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Superconductor Technologies (NASDAQ:SCON)

Q4 2012 Earnings Call

March 07, 2013 11:00 am ET

Executives

Cathy Mattison - Assistant Vice President

Jeffrey A. Quiram - Chief Executive Officer, President, Director and Member of Stock Option Committee

William J. Buchanan - Chief Financial Officer, Principal Accounting Officer, Vice President, Controller and Assistant Secretary

Analysts

Bill Mahon

Operator

Ladies and gentlemen, good morning, and welcome to the Superconductor Technologies STI's Fourth Quarter and Year-End 2012 Results Conference Call, held on the 7th of March, 2013. [Operator Instructions] I would now like to hand the conference over to your host, Cathy Mattison from LHA. Please go ahead, madam.

Cathy Mattison

Thank you, Marc. Good morning, everyone, and thank you for joining us for STI's Fourth Quarter Conference Call. By now, you should have received a copy of the press release. If you have not, please feel free to contact LHA at (415) 433-3777, and we will get that out to you right away.

With us from management today are Jeff Quiram, President and Chief Executive Officer; and Bill Buchanan, Chief Financial Officer. I will review the Safe Harbor provisions of this conference call, and then I will turn the call over to Jeff.

Various comments regarding management's beliefs, expectations and plans for the future are forward-looking statements, and are made in reliance upon the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are not guarantees of future performance and are subject to various risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ from those expressed in the forward-looking statements, and those differences could be material. Forward-looking statements can be affected by many other factors, including those described in the risk factors in the MD&A sections of STI's 2011 annual report on Form 10-K. These documents are available online at STI's website, www.suptech.com, or through the SEC's website, www.sec.gov.

Forward-looking statements are based on information presently available to senior management, and STI has not assumed any duty to update any forward-looking statements. And now I would like to turn the call over to Jeff.

Jeffrey A. Quiram

Thank you, Cathy, and thank you, all, for joining us today. I will provide an update of our Conductus wire program, and then Bill will review the year-end financials. During 2012, the STI team accomplished several major milestones enabling us to begin pilot production of Conductus HTS wire.

As 2012 began, STI had demonstrated our ability to achieve industry-leading performance with our Conductus HTS wire. During the first 2 quarters, we continued to improve on that performance, culminating with the announcement in May that we had achieved in testing with Nexans, a current carrying capacity in excess of 500 Amps per centimeter width on 2 micron HTS film at a temperature of 77 Kelvin. This key technical milestones enables several attractive applications, including our upcoming cable demonstration project.

In the early 2012, we also took possession of our Advanced Manufacturing Center of Excellence facility in Austin. This Class A facility provides STI with a state-of-the-art setting for our new production equipment and enabled us to deploy all of our HTS wire manufacturing processes under one roof. We immediately began preparing for the arrival of our new machines and completed the clean room construction in the first quarter.

We were also attracted to Austin by the availability of the additional world-class engineering and material sciences expertise that STI needed as we launched our Conductus wire manufacturing operation. While we fully expected that over time Austin will become the primary home of our technical team, the combination of the relocation of several key technical personnel from Santa Barbara and our success in hiring exceptional talent has accelerated the transition.

The delivery and installation of our manufacturing equipment suite was the remaining objective in our 2012 plan. Throughout the year, we made significant progress on each of these machines.

I'll quickly review the equipment suite and the process STI uses to make the Conductus wire. First, the commercial grade stainless steel template is passed through the Solution Deposition Planarization, or SDP system, delivering a smooth ceramic starting surface. And then the template runs through Ion Beam Assisted Deposition, or IBAD system, which creates the ideal surface condition for STI's commercially proven and proprietary HTS manufacturing material deposition process.

In the final step, the Reacted Co-Evaporation, or RCE system, deposits the HTS materials. We have received and installed each of these machines in Austin.

The IBAD system, which was delivered in April 2012, has completed process implementation. It is now being used in full production, and we are consistently producing world-class results on that machine.

The SDP system, delivered in November of 2012, has completed initial process implementation. The initial pilot production runs on 50-meter lengths at a width of 10 centimeters were completed in early February of 2013.

