Quicklogic Bags Nokia
On November 22, 2009 we published a tear down report on Sierra Wireless’ (SWIR) USB305 modem (being sold by AT (T) as the ConnectLightning) that confirmed that Quicklogic (QUIK) CSSPs were included in the design. Given the strict NDAs that govern suppliers to the mobile device makers, this was the first independent confirmation of a design win for Quicklogic in the USB modem space. Since then our community of independent stock researchers have been hard at work trying to unearth additional designs that include Quicklogic and we have hit upon a biggie, Nokia (NOK).
First, by way of background, in the USB modem market Quicklogic has a reference design with Icera, a developer of soft modem chipsets for the USB modem market; a market that by some estimates will approach 90 million units this year. While Icera is a private company and does not release quarterly financials all evidence suggests that within the last two years it has made significant in roads into the USB modem market, a market heretofore served almost exclusively by Qualcomm (QCOM). Quicklogic’s primary role in the Icera reference design is to provide the USB modem with support for a microSD reader, a capability that is not native to the Icera soft modem chipset. Given this reference design, our approach to identifying USB modems that include Quicklogic CSSPs is straightforward; find products that 1) are based on Icera chipsets and 2) have microSD readers.
While the USB modem market has been primarily composed of niche specialty players like Sierra Wireless (a confirmed Quicklogic customer), Option Wireless (also recently confirmed as a Quicklogic customer), and Novatel (NVTL), and more recently the large Chinese vendors Huawei and ZTE (OTCPK:ZTCOF), the sheer size of the market (again, estimated to be up to 90 million units in 2010) has begun to attract the large wireless handset firms such as Nokia, LG (OTC:LGERF), and Samsung (OTC:SSNLF) who should be natural players in this market segment. Through the collective research efforts of our research community we learned of the Nokia CS 18 USB modem and while it is not available for us to physically tear down, we have gotten a “look” inside and can confirm that Quicklogic has secured a role in this product. If subsequent to this writing the document becomes inaccessible from the Nokia website a copy of it is archived here.
This white paper provides the technical specification and selling points for the soon to be released Nokia CS 18 USB modem and clearly indicates that Quicklogic’s silicon is in this device. The fifth and seventh bullets on the data sheet under “Other Selling Points” give the game away. Specifically, the data sheet states that the device is based on Icera soft modem chipsets and that the device includes a microSD reader. As previously noted, this configuration confirms the presence of a Quicklogic CSSP. While Nokia is farily new to the USB modem space, its brand ubiquity in wireless devices combined with its global marketing presence makes this a fairly significant bit of business for microcap Quicklogic. As well, the entrance into the USB data modem market by a company the size of Nokia validates the bullish forecasts regarding the growth and ultimate size of this market which is an extremely bullish indicator for Quicklogic as well.
The USB modem market is just the first market segment that Quicklogic addresses using its PolarPro family of CSSPs. The far bigger and more lucrative end markets for Quicklogic are smartbooks and smartphones which Quicklogic addresses with its ArcticLink family of CSSPs. These markets will not only represent significantly more units than the USB modem market but the ArcticLink family of processors carry a significantly higher ASP owing to the more advance signal processing features it provides, namely the VEE and DPO technologies.
Quicklogic’s VEE (Visual Enhancement Engine) is a video processing technology that examines the display output of the device on a pixel by pixel basis together with the prevailing ambient light enviroment to dynamically sharpen color and effective contrast ratio which makes device displays as viewable in harsh ambient light environments (outdoors in the sun) as they are under normal conditions. Anyone who has attempted to send or read a text message from an LCD display that has been completely washed out by sunlight will immediately grasp the overwhelming appeal of VEE. Quicklogic’s DPO (Display Power Optimizer) technology uses the pixel by pixel values from VEE in order to manage display back light which dramatically extends battery life.
With several members of our research community having personally experienced VEE and seen the dramatic improvements in display quality that VEE provides it is our contention that VEE and DPO are destined to become standard in all smart phone and smart book designs. The value of these technologies in terms of improving the quality of bride dresses the display bride dresses and extending the device battery life is overwhelming relative to the higher BOM they present. Further, these technologies provide such a significant enhancement to the end user experience (again, speaking first hand here) that early adopters of VEE and DPO should enjoy a competitive advantage and cause the mobile device industry to move en masse to adopt these technologies in order to close the feature gap. To be clear, this view is not just biased conjecture from self serving QUIK shareholders, but rather it is an opinion that is already finding validation in the recent surge in design activity around VEE/DPO that Quicklogic has publicly released.
Specifically, the company disclosed that as of February 9, 2010 its VEE/DPO technologies are now included in ten reference designs with six reference design partners. While the company has not disclosed who these partners are we can determine with fairly high confidence based on recent press releases and product announcements that Quicklogic counts Qualcomm among its reference design partners with at least two reference designs.
