in that what we've done is created a single unified step.
Today they take a baseband data signal and through multiple subsystems which have to be kind of glued together and work nicely together which is a challenge in and of itself. We eliminate all those multiple processing steps into a single unified baseband right to the RF carrier at the power level that they're looking for. That's the function that enables the ability to do all these applications, whether it's CDMA, wide band CDMA, GSM, Edge, HSUPA which is an extension of wide band CDMA with more data rate capabilities, and mobile WiMAX or some other form of OFDM which people are going to likely adopt for the fourth generation standard and beyond.
We show that through a single circuit for a single chip we do all those things today and frankly if you get into a discussion with us about our technology on a fundamental physics level which some of those OEMs are now under non disclosure at, we show them that really any combination of phase frequency and amplitude modulation we can do. So that's what makes it mode independent.
It's one thing to do all those. It's another thing to do all those and be compliant. So OEMs over the years have had people come to them with new RF ideas. And the challenge in adopting a new RF idea has often been that they've been asked to take a step forward but in some other important areas take one or two steps backwards. And that's not acceptable because they have to be compliant. And we've just put up here five bullet points of some examples of the compliance issues that OEMs look for and I'll just touch briefly on these.
Number One: Full Power Output. We're showing OEMs that they can...If today an OEM is using gallium arsenide power amplifiers for handsets, we're showing them that they can get full power output by using silicon germanium. Now we can put our technology in gallium arsenide and that's fine, but they're very interested in silicon germanium because it affords much higher levels of integration, it's lower cost, it's an advance to how they want to do their supply chain management and integration.
When you show full power output, however, that begs some other issues that you have to study, such as‑I'll go to this fourth bullet here for a moment‑robustness over VFWR conditions.
VFWR is a measure of, I have energy coming out of my antenna. A perfect situation would be, 100% of the energy is coming out of the antenna and none of it is reflecting back into the antenna. But that's not the way the real world works. The real world is, you're holding your phone in your hand, and you're blocking some of the signal coming out of the phone and some of it's being reflected back into the power amplifier, or you're in an automobile, which is made out of metal, and some of the waves that are coming out of your phone are reflected back into the antenna, and the question in VFWR is how much of a reflection back into the power amplifier can it take before it destroys itself?
This is one of the things that OEMs like about gallium arsenide, is it's very robust under those conditions. What we've shown OEMs is that using our silicon germanium implementation, due to the nature of our architecture, we are absolutely just as robust and in a lot of cases probably even more robust. Part of that may be hard for people who understand traditional analog power amplifiers to believe, but we're even more robust than a gallium arsenide implementation of a typical linear power amplifier. We've shown OEMs that under all the VFWR conditions that we do not destroy the device, that the device does not degrade and shorten its life. And that's a very big step forward.
Full range of power control: In a 3G handset your power output from your phone is constantly being modulated more or less depending upon where you are relative to a base station. So if you're close to the base station you're putting out a very small signal and if you're far away you're putting out, obviously, a very large signal. The dynamic range of that power control is huge. In dB, it's 80 dB and that's a very large dynamic range.
One of the tricks in transmitters and power amplifiers has been, how do you tune them up in a way that they can work over that entire power range and still be compliant in terms of spectral purity and quality of signal? We've shown that not only do we do that but we've actually shown that we do that on a single monolithic die.
Today the way they get power control, is that duty is split up among different subsystems that make up the whole transmit chain. In some respects, it's kind of an advantage because many hands are sharing the heavy burden of doing that. But in our situation, while we could break up our chip and that would be helpful to power control, we've shown that we don't have to do that ‑ that in a single monolithic die we do full 80 db power control.
And then the noise floor and the harmonics: What that's talking to is, a lot of the new architectural ideas people have had over the years have had some digital content, some digital processing ideas. And the challenge of that has been that those digital ideas introduce noise in ways that show up on the output of your transmitter as spurs that are unacceptable to either being able to be compliant with the standard or raise the noise floor of the transmitter in a way that it would actually cause adjacent users and other handsets problems.