We continue to refine this process with a focus on improving throughput by streamlining the deposition process. These 2 machines were both designed to produce kilometer lengths of wire template at a width of 10 centimeters.

The RCE system, delivered in October of 2012, has been installed with our first process runs completed last month. We have completed several production runs on our new 100-meter RCE tool, as we strive to transfer our proven deposition process to this machine.

Recently, we reached an exciting milestone by shipping customer samples of Conductus wire completely fabricated in our new Austin facility for the first time. As we discussed on our last call, we've experienced capacity challenges with our R&D equipment in Santa Barbara that has delayed the delivery of the high-performance wire needed for the power cable demonstration project.

We believe that given the progress of our work in Austin, that the wire for this project will most likely be produced on our new RCE machine. Both the STI and our customer remain committed to the successful completion of this project.

We have also made excellent progress with our other customer activities and have received an increasing number of requests expanding the production pipeline of our Conductus wire. The majority of our customer activity is progressing 3 stages. First, customers evaluate the performance of several short lengths of wire. Second, they qualify the wire for their specific power device or application in the required length. And then third, once customers complete full qualification, we will receive purchase orders for Conductus wire in lengths of hundreds to thousands of meters depending on the application.

In addition to the high power cable market we are entering with our customer, we are targeting several other attractive applications. We continue to see a significant increase in activities for superconducting fault current limiters, which is a strategic market for us.

Faults are abnormal flows of electrical current like a short-circuit. As the power grid is stressed, faults and power blackouts increase in frequency and severity. Superconducting fault current limiters act like powerful surge protectors, preventing harmful faults from taking down substation equipment by reducing the fault current to a safer levels so that the existing switchgear can still support the grid.

Multiple customers have requested Conductus wire for technical evaluation and qualification in their devices. As fault current limiters use shorter lengths of HTS wire, we will have the option to use the new pilot production RCE machine to manufacture the wire for this market.

There are also several very interesting motor applications. In fact, the Conductus wire, fully fabricated at our Austin facility, is now being tested for a superconducting motor application. In addition, there are several existing low temperature applications where customers are evaluating the performance of Conductus wire. These include high fuel magnets, Magnetic Resonance Imaging, or MRI; and Nuclear Magnetic Resonance, or NMR applications.

We recently achieved wire performance requirements for a low temperature, high-end superconducting maintenance application by demonstrating greater than 2,500 Amps per centimeter width at 4 Kelvin.

Last month, we also passed testing with a different customer for an application in magnetic fields strengths greater than 14 Tesla. As we look to mid-2013, our intention is to retain flexibility as to when we invest capital in the kilometer length RCE machine.

As I just noted, our new pilot production RCE machine will produce wire in the lengths required for several fault current limiter customer designs. As a result, the STI investment decision will depend on the expected timing of demand for high power cable applications. As always, we'll make future investment decisions based on our view of the situation at that time.

In addition to our production progress, we continue to protect our intellectual property. In September, STI was issued a critical patent on its RCE device and fabrication method. Our intellectual property position continues to underlie our strategy to capture market potential with commercial development of Conductus HTS wire.

We will continue to focus on strengthening our global intellectual property portfolio to support our growing market position.

In 2013, we are focused on delivering the longer lengths of wire customers require to complete qualification for their specific product applications. We expect that the customer requests already in-house will consume all of the wire we can produce in the first few quarters of 2013.

We believe that when qualification testing is successfully completed, customers will place purchase orders for Conductus wire, putting STI on target to producing wire on a commercial scale in 2014.

Now I'll turn the call over to Bill for a review of the financials. Bill?

William J. Buchanan

Thank you, Jeff. While our core focus is on 2G HTS wire development, throughout 2012 and into 2013, we continued selling our wireless products. As we transform into an HTS wire manufacturer, we will continue to evaluate the various options available for both our wire and wireless businesses.

Our fourth quarter revenue for our wireless business was $1.1 million compared to $284,000 in the year-ago quarter. Our commercial gross margins were positive in the fourth quarter of 2012 due to increased revenue compared to negative gross margins in the year-ago quarter.

