2021 BRN Discussion, page-26098

Below is the Pitt Street report analysis of potential revenue streams for Brainchip.

My speculation based on the following is that huge revenue streams could be created by the adoption of AKIDA IP in just one high volume consumer item like a mobile phone so DYOR
FF

AKIDA BALLISTA

“Akida to generate four separate revenue streamsTo leverage the substantial commercial potential of the technology, BRN will licence its Akida IP to other providers in the semiconductor industry. The company is expecting to generate revenues from three separate, but related streams:1) Chip sales2) Module sales3) one-off licencing payments and4) royalties from each chip sold by the company’s customers (Figure 13).BRN also generates revenues from non-recurring engineering (NRE) work related to specific integration needs. While prospective customers have their own specific requirements for the integration of Akida chip architecture into their proprietary chipset (design-in) to create a complete System on a Chip, customisation requires intensive design work that can take 6–18 months. The one-off NRE fees cover BRN’s costs to adapt the technology to customer- specific needs. NRE fees vary widely across the industry, from several hundreds of thousands to millions of dollars. NRE fees are not scalable, however, like chip sales and IP licensing.Figure 13: Predicted revenue streams from Akida Intellectual Property Non Recurring Engineering work Akida IP in commercial productionRevenue Streams Revenues from NRERevenues from technology license feeOngoing royalty revenues based on unit sales Source: Pitt Street ResearchChip and module sales: In addition to IP related revenues, we expect BRN to generate revenues from sales of Akida chips that it has manufactured by third parties, i.e. chip foundry TSMC in Taiwan. Foundries are third-party chip manufacturers that manufacture chips designed by other companies. For instance, a company like Apple could design a new mobile phone chipset using its own IP in addition to IP from design houses like ARM and Broadcom. Readers should be aware that Pitt Street Research Pty Ltd has been engaged and paid by the company covered in this report for ongoing research coverage. Please refer to the final page of this report for the General Advice Warning, disclaimer and full disclosures.17 BrainChip Holdings The most lucrative future revenue stream for BRN will be royalties paid by customers for each chip they sell that includes Akida IPIt can then outsource production of the actual chips to a foundry, like TSMC. By the way, we believe all of these types of players (design houses, foundries and electronics companies) are potential customers for the Akida IP. Going forward, BRN will have TSMC manufacture Akida chips, which it can then sell directly to customers.IP licencing fees: Once the NRE work is complete and customers want to move into commercial production, they typically pay a one-off licence fee for the use of the technology. License fees can vary broadly and will be different for each customer, depending on the intended application areas, expected production volumes, the amount of IP to be used, etc. License fees typically vary from $1m for single-product use to $3m for multi-product use. Non- exclusive licencing will help the company sign multiple licensees to expand its revenue-generating potential.Royalties: We believe the most lucrative future revenue stream for the company will be royalties paid by customers for each product they sell that includes Akida IP. These royalties are usually a percentage of the customer’s revenue from sales and typically range from 2% to 15%, again depending on the intended application areas, the amount of IP used and expected production volumes. Notably, royalty percentages also depend on the uniqueness of the IP that is being licensed. As the specifications and features of Akida are quite unique vs. other technologies, including Intel’s Loihi and IBM’s TrueNorth, this may help the company charge higher-than-average royalty percentages for Akida.Other royalty revenue models simply use a fixed dollar amount per chip sold. This is a preferred model for many high-volume production companies, including cell phone manufacturers. Example: Assume BRN entered into a licencing agreement with a customer to licence its technology with specific integration requirements. Terms could include US$500k of NRE fees, US$1m of one-time licencing fees and 5% royalty on sales from each of its chips that incorporates Akida. Further assume that this customer will sell 1m, 5m and 10m of these chips in years 1 through 3, respectively, at US$25 each.In this example the company will recognise the following three revenue streams from this customer:1) NRE fees of US$0.5m.2) One-time licencing fees of US$1m before the start of production.3) Royalties of US$1.25m (1m x US$25 x 5%), US$6.25m and US$12.5m, respectively, in the first three years of production. Certified Solution Providers to ramp up sales capacityIn our view, the example above clearly depicts the scalability of the company’s revenue model as well as the revenue potential for Akida. Notably, the recurring royalties are expected to surge with multiple licensees (Figure 14).Going forward, BRN may also set up a network of “Certified Solution Providers” (CSP) in a range of countries to ramp up the Akida sales capacity. These CSP’s will be trained by BRN to use the Akida chip. These CSP’s will already understand neural networks, deep learning and the engineering challenges to deploy such systems in the field. Working with Akida involves interfacing to sensors, data collection and scaling as well as processing of the inference results from Akida in addition to training the network with clean Readers should be aware that Pitt Street Research Pty Ltd has been engaged and paid by the company covered in this report for ongoing research coverage. Please refer to the final page of this report for the General Advice Warning, disclaimer and full disclosures.18 BrainChip Holdings data. All this could all be handled by CSP’s who will be provided the tools, know-how and hardware to enable them to sell Akida. Training CSP’s could become a fifth revenue stream for BRN in the future”