I just so happens that I was reading the following report again this morning which was of course not an independent report but as such the information contained therein about the way in which IP sales could be moved forward would have been confirmed directly with Brainchip so to that extent it is at least what in May 2019 Brainchip was planning to achieve in this regard:
"https://www.pittstreetresearch.com/s/BrainChip-initiating-coverage-15-05-19.pdf
Akida to generate three separate revenue streams
Given the enormous costs to build computer chip factories, BRN itself will not be manufacturing Akida chips. Rather, the company will be using a partner, SocioNext, to manufacture the devices for BRN. In addition, BrainChip will selectively license its Akida IP to other providers in the semiconductor industry. These IP licensing revenues from Akida are likely to take the form of Non-Recurring Engineering (NRE) work, license income and royalties from each chip sold by BRN’s customers.
The purpose of ADE is to provide prospective Akida customers and current BrainChip Studio customers (see below) the opportunity to familiarize themselves with the Akida architecture and its specifications as well as to illustrate the possibilities and opportunities that Akida presents.
Non Recurring Engineering work
Revenues from NRE Revenues from technology license fee Akida IP in commercial production Ongoing royalty revenues based on unit sales BrainChip Holdings Ltd 17 Revenues from Non-Recurring Engineering work NRE work conducted by BRN on behalf of the customer will typically be focused on integrating the Akida chip architecture into the customer’s proprietary chipset (design-in) to create a complete NSoC. Revenues from NRE are one-off while the NRE work itself can take anywhere from 6 to 18 months. The NRE fees vary widely across the industry, from several hundreds of thousands of dollars to several millions of dollars.
One-off license fees
Once the NRE work is completed and customers want to move into commercial production, they typically pay a one-off license fee for use of the technology. License fees can range quite broadly and will be different from one customer to another, depending on the intended application areas, the amount of IP to be used, expected volumes to be manufactured etc.
Recurring royalties from every unit sold by a customer
We believe the most lucrative future revenue stream for BRN will be royalties paid by customers for each chip they sell that includes Akida IP. These royalties are usually a percentage of the customer’s selling price and typically range from 2% to 15%, again depending on intended application areas, the amount of IP used and expected volumes to be manufactured. However, royalty percentages also depend on the uniqueness of the IP that is being licensed. We would argue that Akida’s specifications and features are quite unique when compared to other technologies, such as Intel’s Loihi and IBM’s True North, which may result in BRN being able to charge above average royalty percentages for Akida. Other royalty revenue models simply use a fixed dollar amount per chip sold, for instance if the customer only uses a limited IP stack. In our view, the example above clearly illustrates the scalability of BRN’s revenue model as well as the revenue potential for Akida.
We believe there are likely to be multiple prospective customers in each addressable industry vertical, such as mobile phones, security cameras, visual inspection, IoT devices, cloud/server usage, cyber security, financial markets etc.
Selling direct and through third-parties
BRN is in discussions with various Akida prospects in different markets (see below), which may result in commercial agreements in due time. However, in addition to these potential direct sales, we believe future sales through third parties may potentially become a lot bigger than BRN’s direct sales.
Firstly, should semiconductor foundries license BRN’s technology, Akida may find its way into products from many different end-customers. Foundries such as TSMC (TPE:2330) and Global Foundries manufacture computer chips for third parties, including cell phone manufacturers, electronics companies and other chip manufacturers. Over the last 15 years foundries have evolved from “simply” manufacturing chips according to customers’ chip designs into valueExample: Assume a BRN customer agrees to pay a 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. Royalty income for BRN from this customer would amount to US$ 1.25M, US$ 6.25M and US$ 12.5M respectively in the first three years of production. BrainChip Holdings Ltd 18 added chip manufacturers that can add their own IP to customers’ designs. Foundries develop this additional IP themselves, but also source third-party IP to complement their own offerings.
Secondly, BRN could potentially license Akida IP to providers of IP building blocks, like Lattice Semiconductor (NSDQ:LSCC), Cadence (NSDQ:CDNS) and Mentor (NSDQ:MENT). These companies provide core IP as well as separate IP blocks to their customers and we believe Akida IP could be a welcome addition to their offering.
In both channel partnership models, BRN would likely earn license fees and royalties, either a fixed amount or a percentage of revenues."
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