Total R&D expenses, including contract and other R&D expenses, amounted to $1.3 million in the fourth quarter and $1 million in the year -- compared to $1 million in the year-ago quarter. Our total R&D expenses have increased as we expand our 2G HTS wire investment.

SG&A expenses were $1.2 million compared to $1.3 million in the prior year's quarter. Net loss for the fourth quarter was $2.3 million or a loss of $0.05 per share compared to a net loss of $3.1 million or a loss of $0.10 per share in the year-ago quarter.

Total net revenues were $3.5 million for each of the full year ended December 31, 2012 and 2011.

Our net loss for 2012 was $10.9 million or a loss of $0.28 per share, improved when compared to net loss of $13.4 million or a loss of $0.42 per share in the prior year.

The total number of common shares outstanding at December 31 was 50.3 million shares.

Onto the balance sheet. In the fourth quarter, $2.1 million was used to fund our cash loss, and $1.2 million was provided by changes in our working capital. Payments for purchases of equipment for our HTS wire program were $750,000.

We ended the fourth quarter with $3.6 million in cash and cash equivalents, and working capital totaled $3.1 million.

During the fourth quarter, STI received net proceeds of $2.7 million from registered direct offerings of our common stock. Based on our current forecast, we expect our existing cash resources will be sufficient to fund our planned operations through May 2013.

At the end of the fourth quarter 2012, accounts receivable was $122,000. And the days sales outstanding ran -- for the fourth quarter ran at about 10 days. Current and noncurrent liabilities totaled $1.7 million at December 31, 2012, and were down approximately $173,000 from the 2012 third quarter end, primarily due to decreases in accounts payable for our HTS wire equipment purchases and accrued expenses.

Now back to Jeff.

Jeffrey A. Quiram

Thank you, Bill. We are near the end zone in our transformation of STI into a supplier of second generation HTS wire for a very attractive market.

According to the Korean Industries Confederation for Commercialization of Superconductivity, the global market size of superconducting devices is expected to increase from approximately $24 billion in 2015 to over $113 billion in 2050.

This includes nearly $45 billion for HTS power cables in the 2050 timeframe. We have made great progress in outfitting our new state-of-the-art production facility in Austin. We've completed acceptance testing, we received and installed and then turned up equipments throughout 2012. As we discussed, these machines are very complex and perform difficult manufacturing processes. Our IBAD system is delivering great performance and has been producing wire substrate in lengths necessary to meet our outstanding customer request.

The next critical milestone is to implement our proven HTS materials expertise, utilizing our new pilot RCE machine to produce Conductus wire with the desired superconducting properties.

Our technical team continues to make very significant progress in turning up the new machine, and we believe we will solve the remaining operational issues in the near future.

This will enable us to complete the samples for the cable demonstration project and other customer requests. In summary, we are excited about our progress in launching Conductus wire and look forward to fulfilling our customers demand for 2G HTS wire in 2013 and beyond.

And now, operator, we're ready to begin the Q&A session.

Question-and-Answer Session

Operator

[Operator Instructions] And your first question comes from Prakash Masand from GME.

Prakash Masand

Jeff. Had a couple of questions about the fabricated wire that you put out in your press release that you said was completely fabricated at your Austin plant. How long is that wire?

Jeffrey A. Quiram

The wire coming out of out Austin plant is relatively short because we're implementing it on a -- one of our R&D machines. So it's less than meter lengths.

Prakash Masand

So it's less than 1 meter in length?

Jeffrey A. Quiram

Yes, in the wire that we actually built in Austin. We can do -- the longer lengths come out of our R&D machine in Santa Barbara. And really, the lengths that we need to do some of the qualification efforts will really then come off of the RCE machine that's just recently been installed and being turned up now.

Prakash Masand

So at present, you're only able to make wires less than 1 meter in length, and you have to somehow get to 100 meters in length at your Austin plant in order to provide these wires to the customers? Is that correct?

Jeffrey A. Quiram

The machine in Austin is capable of doing 100-meter lengths. Frankly, for the qualification that many of the customers are going to be doing in 2013, the lengths we need to provide off of that machine are in the 10-meter to 20-meter lengths are the longest requests we've seen at this point in time. So we don't need to go to 100, but we need to go significantly longer than we are on our existing machine.

