2023-08-02 06:18:50 ET
Summary
- Ideal Power is adding big companies to its test and evaluation program, and its development program with a top-10 car producer is on track to complete Phase 1 in Q2.
- It has launched its first commercial product and a second one is scheduled to launch in Q3, although sales will not ramp before 2024 as design incorporations take time.
- B-TRAN achieved another 20% conduction loss improvement which is rare in this space.
- Commercial success is still not guaranteed but given the serious interest of big companies we like the odds. The market opportunity is a large multiple of the company's market cap.
Ideal Power ( IPWR ) remains on track for commercializing its potentially revolutionary B-TRAN technology. We have described their B-TRAN tech advantages and market opportunities more extensively in previous articles ( here , here and here ) so this is just an update.
B-TRAN's main applications are in the power switching market where its inherent bidirectional switching reduced switching and production losses and more compact thermal profile.
These advantages can produce important savings in a host of big and fast-growing markets like EVs, EV charging infrastructure, alternative energy, data centers, and other industrial applications.
While the EV market seems the biggest opportunity, as B-TRAN power switches can squeeze out increased mileage and/or reduced battery which are important drivers of the EV market, product design cycles are 3-5 years so we should not expect any near-term revenue (apart from milestone payments from development projects).
But there are more immediate opportunities as the company has just launched its first commercial product, the SymCool for the solid-state circuit breaker market, a large opportunity in itself ( Q1CC ):
This market is projected to grow at a compound annual growth rate of over 6% to approximately $26 billion by 2027. With the clear advantages of our electromechanical breakers and IGBT-based solid state circuit breakers, B-TRAN enabled solid state circuit breakers are ideal for a range of utility, industrial power control and military high power applications from 600 volts to many thousands of volts.
B-TRAN produces very low condition losses and is orders of magnitude faster than mechanical circuit breakers, but a recent innovation in the lab further improved conduction losses by 20%, which (Q1CC, our emphasis):
This latest improvement means B-TRAN conduction losses can be more than 5 times better than bidirectional circuits using IGBTs with diodes . We're in the process of now incorporating this improvement in our driver and capturing the innovation in a patent application... Once where you're continuously conducting things like circuit breakers in particular, will benefit. But even though the applications where you're doing a lot of switching, like energy storage coupled with solar will benefit from it as well. And just to give people with some context, improvements and losses in semiconductors are usually pretty hard to come by.
Improvements of this magnitude are rare, so this is another big improvement in their technology. Sales should start modestly late this year and ramp in 2024.
A second commercial product, an intelligent power module targeting renewable energy and energy storage markets is scheduled to launch in Q3 this year with the ramp late in 2024 and into 2025.
The company has numerous big companies in its test and evaluation program , and added new big companies to the program (Q1CC):
The participants in the program include another top 10 global automaker, the EV charging company, commercial electric vehicle company, the leading provider to the solar industry, affords a Global 500 power management company and several others covering each of our target market segments. This quarter, we added a Global Tier 1 automotive supplier as part of this program... We also added a second Forbes Global 500 leader in diverse power management markets to the program roster.
B-TRAN development kits (consisting of a packaged B-TRAN, device driver, test board, and safety enclosure) will be produced for program participants in H2, speeding things up.
The company has a development agreement with a top-10 automotive company . Management expects Phase 1 to be successfully concluded this quarter after which Phase 2, which involves collaborating with a packaging company will ensue. That will be concluded by Phase 3, the test and certification phase.
Management argued that they went through a considerable technology competition to be chosen by this top-10 car producer. We wouldn't expect differently, these companies do not make critical decisions lightly.
While they still have to go through the rigors of the development program, we think investors should take some confidence from this about the technology claims they make for B-TRAN.
They partner with DTI in the NAVSEA program for the US Navy and have delivered the first shipment of packaged and tested B-TRAN devices to DTI with the next shipment imminent (days).
DTI spots another circuit breaker opportunity for the companies to exploit together and the NAVSEA project has produced wider interest in the B-TRAN technology
They will complete a full process flow engineering run with their wafer fab this month and have qualified a second high-performance fab at another part of the world. Together these can accommodate the expected ramp in SymCool next year with a combined capacity of 1.25M units a year.
The company has also applied for several government funding opportunities and is collaborating with others to pursue funding under the CHIPS Act.
Finances
There are some milestone payments coming from NAVSEA and the development program with the top-10 automaker, the first aren't likely to be much ($36.7K) we don't know the size of the latter but this year's revenues are still likely to be minimal.
That could change next year as their SymCool sales start to ramp, but in any case, they have $14.5M of cash left at the end of Q1 and expect cash bleed to be $8M-$8.5M (with $1.8M already incurred in Q1) so they can last well into H2/24, especially as revenues from SymCool start to come in.
Valuation
With 7.8M shares outstanding (fully diluted) the company has a market cap of just $93.5M (at $12 per share), which we think is a fraction of what the company could be worth in 3-5 years.
Risk
The obvious risk is that market acceptance can be slower than what the company expects and as a result, the company will need additional financing to bridge the gap. While that's certainly possible, we're not overly worried at this stage:
- The company as it has a fairly modest cash burn, any additional financing needs aren't likely to lead to massive dilution.
- The company is financed until at least H2/24.
- Between then and now we'll likely get an early indication of adoption and the financial consequences.
- We would get more worried if by Q2/24 the company hasn't garnered much traction with its two (possibly more) products, given the stated advantages, which are by no means marginal, this would surprise us.
For the same reasons, one could argue that there is no urgent need to buy the shares, at least not yet. The shares have indeed been range-bound (except from the height of the pandemic fury early 2021):
FinViz
Conclusion
The company reminds us of the likes of Aehr Test Systems ( AEHR ) or Atomera ( ATOM ), both also have technology that offers compelling advantages but customer adoption follows the well-known adage "gradually, then suddenly" path, as it did in the case of Aehr. Atomera is at a similar stage as Ideal Power.
While certainly not risk-free, we think the case for the company's B-TRAN technology is strong and has even become stronger with the recent improvements. No doubt the market opportunity (or rather, opportunities) are huge.
There is of course the risk that market acceptance will disappoint, or ramp much slower making additional financing necessary, or that something better comes along. These seem risks well worth taking in our view, even if the shares might be range bound for some time to come.
For further details see:
Ideal Power Firmly On The 'Gradually, Then Suddenly' Path To Customer Adoption