Excerpts from Quicklogic’s March 29, 2010 press release (emphasis added):
QuickLogic Corporation, the lowest power programmable solutions leader, has successfully delivered the first complete display controller solution using the Mobile Display Data Interface Type 2 interface for Smartbook, Smartphone and Tablet applications using Qualcomm chipsets. Additionally, QuickLogic has verified the solution operation as an MDDI Type 2 (dual lane) client running 60 frames/second (fps) at Full Wide VGA (FWVGA) resolution. The solution is implemented on an ArcticLink II VX4C solution platform, which includes QuickLogic Visual Enhancement Engine (VEE and Display Power Optimizer Reference designs of the MDDI Type 2 Display Controller Solution have been system proven with Qualcomm MSM7x30 and QSD8x50 chipsets running the Google (GOOG) Android operating system and are available immediatel bride dresses y.
And the CEO of Apical Limited, the company Quicklogic licenses elements of the VEE technology from, commented in a 2009 press release (emphasis added):
are excited that QuickLogic is adapting the 2nd generation VEE technology to platforms that are fully purposed for Qualcomm mobile processors, said Dr. Michael Tusch, CEO of Apical, Ltd. is an ideal solution for optimizing the consumer viewing experience and battery life in the next generation of Internet enabled mobile devices, under all ambient light conditions. The public information strongly suggests (unequivocably?) that Qualcomm is a Quicklogic reference design partner. The significance of this relationship can not be overstated. By attaching itself by way of reference design to Qualcomm, Quicklogic benefits from Qualcomm’s scale, sales resources, and the ubiquity of its relationships with mobile device OEMs. We believe that this reference design has already translated into a considerable opportunity for Quicklogic at Nokia, beyond the aforementioned USB modem design.
In addition to quantifying its reference designs, bride dresses Quicklogic has also disclosed, without naming names, that as of February 9, 2010 it has ten unique customers for VEE/DPO and fourteen project engagements with these customers. In trying to determine who these customers might be we have paid close attention to upcoming product launches from the largest mobile device companies and there is none larger than Nokia and evidence suggests Nokia is using Quicklogic parts in its designs. The logic here is straightforward:
In November 2008 at the AeA Conference Tom Hart, Quicklogic CEO stated:
Nokia as an example. I joke about this. We couldn have gotten arrested in their lobby two years ago, because we couldn have gotten that far. We been trying to sell them FPGAs forever, and they weren interested. They VERY interested in VEE.
Then, three months later in Feburary 2009, Nokia and Qualcomm announced that they are working together on a new family of Nokia phones based on the Qualcomm’s advanced MSM7xxx series and MSM8xxx series chipsets (the same chipsets that are now mentioned in the reference designs that include Quicklogic’s ArcticLink II VX4 chip).
Nokia and Qualcomm Incorporated today announced that the two companies are planning to work together to develop advanced UMTS mobile devices, initially for North America. The companies intend for the devices to be based on S60 software on Symbian OS, the world most used software for smartphones, and utilize Qualcomm advanced Mobile Station Modem (MSM MSM7xxx series and MSM8xxx series chipsets for cutting edge processing performance and ubiquitous mobile broadband capabilities. The first mobile devices based on this collaboration would be expected to launch in mid 2010.
Almost coincident with the announcement of a Qualcomm Nokia partnership was the March 2009 announcement by Quicklogic first announcing its support for Qualcomm’s most advanced chipsets:
In response to growing demand for its Visual Enhancement Engine technology, QuickLogic Corporation has announced the development of new solution platforms tailored for Qualcomm latest Mobile Station Modem MSM7xxx series and MSM8xxx series mobile processors, including the recently announced Snapdragon family. The new ArcticLink II VX4 family members incorporate the VESA compliant mobile data display interface used by Qualcomm MSMs with the 2nd generation VEE proven system block and embedded CellularRAM framebuffer PSBs.
Fast forward one year and the new family of Qualcomm based Nokia phones is ready to hit the market some time in 2010. This forecast is consistent with Quicklogic’s forecast that it expects to recognize its first revenue from smart phone designs in the second half of 2010. As well, much of the early trade press around this new Nokia family of smart phones emphasize the multimedia and video capabilities of the phone which makes it an ideal target for VEE/DPO. While we do not yet have the incontrovertible proof that a device tear down report provides, the dots connect in a fairly convincing manner to suggest that Quicklogic will be found in the new family of Nokia smart phones.
Qualcomm is but one of six reference design partners for VEE/DPO and Nokia is but one of ten customers that appears to have commited to using VEE/DPO technology. Again, this is likely just the tip of the iceberg as it is very likely that VEE/DPO will become standard technology in next generation devices where multimedia content will requires higher quality displays, and lower power budgets that extend device battery lives. Recall too, that VEE/DPO is just one technology that Quicklogic provides to the smartphone/smartbook markets in addition to providing chips to the burgeoning USB data card market.
So with end markets that will ultimately measure in the hundreds of millions of units annually, reference design partners that include Qualcomm, and customers that include Nokia, why exactly is QUIK a $3 per share micro cap stock with virtually no analyst coverage or institutional sponsorship?