2023-09-13 19:15:55 ET
Summary
- Navitas has positioned itself for growth in the power chip market, particularly in electric vehicles and mobile devices.
- Navitas has found a niche, solidifying its role as a developer of chips designed on GaN.
- GaN growth potential is larger than SiC; GaN will exhibit a CAGR of 53.2%, ahead of SiC with a CAGR of 42.5%.
Navitas Semiconductor’s ( NVTS ) Q2 earnings call press release reported Q2 GAAP EPS of -$0.35, which missed by $0.14. Revenue of $18.06M (+109.8% Y/Y) beat by $1.55M. The company provided Q3 outlook for third-quarter 2023, and net revenues are expected to increase to $21 million plus or minus 2%.
Following the call, share price increased the following day until noon, and it proceeded to plummet 14% over the next two days.
While share prices of the chip design start-up have recovered, they are still down 3% for the past month. Further, share price is down 50% since its November 16, 2021 prior to a December 7 IPO via a reverse merger with Live Oak Acquisition Corp. II, a Memphis, Tenn.-based blank check company.
As a chip design company, Navitas doesn’t have a fab. Instead, it partners with Taiwan Semiconductor ((TSMC)) ( TSM ) to produce its GaN chips, and Belgium-based X-FAB (XFABF) for SiC devices in Lubbock TX, on 150 mm wafers.
Navitas has positioned itself for growth. In 2022, Navitas acquired VDD Tech (Belgium) for high-speed digital isolator technology and GeneSiC Semiconductor (US) for SiC MOSFETs and diodes. In 2023, Navitas bought out the remainder of a joint venture with Halo Microelectronics (Taiwan) for high-speed, low-voltage silicon system controllers.
Navitas has found a niche, solidifying its role as a developer of power chips designed on GaN (gallium nitride) and SiC (silicon carbide) substrates. GaN and SiC represent cutting-edge materials known as wide band-gap (WBG) semiconductors, being utilized in specific applications as alternatives to silicon. In simpler terms, WBG semiconductors can handle higher voltages and function with enhanced efficiency. Consequently, GaN and SiC are progressively being integrated into electric vehicles (EVs), rapid-charging solutions, and premium mobile devices.
That niche is illustrated in Chart 1. These GaN and SiC chips are inherently capable of operating at higher switching speeds with lower losses than silicon. The advantage of GaN is that its critical electric field thresholds for breakdown is 10X greater than silicon, and elevated electron mobility surpasses silicon by over 33%, according to The Information Network's report entitled " Power Semiconductors: Markets, Materials and Technologies ."
Chart 1
These inherent characteristics work in synergy to yield lower on resistance and capacitance concurrently. Consequently, GaN and SiC field-effect transistors (FETs) possess the inherent capability to function at higher switching speeds, while incurring lower losses than silicon-based alternatives. Applications are listed below.
Power Electronics Market
- High-efficiency power converters and inverters.
- Electric vehicle ((EV)) charging systems.
- Renewable energy systems (solar and wind).
RF and Microwave Applications
- Wireless communication infrastructure (5G, satellite, radar)
- High-power RF amplifiers
Optoelectronics
- High-brightness LEDs for lighting and displays
- Laser diodes for communication and medical applications
Competition
Primary GaN competitors include Infineon Technologies AG (IFNNY) (acquired GaN Systems, Inc. 2023), Power Integrations, Texas Instruments ( TXN ), Innoscience, Transphorm ( TGAN ), and Efficient Power Conversion Corporation ((EPC)).
In contrast, there is significant competition in the SiC Ecosystem, as listed in Table 1.
Investor Takeaway
Over 100 million GaN and 12 million SiC units have been shipped by Navitas since its founding in 2014.
According to the company’s recent earnings call:
“In our electric vehicle business, we are seeing strong growth, particularly in both onboard chargers and roadside fast chargers. Recently, a consortium of seven global car manufacturers, including GM ( GM ), BMW (BMWYY), and Stellantis ( STLA ) announced plans to install 30,000 fast chargers across North America. This translates to an additional opportunity of up to $100 million for our silicon carbide business in the next few years.”
Revenue for the three months ended June 30, 2023 was $18.1 million compared to $8.6 million for the three months ended June 30, 2022, an increase of $9.5 million, or 110%. The increase reflects a combination of the Company’s customer growth trajectory, evolving from aftermarket customers to higher volume customers, and the accretive revenue impact from the acquisition of GeneSiC. Total sales volume increased 121%, from 7.3 million to 16.2 million units shipped, while the average selling price increased 4% to $1.07 per unit.
Navitas increased its GaN output 3X in 2022, although TSMC increased wafer prices by 20%. For GeneSiC SiC products, Navitas is ramping its capacity by 5x throughout through 2023. The company also announced a $20 million investment for silicon carbide in-house epi, which will start with the first epi reactor installed in Q1 of 2024. Navitas anticipates its epi facility can support over $200 million in annual revenue.
The market potential for GaN is larger than SiC, as shown in Chart 2. GaN will exhibit a CAGR (compound annual growth rate) of 53.2% between 2021 and 2026, ahead of SiC with a CAGR of 42.5%.
Chart 2
The advantage for Navitas is minimal competition for GaN. As the GaN market expands, the company is poised to sustain its market share thanks to its technological leadership and its position as a trusted and reliable supplier. I anticipate that the growth of the GaN market until 2027 will primarily be driven by Mobile and Consumer applications, an arena where Navitas has fostered strong partnerships with leading smartphone and notebook OEMs.
Infineon's commitment to the GaN market presents both immediate advantages and potential challenges for Navitas. In the short term, it could act as a catalyst for the faster adoption of GaN in the automotive sector, thereby enhancing the strategic significance of Navitas' distinctive position. However, it also carries the risk of posing a competitive threat to Navitas' market share and challenging their long-term technological leadership.
Navitas holds a Strong Buy rating in Seeking Alpha's Quant Rating system, known for consistently outperforming the market. Likewise, the average rating from Wall Street analysts is Strong Buy. In contrast, the average rating from Seeking Alpha authors stands at Buy. Chart 3 illustrates the Quant Ratings.
Chart 3
Personally, I rate the company a Buy.
For further details see:
Navitas: GaN Will Grow Faster Than SiC So Buy The Pullback