So what we've shown OEMs is that we meet the noise floor and harmonic content requirement even though our technology has a lot of digital processing content to it. So it's one thing to say, you know, you've got full power but you're in silicon. You've got a full range of power control. You meet the noise and harmonic content requirements. You're robust over the VFWR conditions. By the way, that has to be true over at the fifth bullet, which is over a wide range of temperature.... over a wide voltage range because you're a battery powered device, right? And the battery is draining as you're using the life of the battery over the talk time and over a broad frequency range because you're sometimes in the cell band frequencies, sometimes you're in the PCS bands, sometimes you're in the VCS bands....
You take and make a matrix of all those things and you can see it's a huge matrix of testing and compliance requirements. And we've shown OEMs that we meet all of those requirements with our technology and our device.
This slide here is simply showing you a few screen captures of the thousands and thousands of screen captures that we provide OEMs to prove that the technology is doing what it should be doing. This is all run on Agilent test gear. Most of the OEMs we're talking to use this very test gear some of them use a competitor, but it's basically the same screen.
What we're showing here are a couple of things. We're showing that through a single D2P circuit we are compliant and have extraordinary waveform performance for GSM and EDGE, for wide band CDMA and for OFDM.
Today that would be three separate chains of transmitters. And then when you multiply that out by your number of frequency bands that's where you can get up to 8, 10, 12 different, separate chains of power amplifiers and circuit filters, et cetera.
One of the leading handset OEMs in an article in "CTIA Magazine" ‑ which is the cellular telephone magazine that comes out daily on the web ‑ a couple days ago was quoted as explaining that one of the challenges they see in the industry is that in a fully‑featured 3G handset today there's eight separate radios and 11 antennas. Obviously, that's not the most efficient product to build in. So they're looking for ways to consolidate those way down and his conversation was on Software Definable Radios, in their view, is the category that's going to get them there and we certainly agree with that.
One of the points I want to make about these screen captures is the quality of the wave form. If you look at this edge on the left here, you'll see these circles with all these dots around it. Each of those dots is a data point, and it's by wiggling those dots around that you make your bits of data, your words. Where that dot is located in space at any moment is measured by what's called EVM, the error of the vector. You're allowed to have this dot 17% off the word supposed to be and still be compliant. What you'll see here is the word 1.46% which is off the charts in terms of quality.
Now, you would expect that to achieve those kinds of quality‑‑because typical handsets today, the chipping is probably an EVM of 8%, 7% or 10%‑‑to achieve this, you'd expect to eat a lot more power consumption, but in fact, at this wave form quality, we have extraordinarily high efficiency which is our next discussion. If we think about efficiency, we think about efficiency over the entire transit function, we think about it having to be stable and having to deliver the excellent quality wave form. I think the slide that speaks the quickest to this topic is the next one here. This is a slide that's showing you our efficiency curve which is the top purple colored line. So the bottom here is power output from your device. So here's full power on the right all the way down to no power on the left, and then this axis here is efficiency showing you 10%, 20%, etc.
What you'll see is our curve starts up and runs off down the general power output in the curve as per the graph here. The line below it that's blue is a traditional power amplifier and its associated transmit chain. What you want to look at when you think about efficiency isn't specifically one point of operation. You want to look at it over the entire operating curve of a network. So if I'm on a wide band CDMA network, my power is constantly changing depending upon where I am relative to the base station. So we actually got some network statistics from some of the networks that are deployed that explain what power level are you at at any given in an urban environment, in a city environment.
We took those statistics and put these two curves into a calculation that say, "What would be the efficiency of our technology over all time use in an urban environment against a traditional approach?" What you'll see here is the traditional approach is about 8% efficient over a typical urban use and our technology is 21% efficient. That is a huge gain in efficiency and it translates to significantly longer talk time.
