http://www.semiconductor-today.com/news_items/2016/dec/poet_011216.shtml

1 December 2016

POET grows revenue in Q3, but operational challenges at DenseLight acquisition delay production

POET Technologies Inc of San Jose, CA, USA — which has developed the proprietary planar optoelectronic technology (POET) platform for monolithic fabrication of integrated III-V-based electronic and optical devices on a single semiconductor wafer — has reported revenue of US$861,545 for third-quarter 2016 (the first full quarter of revenue from its acquisition of Singapore-based DenseLight Semiconductor Pte Ltd), up on US$576,741 last quarter.

Gross margin rose from 28.9% to 47.3%. Net loss has been cut from US$3.4m ($0.02 per share) to US$2.8m ($0.01 per share). Cash and cash equivalents were US$9,699,899. After the end of the quarter, POET completed a public offering that generated gross proceeds of CDN$12,528,000 (US$9,349,254).

During the quarter, the firm completed internal qualification and began early production of DenseLight 2.5G DFB (distributed feedback) lasers, winning an initial customer order in China for applications in the passive optical network (PON) broadband access network architecture, which is the dominant Fiber-to-the-X (FTTx) network architecture currently in use. Also, the firm's sensor product roadmap for 2017 includes additional new product introductions targeted for the LIDAR (laser imaging, detection and ranging) market.

"Revenue in the quarter reflects expanded sales of DenseLight photonic sensors, primarily to existing customers for test & measurement applications," notes CEO Suresh Venkatesan.

"Although we are making solid progress on revenue and product expansion within our DenseLight subsidiary, our integration activities intended to establish a commercial foundation for the consolidated company are not without challenges," Venkatesan comments. "We have uncovered certain deficiencies in the organizational, functional and operational structure of the fab. Importantly, we have already begun to address and remedy these vulnerabilities in order to realize the full value of this business and its related infrastructure. Despite these short-term challenges, we remain highly confident in the potential and unique value proposition that DenseLight represents for its customers and the company alike," he adds.

"In terms of progress on the POET technology, we continue to maintain a strong focus on the development and refinement of the integrated opto-electronics engine, which includes the integrated detector," Venkatesan continues. As a direct result of POET's capital raise, it is now able to pursue parallel development paths for its vertical-cavity surface-emitting laser (VCSEL) design and validation and has taken steps to accelerate its cycles of learning. "Furthermore, we are making selective investments in capital equipment as well as other key capabilities to give us greater control over some of the most time-sensitive aspects of the technology development process," he adds. "The previous delays we encountered - largely related to epitaxial wafer supply and more recently export license controls - were both resolved subsequent to quarter-end, which has enabled us to resume progress toward the production of integrated device prototypes." Specifically, POET has engaged with multiple third-party sources for critical epitaxial wafers, and resumed the development cycles at its 6-inch Taiwan foundry partner Wavetek. "Although this pre-prototype stage of product development has taken longer than we originally anticipated due to various constraints, we believe we are on the right path to achieve commercialization in 2018," Venkatesan says.

POET is currently focused on evaluating multiple paths to improving VCSEL functionality and optimizing the transistor. Ultimately, realizing the commercial potential of the POET technology will require the firm to complete the development of integrated device prototypes, begin product development of integrated single-chip monolithic transceivers for active optical cables (AOCs), demonstrate alpha prototypes, engage potential customers with beta prototypes, demonstrate manufacturability and scalability, and complete qualification of these integrated devices in end-user applications.

During the quarter, POET announced an agreement with Singapore Economic Development Board (EDB) to expand R&D operations in Singapore.

The firm also continues to work on multiple sources of additional NRE (non-recurring engineering) revenue, US$154,000 of which was included in sales in third-quarter 2016.

On 8 November, POET was awarded two US patents (#9,490,336 for a fabrication methodology for optoelectronic circuits and #9,490,321 for the design of an integrated optoelectronic circuit). Each represents a significant barrier to entry for potential competitors, the firm reckons. In addition, the '321 patent is fundamental to protecting the firm's design of integrated optical transmitters and detectors using both thyristor and bipolar circuits.

POET says that, due mainly to the unexpected production delays at its Singapore fab, it has lowered its second-half 2016 revenue guidance from US$2m to US$1.6-1.8m, depending on closing and shipping multiple orders for sensor products, 2.5G DFB lasers and the timely completion of NRE for key clients. However, even considering the reduced revenue guidance, POET says that it has achieved significant quarter-on-quarter revenue increases and expects that the DenseLight business unit will develop into a robust platform for the commercialization of POET technology. The firm anticipates continued revenue growth at DenseLight and targets positive operating cash flow by first-half 2017.