In my previous article, I analyzed the Energous (NASDAQ:WATT) beam forming technology and the challenges that Energous faces in obtaining FCC approval for its high power WattUp array wireless charging technology. Specifically, I concluded that it is not possible to obtain 4 W power delivered over a distance of 6 feet within the established safety rules governing electromagnetic radiation. The article prompted Energous management to hold an emergency conference call to "provide a company update and address misinformation about the company's technology and direction." During the call, CEO Stephen Rizzone and CTO Michael Leabman spent some time discussing the high-power charging technology but the main emphasis was on highlighting the positive reception of the low power WATTUP Mini wireless charger introduced in 2016 CES.
In this follow-up article, I will first cover Energous' response to my earlier article and the recent developments in high power WattUp array technology. Next, I will analyze the performance and cost of the low-power WattUp mini charger.
Energous response to skepticism and recent WattUp demo
My earlier article prompted Energous to arrange a conference call to address my critique of the WattUp array technology. During the call, CTO Michael Leabman validated my analyses method but noted that:
1. It is possible to create pockets of energy near the WattUp array.
2. My limit for safe exposure (2 mW/cm2) is too low and higher emissions are acceptable. CTO Michael Leabman did not specify what he believes is the correct safety limit but power densities from WattUp array are higher.
3. My estimate for antenna efficiency was too conservative (50% vs 95%).
4. I had not factored in the transmitter and receiver antenna gains. I had assumed zero gain for the receiver antenna because I assumed that the charging should work no matter how the receiving device is oriented. (A technical note: The only way to have receiver antenna gain is to have a directional receiver antenna. This means that the receiver needs to be pointed directly to the transmitter.)
These points are further emphasized in the IEEE article where CTO Michael Leabman validates the use of Friis equation (doubling the distance gives 4x less power). In the IEEE demo, hundreds of milliwatts of power was delivered levels with the aid of directional antennas and high field densities (points 2 and 4 above). I will admit that this is a nice science demonstration.
The tone of the IEEE article was positive but problems emerge when one looks at the practical details: The power received from one WattUp array was less than 200 mW at 3-4 feet from transmitter. Even in this highly idealistic and controlled set-up, the power is 20 times less than in the UL test and it would take more than 10 hours to change a smartphone.
The biggest news, however, was that the receiver had to be perfectly oriented to the transmitter. As the article states, "it doesn't work nearly as well if the receiver antenna isn't parallel to (and pointed at) the transmitter." This is the price you pay for using directional receivers to obtain antenna gain to boost the power. The power output is higher but you need to perfectly orient your phone to charge it.
I can already envision the next iPhone advertisement with Energous technology inside: charge wirelessly (in 10 hours if within 3 feet of monitor sized array and phone must be upright pointing to the array). Recall the iPhone "antenna-gate" and Jobs' reply "don't hold it like that." Well, Energous' reply to customer issues might well be - don't put it on the table like that! Take away the orientation requirement for the receiver and the power level drops as much as 10x (=it will take 100h to change a cell phone). The reality does not match the hype.
In the recent quarterly update, the debut of WattUp array was again pushed into the future. Energous will first focus on the WattUp Mini charger and the WattUp array is scheduled to debut in 2017. In the past year, Energous has moved backwards from a completely functional cell phone charging demo to a slowly charging lab demo that requires perfect receiver orientation. This alone should give investors pause. The saga of continuous delays is well documented by Paolo Santos in his excellent article.
New "WattUp Mini" transmitter
As the WattUp array has been pushed to 2017, Energous will first focus on the low power WattUp mini shown in Figure 1. According to CEO Stephen Rizzone, the WattUp Miniwill work in contact or within millimeters of the transmitter, provides milliwatts of power, and is smaller and cheaper than competing standards such Qi. Let's look at these claims.
Figure 1. WattUp mini transmitter.
Energous is not claiming that WattUp Mini is better than competing wireless charging technologies already on the market. This is probably the reason why Energous is not giving much performance information on the WattUp Mini even though it is already sampling to customers. If the WattUp Mini had a technological advantage, I'm sure Energous would advertise it.
Given that Energous does not provide specifications, we must do our best to estimate the technology performance. The analysis is straightforward for the WattUp Mini shown in Figure 1. The low power WattUp mini charger looks like a USB dongle that can be plugged into a standard USB port. Given the confidence of Energous in obtaining FCC approval for the WattUp Mini this quarter, the transmitter likely uses off-the-self Wi-Fi amplifier which transmits 100 mW. The power is transmitted with a single antenna as the USB stick is not large enough to house a beam forming array to generate the "3D pocket of energy."
The received power at any given distance from the transmitter can be estimated using a Friis equation. Table 1 shows the received power, field strength, total efficiency and time needed to charge a small 800 mAh battery. As is seen, the charging works only very close to the transmitter and even then the charging takes days. At larger distances, the signal is too weak for charging and the WattUp can only be used for powering very low power sensors. It may be possible to boost these numbers slightly by increasing the transmitter power to 500 mW which is the FCC limit but the power output is still very limited.
Table 1. Estimated WattUp mini performance at different distances.