Prakash Masand

But when I listened to the call in the last 2 or 3 quarters, I thought that you mentioned that your goal was to get to 100-meter lengths from this new machine because that was the length that you needed to provide to your customers. Did I hear that wrong and suddenly, it's gone from 100 to 10 or 20 meters?

Jeffrey A. Quiram

No, I -- what we really need to do -- it depends on the application, of course. There are a number of applications where the length of wire that's needed is significantly shorter. There are really no applications today that actually require 100-meter lengths. What you really see when you get to extreme lengths of 1 kilometer, that's where many of the power cable, the motor and generator applications, some of the low temperature applications are a little bit less, maybe 500 or 600 meters. But when you look at shorter lengths for -- like fault current limiters, many of those demands are in that 10- to 20-meter lengths, not 100. But the real benefit of...

Prakash Masand

So if you provide a 10- to 20-meter length to your customers, based upon them doing an analysis of that, that's going to make them comfortable to order a 1 kilometer length wire?

Jeffrey A. Quiram

As a matter of fact, it will, because the real capability that you're demonstrating is the ability to take the deposition process. Because it's really a matter of how can you build the film? Can you get the film to perform the way you want it to perform? And the ability to do that and get the consistent growth -- because what everyone's really looking for is consistency in performance, not only along the length of the wire but also across the width of the wire. And that's really a function of the consistency and the yield you can get on, on putting down the film. And so the transition -- once you've demonstrated the ability to put 10 meters worth of that film down consistently, you really demonstrated that you've successfully solved the problem, which is really the geometry problem on how you deposit these materials. Where your -- the real challenge that we've been working on is you're taking a process that normally would deposit materials on substrate that sits on a platten and you're turning it in and trying to put it on material that sits on a drum, so -- and everything is spinning, of course. And so you're changing the way the direction that the material is being put down in how you're handling the template. And frankly, once you've been able to demonstrate doing that over lengths in that single-digit to even double-digit meter lengths, then it's just a matter of ramping up the capability of the machine to handle additional volume of wire.

Prakash Masand

So if I hear you right, when you say that you're working hard to develop longer lengths of wire in the next few quarters to the customers, you are referring to a 10-meter length wire fabricated at the Austin plant to the different manufacturers or whether it be for electric utilities or NMRs or other applications, that's what you're referring to, a 10-meter length wire?

Jeffrey A. Quiram

Something less than 100 meters, yes.

Prakash Masand

Okay. The second question I have is, are you familiar with the company Grid Logic in Lapeer, Michigan?

Jeffrey A. Quiram

I've heard of them, yes. I'm not overly familiar with them, no.

Prakash Masand

They just received the $4 million grant from the Department of Energy to do what it seems like you guys are doing, which is low-cost superconducting. And I was wondering, a, is that something that's similar to what Superconductor Technologies is doing; b, if they are able to get $4 million in grants to do that, is that another option for you to raise money through the Department of Energy; and c, are the patents that you just got in September cover what they're doing?

Jeffrey A. Quiram

I can't respond directly to exactly what the company you're referring to is doing, and I'm not overly familiar with them. I've heard the name, but I'm a little surprised that they're in the wire space. I'll definitely check into that, and then I can give you a call back and talk with you about that off-line.

Prakash Masand

Okay, very good. And then the final question I had is you had advertised several jobs at the Austin facility, but I noticed today that none of them were being advertised. Have you filled all those positions that you advertised in the last month or 2?

Jeffrey A. Quiram

We've filled every position that we wanted to in Austin. We've had very significant success in attracting the talent that we want, and right now, we've got all the people that we have in our plants. So...

Prakash Masand

How many employees are there in the Austin plant?

Jeffrey A. Quiram

There's approximately 19 in the Austin facility.

Prakash Masand

Out of the total of how many employees at Superconductor Technologies?

