BeammWave: Shifting to a new phase
Research Update
2025-02-17
07:00
Analyst Q&A
Closed
Rasmus Jacobsson answered 3 questions.
Redeye argues that BeammWave has shifted to a new phase with three customers representing most of the potential end markets, from smartphones to base stations and CPEs. Hereafter, supporting existing customers will be more critical (although BeammWave remains confident that new business will be won over time). The mmWave leader can carry BeammWave to profitaiblity alone, for instance. Redeye makes minor adjustments to its estimates and argues tangible progress in the industrialization process and announcements that customers are progressing will catalyze the share.
Rasmus Jacobsson
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BeammWave state the customers are progressing faster than anticipated. BeammWave installed the ADP1 platform at the mmWave leader in January and got final approval on the spot, paving the way for the next phase (we shift our SEK1.6m net sales estimate to Q1'25.) Alpha Networks is in a pre-study phase. We believe this means that BeammWave and Alpha Networks are evaluating the use of digital beamforming for next-generation products. Though Alpha Networks appears to lag peers in progress, its OEM structure simplifies execution: product development hinges solely on joint Alpha/BeammWave progress, avoiding one supply chain layer faced by the mmWave leader and Molex. OPEX came in somewhat higher than anticipated, relating to the rights issue in the quarter. Thus, we have not changed our OPEX estimates.
To support existing customers, BeammWave is in an industrialization process. Our understanding is that the industrialization process consists of ensuring the chips can be produced economically with acceptable yields, building testing functionality, etc. Economic viability typically falters when relying on exotic production methods or pushing paramaters to their limits. BeammWave has avoided both and is thus confident the main constraint is engineering hours. We note Globalfoundries (third largest foundry globally by revenue) was the first to press release it was working with BeammWave and EXTOLL, which suggests BeammWave hold "special status" at Globalfoundries where it competes for capacity with multibillion-dollar companies.
We expect the mmWave leader to be billed in Q1 2025 but have otherwise kept our estimates unchanged. We reiterate our fair value range of SEK2.2-14.4 with a Base Case of SEK7.0. We argue tangible progress in the industrialization process and announcements that customers are progressing will catalyze the share.
| Key Financials | |||||
|---|---|---|---|---|---|
| SEKm | 2022 | 2023 | 2024 | 2025e | 2026e |
| Total Revenue | 14.2 | 14.0 | 17.3 | 23.6 | 92.6 |
| Revenue Growth | 164% | -1.6% | 23.6% | 36.3% | 292% |
| EBITDA | -15.7 | -20.9 | -23.2 | -29.3 | 5.8 |
| EBIT | -15.7 | -21.0 | -23.2 | -30.3 | 1.2 |
| EBIT Margin | - | - | -2177% | -261% | 1.5% |
| Net Income | -15.7 | -20.2 | -22.8 | -30.3 | 1.2 |
| EV/Sales | - | - | 3.8 | 6.0 | 0.9 |
| EV/EBIT | -5.5 | -6.4 | -0.2 | -2.3 | 61.6 |
Case
Attractive 5G exposure with idiosyncratic upside
BeammWave’s digital beamformers are theoretically superior, but their commercial success is unproven. Positioned as a Qualcomm competitor in the mmWave handset market, BeammWave's products could offer Qualcomm's rivals a differentiated, cost-effective, and high-performance solution. We anticipate BeammWave may win at least one smaller volume-related customer by 2027. Currently, BeammWave has secured a joint development agreement with Molex (a subsidiary of Koch Industries) and one order for its development platform from a mmWave leader. The latter has an existing market share and could offer significant volumes.
Evidence
Disrupting the market with digital beamformers
While analog beamformers offer inadequate performance, this technology has been the only alternative in a market where digital beamformers are seen as commercially unviable from cost and power efficiency perspectives. mmWave has been seen as a “nice to have” feature, with network operators driving its adoption in handsets.
As mmWave becomes more persuasive and consumers gain awareness of it, we believe OEMs and network operators will demand adequately performing beamformers. We argue Qualcomm has little incentive to disrupt itself. Instead, we believe BeammWave offers a compelling technology for Qualcomm’s competitors to differentiate their offerings with better mmWave performance through which to gain market share.
Supportive Analysis
mmWave networks promise substantial cost reductions, estimated at 85%, compared to 5G networks operating at lower frequencies. Despite historically limited use cases, the necessity of mmWave in average US dense urban areas is expected by 2023, driven by data consumption growth exceeding 20% in the next five years.
BeammWave challenges the commercial viability perception of digital beamformers, aiming to offer technological superiority with comparable cost and power consumption. While Qualcomm may not adopt digital beamformers, BeammWave presents a compelling technology for Qualcomm’s competitors to differentiate their offerings and gain market share in the growing mmWave segment. Furthermore, BeammWave’s integration into the technology stack positions it strategically for a potential bidding war.
Challenge
Ahead of the market opportunity and dependent on the ecosystem
mmWave remains a niche market within the broader 5G landscape, primarily available in the US, Japan, and South Korea due to mmWave being uneconomical in most other regions. Device availability is limited, with Apple launching its mmWave device in select areas in 2020. However, the market is expected to take off as mmWave becomes necessary to meet growing data consumption needs, forecasted to be crucial in average US-dense urban areas by 2023.
Digital beamformers still new to the market
BeammWave believes it is the only company announcing digital beamformers for commercial use. Analog beamformers are perceived as offering better power consumption performances than digital beamformers. BeammWave thus faces the challenge of convincing the market that its digital-based beamformer can provide the same or better power consumption performance as the commonly used analog beamformers. As a small company with limited resources, this is a significant challenge. However, given the availability of prototypes for customer testing, there is no longer a need to rely solely on BeammWave’s claims. A positive catalyst in this regard would be one of the large handset makers, such as Apple, announcing its intention to use digital beamformers. Even if this handset maker developed a proprietary digital beamformer, it would pressure the remaining handset makers to follow suit to remain competitive performance-wise.
Valuation
Reasonable odds
While we agree the market potential for BeammWave is significant, we see limited re-rating potential before a concrete customer announcement and industry validation. Our estimates imply about one smaller volume-related customer by 2027. The main factor we look for in validating our thesis is industry validation, with a handset vendor or supplier adopting the technology. While current funding remains decent with outstanding warrants in the money, future financing needs may weigh on the share. Our fair value range is SEK2.2–14.4, with a base case of SEK7.0. We do not expect significant revenues for BeammWave until 2026/2027.
Disclosures and disclaimers
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