Another OEM I'm thinking of right now, their CTO was interviewed maybe six months ago on a magazine about battery life management in mobile devices. He was saying that their company's goal was a 10% efficiency increase year over year although he didn't necessarily see anything on the horizon that would give them that but that was what their goal was. So here you're going up to 300% efficiency increase, so you've got 10 or 15 years worth of that particular goal in the bag right now. So this is a big, big advance to the industry, and efficiency certainly is one of the pieces of our technology benefits that gets us in the door with these important OEMs.
Integration, of course, is another very big story. It would be one thing to go to an OEM and say, "Here's much better efficiency to extend your talk time, here's a way to do multimode with very high quality wave forms." Often times they'd expect, well how much bigger is that going to be, how much more expensive is that going to cost me than what I'm using today, but we show them that it's exactly the opposite. That it's significantly smaller and actually gets them some cost targets that they've got over the next two, three, four years to try to achieve. And we do that because, through a single piece of CIGI we can do wideband CDMA and CDMA up to 28, 28.5 dBm power output which is what their goal is, 35dBm for GSM cell bands used.
But what also is very exciting about the technology to them is how it can be partitioned. It can be monolithic and it can be broken apart. And if you break it apart you can start to put a lot of the technology into pure RSV models and obviously it's a very big advantage for cost and for size and how they want to manage the intellectual property content of their handsets.
So it's those aspects of mode independence, high efficiency integration wave form quality that really creates the benefits to the OEM. It gives us the traction we've been getting with the OEMs. Cindy is going to talk to you for a few minutes about how that translates to a business model for the company.
Cindy Poehlman: Well, let's start with
talking about our target markets. As we said, the cellular handset industry is
our target and as many of you know that market is expected to exceed over a
billion handsets this year, growing to over one and a half billion in 2010.
This chart is really just breaking down those handset numbers by standard and you'll see this area. The grey up here is the 3G standard, which today is about 40% of the market but it's growing to about half the market over the next several years.
And for those of you who were with us maybe at AEA last year we talked a lot then about, about the 3G standard and the fact that we felt that our technology certainly brought the most notable benefits in the area of 3G.
The more difficult the wave form the more our technology shines and while that's still very true, what we found in our discussions with OEMs over the past year is that this is also a very compelling mission for 2.5G. So there's a very large market there for us.
One of the questions you may then ask is, "well, we understand the size of the market but what does that translate into in terms of revenue potential for the company?" And while we're obviously not prepared to share with you our expectations in terms of specific royalty streams and whatnot, I think what we can share is that the way we're approaching our IP licensing model is that of a value proposition. I mean we're not looking at our model as we're going to collect some percentage of the total cost of the IP they develop or some percentage based on size of silicon. That would be counter intuitive for us because we're going to bring cost and size down.
We're looking at it as how much value do we bring to the OEMs in terms of cost reduction. We're comfortable saying, you know at this point that in the 3G handset, our solution can pull $3‑5 out of that handset. And we've had the question, "well, gee, $3‑5 that really doesn't sound like a lot." To these handset manufactures, it's a tremendous amount; they're looking at pulling out dimes and nickels.
And I think it's also important to point out that, that's only looking at what the cost value is. Remember one thing that Jeff said is efficiency is probably one of the number one things that gets us in the door too see these OEMs, what we can bring in terms of efficiency benefits. There's a huge value to that, it's a little more difficult to put dollars and cents on but that is certainly an enormous value. So in terms of looking at the revenue potential, you kind of have to look at what the value is that we bring and then extrapolate from that what percentage of that, as an IP company, is it reasonable to expect that we can retain.
Let's talk a little about who our target customers are. As we've said over the last several quarters, we're targeting to tier one handset vendors. And as you can see on this chart, from the most recent AVI research numbers the top four participants in this market are the top four market leaders account for 75% of handset sales. That's a pretty concise group of people to target.
In addition to the tier one handset vendors, we are also targeting their key base and/or transceiver suppliers. And although the symbols here aren't necessarily to scale they are really intended to indicate who's supplying who, obviously Free Scale to Motorola, Qualcomm is supplying several of these vendors along the chain.