Given the feedback from my previous article, I fully expect that many will discount this analysis. A typical argument may be summarized as follows: "If this were true, it would be a scoop/scam/fraud. Hence it is not true." Before you make this argument, please check the Ph.D. research shown in Figure 2. According to this research, the FCC transmission limits limit the received power levels to microwatts. I have yet to see any technical explanation how power levels promised by Energous could be feasible. Alternating non-technical opinions do exist. For example Stefan Toma believes that my analysis has no merits and Energous will be a multi-billion dollar company in 2-4 years.
Figure 2. Ph.D thesis result showing maximum allowable power vs distance (source).
Given that WattUp mini does not work at longer distances, we need to look at near field power output. In near field, the power depends exponentially on distance. Table 2 shows the estimated power received and time to charge 800 mAh battery in contact and a few mm away. It will be interesting to compare these numbers to Energous' specifications. Hopefully, Energous will soon publish the performance numbers, especially the power output and the total efficiency, for the WattUp Mini so we can compare hard numbers against competing standards.
Table 2. Estimated WattUp mini performance in near field.
Even in the near field, the power output of WattUp mini is severely limited. This is significant because the competing standards such as Qi that are already on market provide much better performance. Qi chargers have power outputs up to 8 W and efficiencies greater than 80%. Qi even works at longer distances than WattUp Mini! WattUp Mini may be smaller but Qi receivers can also be made small by making the coil smaller. Yes, the performance of inductive charging will suffer with small coils but Qi chargers will still be better than WattUp Mini.
It is no surprise that inductive charging beats RF at close distances: Inductive coupling forms a tight coupling between transmitter and receiver coils. The resulting efficiency is good. RF changing is inherently loosely coupled and the total efficiency will be sub-20% at best. In addition, the transmit power is limited by the FCC. There really is no performance advantage for WattUp Mini other than that the technology is compatible with bigger but commercially non-existing WattUp arrays.
Cost of low power WattUp mini charger
The cost of the WattUp system consists of two components: a transmitter and a receiver. The RF transmitter requires a frequency reference ($0.10), an antenna ($0.05), a synthesizer chip ($0.20), and a power amplifier ($0.20). Including a USB connecter, packaging and assembly, the direct cost will be close to $0.60.
The receiver will require an antenna and receiver chip. Energous has announced that they have a 3 mm by 3 mm receiver chip so total area is 9 mm2. Since this is at 5.6 GHz, we have to assume that the process node is fairly advanced at TSMC. Assuming that the CMOS wafer cost is $0.10 per square millimeter, the receiver chip alone is $0.90. The total receiver cost including the packaging and assembly is close to $1.00.
The total system cost for both transmitter and receiver is therefore close to $1.60. I would consider this to be the bare minimum cost in volume. The actual cost may well be higher. Add 30% profit margin and the WattUp Mini system price is around $2.10 which would net Energous $0.50 for each device.
The total cost is significant as the cost is supposed to be the main advantage of the WattUp Mini charger that competes with batteries in the IoT market and Qi chargers in the wearable market. A typical battery can power low-power IoT devices for up to three years and costs less than $0.10. Qi chargers have a sales price in the dollar range (less in large quantities). Since Energous management is reading - and responding to - Seeking Alpha articles, perhaps they will explain how the WattUp Mini could be cheaper than competing technologies. In any case, given the low cost and superior performance of competing technologies, the profit potential of WattUp mini chargers is limited to $0.50 or less per charger.
WattUp mini revenue potential
Energous seems to focus on wearables and fitness trackers. The total volume for fitness trackers in Q3 2015 was 21 million units. Assuming that 20% of them will wirelessly charge and that Energous captures 20% of this market, WattUp mini could be in 804k units per quarter. With a profit of $0.50 per unit, the profit potential is just $400k per quarter. This seems highly optimistic for a first-year ramp given that there is no obvious application need or advantage in comparison to competing technologies. I suspect that 2017 sales will be less than one million units giving revenue of $500k for the year. Of course, these estimates are speculative and interested readers may redo the math with their own assumptions.
Stock price target update and the looming secondary
Since my original article, Energous stock price has dropped significantly and bounced up on Apple (NASDAQ:AAPL) rumors and positive PR. I do not see much value in the company IP but it does hold cash ($30M as of 31.12.2015) from its successful IPO and secondary offerings. This cash will provide short-term but sinking support to the stock price. With the current burn rate of $20M per year, the cash cushion will vaporize by Q1 2017 by which time Energous needs to either generate sales or have another secondary. Given the tough sales proposition for the WattUp Mini outlined above, I fully expect to see a secondary by Q2 2017. The path to the lower price will be affected by the regular Tier1/Apple rumors but I firmly believe that this stock will head lower as the secondary approaches.
The low-power WattUp Mini charger does not have performance nor cost advantages and it is therefore unlikely to be a significant revenue generator in the near term. I reiterate the sell recommendation for this stock. Shorting of the stock is risky due to the speculative nature of the stock and fast price movements driven by rumors but shorting does have a high reward potential at current price level (around $10 per share).
Disclosure: I am/we are short WATT.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.