Jeffrey A. Quiram

It's about half of our total employees. So we still continue to have some of our technical resources in Santa Barbara. A lot of our business operations, personnel are -- remained in Santa Barbara as well. And then of course, all the personnel involved in the ongoing wireless business are in Santa Barbara. So right now, it's about an even split between the 2. And then I think we'll see over time that Austin will continue to grow and will over time become a larger location for us.

Prakash Masand

And then finally, Bill mentioned you have money to last you until May of 2013. What plans does the company have to raise additional funds to do all the things that you spoke about?

Jeffrey A. Quiram

The company has -- we continue to have discussions with many different -- along many different avenues, from discussions with other potential strategics to discussions about continuing efforts in the public markets. So we do have a degree of confidence that -- with what we're hearing from investors and what we're hearing from other participants that we will be able to continue to secure funding as we move forward. And our goal is always to do it in a way that we think is most beneficial, as little dilution as possible for our shareholders. And we'll continue to strive to do that. It is a challenge. It's one that, in this market, it's a little bit more challenging than in the past. But at the same time, we have confidence that we're going to be able to execute on that plan.

Prakash Masand

Yes, and finally, I just want to make a comment. My feeling is that the company always talks about the great potential for all the applications, kind of on the horizon, but has really undelivered and overpromised on all the wire specs. And so it's kind of fairly concerning that we haven't hit the targets that you said the R&D facilities in Santa Barbara would provide the wire, then you said it cannot and now -- then it was a 50- or 100-meter wire. To the end hearing, it's only 10 meters, and it kind of feels a little bit disconcerting.

Jeffrey A. Quiram

Well, I think, that if you really go back and look at what we've been saying all along, the only thing that we've not done that we stated we would do was deliver the demonstration, the wire for the demonstration cable project. As far as the volume of -- and when we are ramping up and the lengths of wire and when we're going to be providing them, we've been very consistent on that. And would we like to be providing longer lengths by now? Yes. Have we stated that -- we've never stated that we're going to be doing kilometer lengths. We've always stated that, that's end of 2013, 2014 timeframe. We've been very consistent on that for, I don't know, 3 years.

Prakash Masand

But it's only 1 kilometer length you have, but not for the 100-meter lengths?

Jeffrey A. Quiram

Well, yes, but the challenge is -- so we're turning this machine up. We're, what? A month or 2 months behind on it. So I guess, I just -- all I'm really doing is questioning your characterization that we've been consistently missing our targets. And I would just -- my position on that would be that we have not been consistently missing anything. From a performance on the wire actually, we've -- we are actually delivering better performance in current handling capacity and some of the low temperature applications than we ever believed we would. So on that technical side, we're actually making great progress. So I'm just responding to your characterization that it's been a consistent underperformance and I don't think that, that's accurate.

Prakash Masand

Well, I mean, your stock is down 97.6% since you took over as CEO. I mean, the numbers speak for themselves.

Operator

[Operator Instructions] And the next question comes from Jim Collins from Clemens [ph].

Unknown Analyst

Jeff, yes, I think, it's congratulations on the progress that you're making it a very complicated process. And if I understood what you previously said, we're about 1 month or 2 away from having the lengths that we need for this demonstration?

Jeffrey A. Quiram

Yes, we are -- I would say, it's in weeks, Jim. What we're really doing when you turn this machine up, the real focus on the work is to have all the subsystems working properly. You need to have the vacuum and the heat and the ability to evaporate the materials, all kind of in the -- it has to be running in sync. And so what we're doing as we turn up and do these production runs, you really are knocking down the areas where the machine is not necessarily dialed in. And you just kind of keep doing that. So it's a bit of an iterative process that it's just -- it's what you need to do. And it's -- I guess, the good news is we've done this before. We know how it's done. I mean, we had to do it with the IBAD machine, we had to do it with the SDP machine, we had to do it with our wafer machine that we built in Santa Barbara. So the real -- I guess, the reason we say near future because it's really -- it's hard to know, is it going to be 4 weeks? I mean, is it going to be 20 runs or is it going to be 2? And the reality is we know that the -- we know what the challenges are. We know the areas that we need to continue to refine it? And we're close. So -- but I hesitate to give you an exact date, Jim, I guess, is what I'm saying. But I think it's weeks.