You know you have got about a dozen circles up there, that's still a very concise and targeted market, which is important to us, because we are a small company. But this is a nice sized market in terms of being able to really focus our resources and go after a relatively small number of customers, albeit extremely large customers.
So our business model is one of licensing intellectual properties through a tiered IP product portfolio that addresses the needs of the customer and the market.
And as Jeff mentioned earlier, our IP implementation, would really be a little bit customized for each customer. There are a lot of the different partitioning options that he mentioned; some of it can be done pure CMOS and that's of interest to some customers. So we really see customized design, depending on how the customers want to implement, and we see that as a revenue opportunity for the company in terms of non‑recurring engineering design services.
So our commercialization strategy can really be boiled down to a few bullets. Offering IP licensing model that are addressing all of the currently deployed standards as well as the migration path for future technology.
In some cases we may find ourselves in what we call technology agreements with customers, in advance of an IP licensing model and what a technology agreement will allow us to do is to provide the customer access to the technology, while enabling them to work in concert with us to help develop a product plan for how this IP will be implemented into their specific product roadmap. The end of the technology agreement will obviously then slip into specific IP licensing model for a specific implementation.
We are expanding our market awareness. As we said we have got a very concise group of customers that we are targeting but we have also recently been able to expand our efforts in and we have a targeted campaign to reach out the network providers. Although we don't see them as customers today they are certainly key influencers in this market.
Technical support is obviously a huge part of our offering as I said possibly an opportunity for revenue generation in terms of engineering design services, supporting this technology to different processes, implementation support for the customers. There's a tremendous amount of customer testing and analysis going on now that will continue even once these people become customers of the company as the technology continues to evolve.
And for those of you who look at our web page occasionally you may have seen recently we have added a secure Internet portal and the purpose of that is for our target customers to be able to go online and obtain the test data that they need on a real time basis. Obviously the backbone to all of this is our comprehensive patent strategy, which has always been a high purpose for the company.
For those of you who maybe listened to our Conference Call, our quarterly Earnings Call last week, Jeff did a good job I think of kind of looking back in hindsight over the last period of time. You know to a lot of people who have followed the company, it seems like we have taken a long time to get to where we are. You know, why is this process taking so long? Probably a little easier to do looking back in hindsight than it was looking forward but we have been able to kind of categorize these commercialization processes into five key steps.
The first step, which really started early last year, early to mid last year, was introduction of the technology and realized we were introducing a new RF architecture: the first new RF architecture that has been introduced in decades. And not only were we doing that, we were also trying to find the correct entry points into these target customers. As you might guess, some of the customers that were shown in those bubbles earlier are not very to get easy to entree into.
In some cases we have the good fortune, through board member contacts and other contacts, to get into these companies at very high levels. In other cases we literally went in through an initial sales cold call. So, as you might imagine, for some of these customers was a very lengthy process.
The next step in this commercialization is what we call awareness. That's really kind of past the high‑level technical evaluations to kick this higher phase and expand awareness of these target customers of what your offering is. I think it's safe to say at this point that all of the companies that we started talking with last year that we've added to our discussions over the years have moved past phases one and two at this point and they're either in three, four, or five, depending on the company.
Step three is really the detail‑level technical review. As Jeff mentioned earlier for those three slides that he showed with technical diagrams, there are thousands and thousands of other test data points behind those. And this stage really consists of a very rigorous technical review where these companies are trying to uncover the gotcha. They've seen a lot of technologies cross their doors over the years, they've developed a lot of things in house over the years, and they kind of know where the roadblocks are. And so in a lot of cases they put up three tests to ensure that we're not going to hit those same roadblocks and encounter those same issues.
This is also the stage where we see champions developing at these target customers‑‑people within those organizations who understand your technology enough that they feel like they're going to champion it through to others within their organization. And that's a very important step.
