Interesting

4DS Memory Ltd (4DS): On the cusp of something significant…

Price: A$0.038 | Price Target: $0.055 |ASX: 4DS | 12 October 2016

We see 4DS Memory Ltd (4DS) on the cusp of achieving key milestones over the next 6 months, which could unlock significant value and a share price re-rating. 4DS is involved in the development of resistive random access memory (ReRAM), an emerging non-volatile memory technology. The technology is disruptive and has been earmarked by industry participants to displace incumbent solution NAND Flash (however we note this is a long term proposition). From a broader industry perspective, we see significant opportunity for 4DS to disrupt the cloud and mobile storage space, which is estimated to grow at a 16% CAGR.

• The Company. In conjunction with its strategic partner, 4DS is developing a patented, non-filamentary ReRAM technology – called Metal Oxide Hetero Junction Operation (MOHJO) – suited for gigabyte (GB) silicon storage which is smaller, requires less power with increased reliability and performance relative to incumbent data storage solutions, such as NAND Flash.

• The market. The majority of non-volatile memory (NVM) storage currently uses NAND Flash (Flash), the predominant storage technology used in mobile phones, tablets and laptops. Due to the proliferation of data consumption, memory storage use is growing exponentially, driven by: increasing use of cloud storage; continued proliferation of mobile devices; increasingly connected devices. Annual global memory market valued at US$79bn p.a., which is growing at a 16% CAGR. Flash is an estimated annual market of US$40bn.

• The opportunity. It is widely accepted that the existing Flash technology has a diminishing ability to scale further. The industry requires a solution which can scale further, is fast and reliable, and meets the future needs for more storage in less physical space. The industry is seeing a shift from cloud players to silicon storage. While hard drives in the cloud offer a good solution (great retention and recovery), it is power hungry, heat producing and inferior latency.

• The solution – 4DS ReRAM. 4DS has developed a scalable non-filamentary ReRAM memory cell at a 50nm lithography, a breakthrough in ReRAM technology. 50nm represents significant progress towards the development of next generation mobile and cloud silicon storage.

• The strategy. Over A$15m have been invested so far in developing 4DS’s ReRAM technology since 2007. 4DS owns 16 patents for material composition and deposition process and mechanism of action. Further, 4DS is currently engaged in a joint development arrangement (JDA) with a global storage leader, HGST Netherlands B.V. (HGST), with the goal of optimising their memory cell and manufacturing process. HGST is a subsidiary of Western Digital, a US$17bn NASDAQ-listed company. The joint development arrangements provide 4DS with the resources and technical expertise which can expedite the development and commercialisation process.

• Strategic partner is the natural acquirer, in our view. We estimate Western Digital has invested significantly more in the JDA than 4DS’s A$15m (the company has not disclosed this figure). Further, it is our understanding that Western Digital spent significant amount of time undertaking due diligence into 4DS and its patents. We believe it is the natural acquirer of 4DS (apart from having first right of refusal to any licensing opportunity). We believe the current share price is not fully appreciating this strategic partnership.