Unknown Analyst

Okay. And I get to reiterate with you. Once we have the settings, they're sort of like locked in? And then from that point on, you can -- if you could make 3 meters, you can make 30 meters, right? Is that the idea?

Jeffrey A. Quiram

The idea definitely is that once you've demonstrated consistent performance in laying the material down, you then -- it's a matter of how long a piece of substrate you load in. And so for instance, what we do now, when you're putting this and ramping up this drum, you put in multiple pieces of template because you're really trying to find out if the performance at the edge of the drum is the same as the performance in the center. And the goal is to be able to take those individual pieces and test them and compare them. And that's how you really pinpoint what's going on with the material and then try to find out, okay, we're having a little bit of a difficulty in this particular zone. Is it a temperature issue? Is there something blocking the material from coming up? What caused that? That's the process that we're undertaking. And so once we get to the point where we feel that we have that consistent performance, that's when you probably start loading it with really the long lengths. That's when you load a 50-meter piece of template and deposit on it. But that's -- we're not quite there yet, I guess, is the point.

Unknown Analyst

Okay. Well, your competitor is SuperPower. And some of their information, they are producing a kilometers of the stuff. And I'm just wondering if -- do you have any idea how long it takes them to make 1 kilometer? I mean, I'm trying to compare with what we ultimately will do, I mean, if they're making kilometers now, then they also claim that they can splice the shorter lengths together to make longer lengths, if you will, solder it or however, they do it, which I thought was quite interesting. And I would presume we would ultimately will be able to do that also?

Jeffrey A. Quiram

Well, I mean, I'm not going to talk of -- necessarily about SuperPower directly because I am not privy to everything that they're doing. But we do know that them and others have been producing kilometer lengths for a while. The -- but they just don't produce enough of it is really the challenge. And as far as splicing things together, that's normally -- that's probably something that's done due to necessity. It's not the preferred method, and I can tell you from the feedback we've received from many customers that's -- they have very, very strict rules on what they'll accept. There are several applications that will -- that have said, "Well, okay, we'll take kilometer lengths but can have no more than 2 splices." But that's only really being done in -- that's usually something that's being built in a pilot production or they're trying to build a sample or a demonstration system. The reality going forward is that when you're designing the coils and the devices that will contain the superconducting wire, just having a splice show up, kind of out of the blue, is a problem. And it's a problem primarily because the splice is not -- it changes the physical characteristic of the wire. It makes it wider, it makes it thicker, it makes it less potentially -- it can't bend as well at the splice. So that's why when we say there are applications that require kilometer lengths, things like a motor, they're planning on having splices, they know they need splices because they need 300 total kilometers to build the coil. But they need to have those splices exactly where they -- they need to plan where those splices are going to be so that they can account for them in the design, in the manufacturing of the coil. So I know that there are definitely consumers of wire that will take splice product. But long term, especially at kilometer lengths, that's not a long-term opportunity, we don't believe. I think, it's done out of necessity at this time.

Unknown Analyst

Okay. And then earlier, we indicated that we were shooting for -- we have already done samples of the 500-amp meter wire sample, which would -- could do some sort of the record, if you will, based on what's being distributed out there by other people today. Are we still shooting for that number? Or is it higher? Or just how do we stand with that goal?

Jeffrey A. Quiram

Well, we're shooting -- for our cable demonstration project, we're shooting for that number. And the reason -- and that number is the target because that's how the cable was designed. The cable was designed to use strands that can carry 500 Amps. Are there going to be other designs and other approaches that will prefer to have higher performance? Probably. Are we continuing to push the envelope and try to get greater and greater current carrying capacity? The answer is yes. And it's a combination of increasing the amount of current you can carry and then of course, also trying to do it in as thin of film as possible for all the various reasons associated with production. You want the thinnest film as thin as possible so that your production time is shorter, for instance. And the throughput of the system -- so those are the areas that we're working on to refine the performance of the crystal. And that work will probably never stop. I mean, we'll always be trying to push the envelope on that.