We then move into what we kind of coined as "product sets." A couple of quarters ago we mentioned on a conference call that we found it very encouraging that these OEMs were now asking us to sign non‑disclosures so that they could share with us some of their confidential product information, their product roadmap.
Early on in this process OEMs weren't interested in signing non disclosures. They were like "Don't tell us anything that's going to be under non disclosure because you don't have anything that's important enough for me. We don't want to sign a non disclosure. Our information is much more proprietary than yours. We're the big guy, you're the little guy." So we found it very encouraging when these same people then turned to us and said "OK, now it's time to sign a non disclosure because we need to share some of our product information so you can help us understand where your technology fits into our product plan."
Obviously the final step in this, the culmination of all this, is the business relationship‑‑negotiating terms and conditions, finalizing the business relationship, and launching product development activities. And we do feel, as we said in our conference call, that we have customers who have reached this stage, and obviously we're focusing, we're very labor‑focused on those companies at this time.
So why are we so confident that we're going to be successful? There are really a couple of simple reasons. We have a technology that's providing solutions to problems that the industry is facing today. Competing suppliers, while they may understand the problem, they don't have a solution to meet it. They cannot achieve the elegance, the power efficiency, the cost effective solutions using existing technology. And our technology simply doesn't share the same physical limitations of the existing technologies.
One of the things we've started to notice over the last several months is where at one time with these OEMs it was considered very high risk to champion through a technology from an unknown company, we're starting to see that change at one point now to where it's becoming high risk not to, quite frankly, because if they don't, their competitor might. And we find that very encouraging.
Looking ahead, we really have one milestone that you should be looking for in the near term. And that is announcements of initial relationships. Obviously when that comes, with it will come a lot of additional longer‑term milestones that we can lay out. But that is our focus right now, getting to those initial relationships. And as we said in our last quarter call, we expect that to happen in the next few months.
As we are at the AEA financial conference, we thought it a little remiss if we didn't spend just a tiny bit of time on the financials. And really for this company, as several of you guys know, the focus for us is really on the balance sheet right now‑‑what is our cash position. At the end of last quarter we had a little over 17 million in cash. And based on the cash uses that we've seen over the last year, that roughly translates into about five quarters of cash remaining. And that's assuming there's no incoming cash from technology access fees, engineering design fees, all of which we certainly expect to see in that period of time.
And the only other thing we'd like to highlight here is on the operating expense side, and whether you're looking at this chart on a quarter to date basis or year to date basis, it comes out exactly the same. Well over 50%, nearly 60% of our expenses are in the area of R&D. Why that's important is that we feel as we start to announce these initial relationships that we will see some engineering/design fees come with that and we expect that certainly the portion of our engineering organization will be focused on supporting those initial customers. We believe that will come with revenues to help offset those costs and certainly help fund any additional growth that's needed.
So at this point, I'd like to open it up for questions.
Man 1: Jeff, I know you guys showed the partner/customer computer log, what kind of stuff can you do for smaller OEMs, I mean it seems someone like me should see any units [inaudible].?
Jeff Parker: OK, I'll repeat your question
just because we're webcasting but the question is, we see that you're targeted
with tier one OEMs, is there any progress for targeting at the smaller second
or third tier OEMs?
Right now our focus truly is exclusively in tier one and what we said was as long as we see progress at a rate that makes sense and we don't see people dropping out of the race to get to or out of the goal that starts without the technology, we'll take our limited resources and absorb them on that front.
The other thing that influences us right now to stay with those companies, is when you look at adopting a new architecture like this, the more control a company has over their baseband processor and other pieces of their systems the easier it is to adopt this type of technology.
If you look at the tier one list that we put up there, most or all of those companies have a great deal of flexibility and control over the actual content that goes inside of that handset and that makes adopting this technology very practical.
Man 2: [inaudible] gets to market faster?
Jeff Parker: Right, so a follow‑up
question, right so a follow‑up question you have is, couldn't a tier two
or three company get to market faster?
