QuickLogic (QUIK) is a fabless company that makes customer-specific standard products (CSSP). This is a sub-category of field-programmable gate arrays (FPGA). It basically means that the function of a chip can be altered after its production. CSSPs are products that aim at a range of particular applications that today's processors are not best suited to run. In this article, I'll write about QuickLogic's new product the ArcticLink 3 S1, a chip for the purpose of managing the multiple sensors built in a smartphone without draining most of the battery. I believe this chip has tremendous potential and that the company's recent success with another new product positions QuickLogic in a very interesting place into 2014 and beyond.
A Short Intro
QuickLogic operates in a few main markets: the smart connectivity market, the display bridges market, and the sensor market. Let's take a look at QuickLogic's TAM.
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Display bridges are chips that aim to solve the display bridge problem. To learn more about this problem, I suggest watching this video. In general, the display bridging problem is when system designers (smartphones/tablets) want to use a display that uses a certain interface but a processor that uses a different interface (the common interfaces are: RGB, LVDS, and MIPI). When a designer encounter this problem he has to choose a different display or a different processor so the two parts will be compatible. QuickLogic offers a chip that bridges this interface difference and enables the designer to enjoy freedom of choice when choosing a processor and display. According to the company, there are about 60M devices shipped today (smartphones and tablets) that have a mismatched interface, causing lower display quality.
Smart connectivity chips are made for solving a variety of connectivity issues confronting system designers.
Ultra-Low Power Sensor Hub
This is a new product QuickLogic has recently demonstrated. As you all know, we regularly witness the arrival of new smartphones and tablet designs with smaller and smaller improvements. The competition in the smartphone and tablet market has become very intense. As anybody who uses a smartphone these days knows, battery capacity is a huge deal breaker. There is nothing more annoying than finding out that after you have driven to someplace using a navigation app like Waze or Google Maps, your battery is almost dead. Today's available smartphones have not yet perfected the method of extracting and processing the data generated by the smartphone's sensors. A lot of processing takes place in your device's main app processor, which eats up a substantial amount of battery life, resulting in your smartphone battery going dead in the middle of the day.
Battery life as well as extra features could drive smartphone designers to look for any piece of competitive edge that will allow them to win a greater share of the fast-growing smartphone market. QuickLogic hopes that this drive will encourage designers to utilize the ArcticLink 3 S1 ultra-low power sensor hub in their designs.
The ArcticLink 3 S1 is a very small chip that does three things. It collects the raw data from the smartphone's sensors, processes it, and interrupts the main app processor only when it needs to, thus taking a lot of load from the processor and achieving the same purpose for a lot less power. Current smartphone manufacturers had set a bar of 1%-2% power usage for sensors. QuickLogic claims that this new product is the only one in the market that gets under this threshold.
As I just mentioned, smartphone manufacturers are looking to get any piece of competitive advantage they can get. The end-users-us-don't care about how many cores the processor has nor does he or she have the tools to fully understand why the Apple (AAPL) new A7 processor is better because it is a 64-bit processor instead of a 32-bit one. The end-user cares about his or her experience. Always-on-context-awareness (AOCA) is a term that refers to the ability of a smartphone to always know and react to its environment. It means that your smartphone knows if there's daylight right now or if it's in your hand/pocket/table. It means that your smartphone always knows exactly how many steps you walked so it knows exactly where you are, also when you are indoors. That means that if you just walked into the dairy section in your local supermarket, the store can know exactly where you are and send you a certain discount for let's say 30% off on American cheese. It means that if you're sitting in your car and driving, your smartphone will hold your messages until you park so you won't be tempted to reach for it while driving. A true AOCA-enabled smartphone will do all of that while consuming 1%-2% of your battery.
I believe that if the user experience will get to that level and developers will be able to develop apps that do all of the above but consume very small amounts of power, there will be no smartphone manufacturer (starting with the high-end and going down) that will be able to afford not using a sensor hub in its designs.
Source: QuickLogic Presentaion
Recent Success and Go-to-Market Strategy
In the past three quarters, QuickLogic revenues have tripled, from ~$3M to ~$9M. The reason revenues grew at such fantastic rates is the Samsung Tab 3.0 7-inch tablet. Samsung chose to embed the ArcticLink 3 VX display bridge. I think this means the company's claims got a very serious validation and that the Samsung design win is a sign that the company can execute its strategy very well. In the past month, QuickLogic announced that the ArcticLink 3 S1 sensor hub will be production ready in Q1-2014 and samples are already shipping. I think that the AOCA environment, which will enable getting the user experience to the next step, is a very logical way for smartphone designers to enhance the entire mobile eco-system. Of course, while recent success may have just showed us what one big design win can do to the company results, it doesn't tell us anything about the future except that QuickLogic has good-enough execution ability to be a Tier-1 supplier. Even if the new sensor hub ASP is $1 per unit, a relatively small design win of 10M smartphones a year (1% of the smartphone market) means an additional $10M in revenues. For a company that is forecasted to have ended 2013 with revenues of $24M, $10M is a big deal.
The QuickLogic Go-to-Market strategy is described by the following:
Source: QuickLogic Presentation
CSSPs are products that a customer can fully program and change and thus create a competitive differentiation. For example, a smartphone manufacturer that wants to include the QuickLogic sensor hub in its design but wants to program it with its own algorithms because that manufacturer believes he or she can get a competitive advantage using its own IP.
Reference designs are QuickLogic's way of going to a customer and instead of just saying: "You can do everything with this chip!" giving that customer a reference design so he or she can witness a proof of concept of QuickLogic products and what can be achieved with it.
The catalog CSSPs are fully ready solutions. At GlobalPress Electronic Summit 2013, QuickLogic gave the example of Texas Instruments (TXN), which wanted to market an app processor to more markets like the camera market. However, the TI processor wasn't designed for the camera market so it couldn't handle the camera interface. QuickLogic designed a CSSP to complement the TI processor, which enabled them to penetrate more markets that required an interface that includes image capturing. Catalog CSSPs enable OEMs to quickly utilize QuickLogic's solution with the least amount of design effort.
I believe that this flexible and wide Go-to-Market strategy will better align QuickLogic to take advantage of the new sensor hub opportunity.
In conclusion, I think that QuickLogic is very well positioned going into the 2014-2015 timeframe. With the Samsung display bridge design win and vote of confidence in place and the new sensor hub ready for production, QuickLogic revenues can soar in the coming years.