Unknown Analyst

And then, I guess, my last question is in terms of the -- what the price of the product is going? For now, we had just discussed or you had shown in other presentations, something like $25 per 100-amp meter. And is -- what's the price of what's going on in the world market today? Any -- has the number changed any or up or down or sideways?

Jeffrey A. Quiram

Well, I mean, the price per kiloamp-meter is very much a function of the application. So there are some implications that are not as price sensitive as others. The majority of the wire that's being sold today is in the $250 kiloamp-meter and higher. When you look though -- when you look out into the future and the large orders that are being placed and the expectation and the pricing for the wire in the out years is probably down in the $100 kiloamp-meter range in the next couple of years. And ultimately, as you try to bring more and more applications into the target zone, that price will need to be continued to be pushed down. I think one of the things that's very exciting for us is that we recognize a pretty significant advantage on some of the cost elements associated with just building up the wire. Now ultimately, the biggest thing that affects cost is yield. And so we need to be able to demonstrate the implementation of our high-yield process going from the wafer to the wire. And once we do that, we think we're going to be well situated to compete for business at those prices as they continue to go down as volume goes up.

Unknown Analyst

Okay. And then I understand, I guess, that GE is working on -- it's a low temperature wind turbine for the -- like the 10-megawatt turbine that we had talked before about. This would be the 2G stuff and all of a sudden, they're finally to work in a low temperature one also.

Jeffrey A. Quiram

Well, that -- they and others are building a number of products that they absolutely want to build with high-temperature wire. But they can't because there's not that much high temperature wires available. So in this instance, as in others, there are projects being done using low temperature wire because that's -- they can't get the high temperature wire to do it. I mean, that's the supply constrained environment that -- that's just an indication that, that problem is still very significant. The thing that, I think, everyone should know, though, is that long term, when you look at things like a 10-megawatt wind turbine, for instance, if you do it with low temperature wire, that means that you're cooling -- the cooling requirements for that wire are very significant. But they're space intensive. They're large. They're heavy. They're not overly reliable and they require maintenance. So that's not something that long-term is very attractive to somebody who wants to build a 10-megawatt wind turbine and put it 40 miles out to sea. That's really the attractiveness of the high-temperature approach that -- you can get away from some of those problem areas. And so -- but you're going to see over the next year or 2 that, that device manufacturers are going to be building stuff of low temperature wire, but that's really just because of necessity and a substitution that they're being forced to make because they can't get the other wire they need.

Unknown Analyst

Will we be using the RCE machine for that purpose in terms of -- is the cost about the same in terms of what you could sell wire from for the -- if it was made with -- for low temperature purposes?

Jeffrey A. Quiram

Well, yes, because what you're really doing, Jim, if you remember that there are certainly things that you can do to the film to optimize it for low temperature operation. But just taking the product that we designed for high-temperature applications, and cooling it to low temperature application, show us very significant increase in performance. I mean, I think, as we talked about, that one low-temperature application took our wire to 2,500 Amps by cooling it. So can we make that better by optimizing it for the low temperature application? Absolutely. But that's all -- those are all decisions that we'll make as the business relationships come into existence. And so if we -- just hypothetically, if somebody with low temperature application would come to us and say, "We really want to use your wire in our approach and we're willing to commit to you that we're going to buy a bunch of it," We would certainly commit to them that we'll refine that wire and make it even better.

Unknown Analyst

Yes. But I think about it, in terms of the price, that would sold for less money because it's a low temperature product. So we have one machine -- that would be not the most efficient way to make the most money if we switch to use the low temperature and it paid less, right?

Jeffrey A. Quiram

Well, yes, but in some instances, Jim, what you're seeing is that the high-temperature wire actually outperforms the low-temperature wire at low temperature. I mean, so you're potentially getting a performance benefit. So you wouldn't necessarily be selling it cheaper, I guess, is what I'm saying. Now some of the low temperature applications though, are mature. They're existing, so some of those can be more demanding from a price perspective than others but we just have to -- we're playing that on a case-by-case basis.

Unknown Analyst

Okay. And I guess, the one last question on Resonant. I don't understand the connection, we have. If Resonant gets the big contract, are we participating as -- do we own Resonant or just how does that work now?