You know I'm not convinced of that for two reasons: number one is what I just mentioned, the ability to hold the content in your phone in terms of baseband processors and such will enable adoption of technology much quicker than if you've got to try and work amongst multiple kind of unrelated parties.
The second thing that we were seeing with some of these Tier One OEM conversations is although we may do an agreement, a contract, with a company, and look at that as one design whim. I believe what you'll actually see is within that agreement, within that company, there may actually be multiple customers, multiple constituents.
And that's been true of recent conversations where companies have said to us, "Hey when we get to the finish line of an agreement and we can launch product development activities together, are you guys ready to support possibly two or three possible initiatives?" One initiative being maybe less optimization but quicker to market and other initiatives being we want to squeeze every penny out that we can from your technology and it's OK if it takes longer to get it into product.
So I think you're going to see that with multiple customers who will run parallel tracks to take advantage of this technology in different ways. So I'm not...I don't think it's necessarily a truism that a smaller tier two or three company can get to market with this technology faster, caveat being that tier one companies are hard to get going, right it takes a lot of time to get everybody in the organization who has to make a decision to go forward.
But the reason you heard us very encouraged in our last conference call and the reason is we're seeing that momentum with some of these tier one OEMs now; where they have had all of the decision makers come to the conclusion, "yes this is what we want to do, " and are moving forward to go figure out how to do that.
Man 3: So our answer basically with OEM in your model is to do licensing? [inaudible]
Jeff Parker: Right.
Man 3: Who usually licenses [inaudible]?
Jeff Parker: Well, it's different with
different companies. So as an example, if you look at a company like, well,
let's look at some of the companies we've put up on our screen. So if you look at
some of the handset companies, some of them have their own internal resources
designing transceivers, they then have those transceivers built at
semiconductor fabs, they don't necessarily own the fabs, but they own the IP
already that goes into the content of that transceiver. Some of them, by the
way, own the content of the IP that goes into the power amplifier.
But frankly they don't, you know, own a gallium arsenide fab. So they have the fab make that for them. In this case we would license our IP to those companies. They would then have, in the license, the right to have made that IP at whatever fab they want to put this to.
If you're talking about licensing to companies who make transceivers today what we're really showing them is: here's how you can take the content you're providing which stops at the PA and go all the way to the antenna. And that's very interesting to them because they've already got 70% of the puzzle. This adds now the rest of the puzzle to their portfolio and does it in a way that they don't have to work with a new type of fab material. Right?
Because most of these transceiver companies are building this on either SiGe or our CMOS. One of the neat partitioning opportunities with our technology is you can take and put in our CMOS really everything up to the RF output of our device. And then the RF output can be broken off and put into SiGe or they can put it in GaAs. And you can eke out a few more percentage points of efficiency if you want to put it in GaAs. But right now the enthusiasm we're seeing appears to be more for keeping it in SiGe, but you never know some companies may port it to GaAs, and that's fine. If you want to squeeze every last ounce of efficiency out, GaAs is a good material.
Man 4: [unintelligible]
Jeff Parker: OK, so the question here is
if you're a traditional power amplifier manufacturer, who's counting on higher
ASP per phone through multiple power amplifiers because you need different ones
from 2G versus 3G and maybe even different ones from 3G to 4G, what kind of
dynamic does that play?
This is just my view of the industry. My view of the industry is that if we're a content provider, whether it's IP content or silicon/gallium arsenide content, we're kind of all working at the pleasure of the OEM. And when the OEM cuts the purchase order, we're going to do what it is that the OEM finds beneficial. If an OEM goes to a gallium arsenide fab and says, "look, today we need eight power amplifiers to do this particular phone, but with our new architecture we've licensed, we're only going to use two." They're going to build them two gallium arsenide power amplifiers implementations using our architecture. Or, I guess the OEM will find someone else to do business with. I mean, I can't speak for them but I would think that's the kind of influence they would have. They certainly have that influence over our company.
Any other questions?
Well we appreciate your visiting with us today and thank you very much. Hope you have a very successful stay at AeA.