Q & A: POET Technologies Remains On Track Despite Industry-wide Supply Slowdown

April 1st, 2021

The global semiconductor industry has been trudging through an unprecedented shortage of key materials needed for the production of silicon chips and other components that run the world’s machines and devices. In an interview on March 18, the management team at POET Technologies reiterated that the slowdown has not had a material impact on the company’s published timelines or revenue forecasts.

In fact, they see an end to the shortage occurring as suppliers build out their capacity and the COVID-19 pandemic wanes, which would lower the constant demand for data and connectivity from the world’s population. POET Technologies CEO Suresh Venkatesan, who has more than three decades of experience in the semiconductor industry, expects the shortage to rectify itself as communities return to in-person gatherings and off-line activities.

In the meantime, POET continues to build out its operations, recently announcing that Super Photonics — its joint venture with China-based Xiamen Sanan Integrated Circuit — has bolstered its staff and facilities as it prepares for mass production later in 2021.

Venkatesan, President and General Manager Vivek Rajgarhia, and CFO Thomas Mika spoke with journalist Adrian Brijbassi about the company’s accelerating progress towards commercialization.

Q: How did previous chip shortages resolve themselves and when do you foresee this shortage ending?

Suresh Venkatesan: I don’t think I have ever seen the semiconductor industry as heated up in terms of supply versus demand as it is today. The situation is largely as a result of the pandemic. People began to work at home, and then suddenly more people wanted laptops. For the first time in years there was a spike in laptop sales. And, of course, there is the obvious aspect of Internet connectivity. More people have routers and broadband and are using more data. That all leads to a disruption in supply that causes inventory to be extinguished across the industry. So, everybody is now building inventory and then overcorrecting, which typically is what happens. It is a weird confluence of circumstances. The pandemic affects various aspects of our lives and semiconductors touch pretty much every aspect of everybody’s life. The demand has gone into overdrive, the likes of which I have never seen. Even foundries that have traditionally had a lot of excess capacity are oversubscribed.

Thomas Mika: As we previously said in our interview on Agoracom, if we believed this industry-wide shortage was causing a material delay for us then we would be obligated to do a press release about it. Our view is that it is not causing any material delay. While it may delay the production of our samples by a month or two, or even three, we don’t believe it will materially affect our revenue for 2022. So, I think that is an important detail to note and, if at some point in the future, we ever did believe it was going to cause a change in our revenue outlook then we will have to issue a press release, but we don’t anticipate that happening.

Q: And once production is ramped up, the situation resolves itself? It’s that straightforward?

SV: It will resolve itself the way semiconductor boom and busts have always resolved themselves. There will be a huge buildup of capacity happening and then suddenly demand will shift, and there will be an overcapacity situation again. The industry goes through these cycles. 

I would think 2022 onwards things will start becoming more normal. Right now, we’re correcting for industry depletion plus a change in lifestyle with the work-from-home situation. Those things will auto-correct once normal life begins again. 

TM: In the meantime, we do have options. We typically have back-up plans for back-up plans. We recently cited the point about mask shops, for example, where we were getting six-week lead times when previously we were getting our deliveries in two weeks. But we have been able to find other mask shops that could deliver our order in four weeks. It’s one of the reasons why our ability to produce those alpha and beta samples for our customers has seen limited effect and we remain on course.

Has the relationship with Xiamen Sanan had any noteworthy benefit for Super Photonics in dealing with the issue of chip shortages? 

VR: The chip shortage that we are referring to is mainly from the silicon fab. Sanan is providing devices, such as lasers and photodetectors, from their indium-phosphide [InP] fab. Partnering with Sanan definitely has benefits in terms of priority for the InP device supply.

Q: Are there any updates on the progress the company is making in regards to its North American and European customers?

Vivek Rajgarhia: We continue to work with customers and are getting closer to getting the products out into their hands. As we are entering the product sampling phase, we are having discussions with multiple customers and they all want to work with us. They want to see the products and samples and then there will be further discussions. They are not questioning the value we bring. They are not questioning the value of the optical interposer solution. We see that there is quite a bit of opportunity that exists for us.

Q: Once they have the samples and they do their testing, do you liaise with them virtually or do they have to send physical samples back to you to re-design?

VR: No, there is a certain application know-how that we provide. Working with the lead customer for several months has also helped us understand how our optical engine, based on our novel optical interposer, will be used in the application. So that learning is applied to other customers, in general. We have set up a capability within the company to work with the customers. Saying that, each customer has slightly different ways they do things, so there’s a level of handholding with the customer as they work with our product.

Q: And I imagine there has to have been a lot of trust built up on both ends to have that sharing of knowledge take place?

VR: We are not in an industry where once we have products we sample them to 1,500 customers. It’s not like that. These are selected customers, a handful of customers who we closely work with, who adopt our products, and we offer a level of support where it is needed, and gain an understanding of how they will use the product in their modules. But that said, with working with them during the last six or nine months, we have developed quite a good infrastructure of reference designs. We are learning from our customers how our optical interposer will connect to the outside world within the module they build. That is important knowledge for us and knowledge that can be easily transferred to other customers.

Note: Author Adrian Brijbassi has previously written about POET Technologies for the Globe & Mail and has since become an investor in the company.

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