Jeffrey A. Quiram

Well, we're a minority owner in Resonant, so...

Jeffrey A. Quiram

What's the percent?

Jeffrey A. Quiram

It's less than 50%. So we -- I think, Bill would tell you that we do some accounting, and we have to recognize their profit and loss on our P&L. But I mean, it's not like -- the revenue doesn't flow to us nor do the cost. So ultimately, what we have is an ownership share in an enterprise that we think has a some very significant potential going forward. And if they deliver on the promise there that we expect that ownership position will be of value to our shareholders. And that's what the purpose of spinning that organization out and setting them free was in the first place.

Operator

And our next question comes from Bill Mahon from the company WK Mahon & Company.

Bill Mahon

I'd like to just ask about the wire for the -- for limiters. They require shorter lengths, which I understand that you're capable of manufacturing right now. Is that correct?

Jeffrey A. Quiram

The machine that we are turning up right now, Bill, we'll be able to manufacture at length sufficient. Now we're not delivering those lengths right now because that machine just being turned up but...

Bill Mahon

Right. Okay. Well, that's all right. Now I don't want to get too technical because I don't understand half the stuff you guys were talking about anyway, because I'm new to the story. But here's what my question is. How big is the market for the fault limiters wire?

Jeffrey A. Quiram

It's a multibillion market.

Bill Mahon

Okay. So it's at least $1 billion, is that correct?

Jeffrey A. Quiram

It's tens of billions of dollars.

Bill Mahon

And that will pertain to your portion of it?

Jeffrey A. Quiram

That would pertain to -- when you look at some of the forecasts and some of the reports, again, it's a function of -- well, when you look at -- if you look at the market right now, Bill, you would say, "Well, it's not that large at all." But it's primarily because there's not enough wire being provided to build enough devices to make it that large. But the number of places where a fault current limiter and where a superconducting fault current limiter would be applicable into the grid is very significant. Pretty much every substation in the world has some sort of equipment in place to try to protect it from these faults.

Bill Mahon

And when you have that machine turned up, you'll be able to supply that market?

Jeffrey A. Quiram

We'll be able to supply that market.

Bill Mahon

When do you think you'll be ready to supply that market?

Jeffrey A. Quiram

Well, I mean, the intention is to first have this machine up pretty soon. So...

Bill Mahon

Okay, so that's good enough. So if that's what your intention is and it's a $1 billion market, and if you want and you don't have to pursue this. I'll be glad to call you off-line because I don't want to take up as many -- much time as the previous callers did. But if you are able to do that in a relatively short time, Jeff, why don't you concentrate on that market so that you have cash flow, et cetera, coming in so you don't have to do a financing?

Jeffrey A. Quiram

Well, that's exactly what we said in -- as far as making the decisions on going to that next machine, the issue is we've got to get this wire out. We've got to get it in the hands of the people that are being fault current for limiters and qualify it and start building devices around it. And yes. I mean, I think that you're exactly right. We do think that is a viable alternative. Now whether or not that's an approach that would not allow us to not raise any money at all, I think that..

Bill Mahon

No, that's a step too far. Okay, but Jeff, do you mind? I have some other questions and I don't really want to take up a lot of time because I know there are other people that want to ask you questions. Can I call you directly afterwards or can you tell me whom I can call other than Cathy because I don't think she's up to speed on this...

Jeffrey A. Quiram

We have your number, Bill. We have your number, we'll get a hold of you.

Operator

Thank you, ladies and gentlemen. That does conclude the Q&A session for today. I would now like to give the floor back to Jeff Quiram. Please go ahead, sir.

Jeffrey A. Quiram

Thank you, all, very much for joining us today. STI has been invited once again to exhibit our Conductus wire and cryocooling solutions in SuperConductingCity at Hannover Messe in Germany in early April. This event is the world's leading showcase for industrial technology and superconductivity is highlighted as a key technology of the future. We are honored to represent the industry at this very important event. We look forward to speaking with all of you again on our next call. Good day.

Operator

Thank you. Ladies and gentlemen, this does conclude the Superconductors Technologies STI Conference Call. Thank you for your participation. You may now disconnect.

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