Ethernity Networks Ltd (LON:ENET), a leading supplier of networking processing technology ported on FPGA (field programmable gate array) for virtualised networking appliances , today announced its results for the year ended 31st December 2020.
Financial Highlights
– Revenues increased by 38.0% to $1.85m (2019: 19.6% to $1.34m)
– Gross margins increased by 37.5% to $1.58m (2019: 41.6% to $1.15m)
– Gross Margin remained constant at 85.4% (2019 85.6%)
– Operating costs before amortisation of intangible assets, depreciation charges, provisions and other non-operational charges decreased by 23.0% to $5.27m (2019: 14.1% to $6.85m)
– EBITDA loss (adjusted in 2019 for R&D capitalisation) reduced by 34.2% to a loss of $3.72m (2019: $3.47m before additional capitalised R&D costs)
– Cash funds raised during the year of $3.29m
Operational 2020 and Post-period highlights
Operational Highlights
– Ethernity and TietoEVRY joint offering in February 2020, to boost 5G performance with UPF/VPP acceleration
– Further progress for the Company’s 5G UPF offering in China with additional engagements
– New design contract for Ethernity flow processor technology with a North American tier-1 telecom OEM signed in April 2020
– New contract in August 2020 with existing OEM customer, based in St Petersburg, to upgrade an existing hardware platform with new FPGA-firmware
– In September 2020, signed a contract to provide an Indian telecom OEM with end-to-end system functionality including Hardware design, delivery of Cell Site Router Data plane on FPGA SoC, and complete Router Software Stack for 60Gbps and 360Gbps appliance platforms
– Order from new tier-1 North American aerospace OEM customer in November 2020 to provide ENET’s Avionic Ethernet Switch firmware and software, integrated into Ethernity’s (UEP) device
– Recognized as a vendor to watch in Gartner Market Trends
Post-period Highlights
– Subject to accounting and revenue recognition, revenue for first Half of 2021, is expected to be approximately $1m, 2.5 times higher than revenue in H1 20.
– Exercise and close of Warrants from the July 2020 placing
– Total funds raised by the Company from July 2020 to date, from the placing, warrants and the Share Subscription Agreement of £5.4m (~$7.3m)
– Significant interest from operators, server vendors and integrators in Ethernity’s DU NIC, which embeds vRouter data plane offload that can be equipped with our own or Third party vRouter software stack, as a result of which we shipped an early version of our ACE-NIC to Tier-1 server vendors, adapted to support Fronthaul and Midhaul requirements within the DU. Progressing towards trials during H2 21, with vendors anticipating deployment in 2022
– In recognition of the innovative vRouter offering for DU, in May 2021, Ethernity’s 5G DU Aggregation and vRouting on FPGA SmartNIC solution was shortlisted for a prestigious 2021 Global Mobile (“GLOMO”) Award
– Production orders received for the Company’s ENET Flow Processor FPGA systems-on-chip (SoCs) from an American wireless broadband solution manufacturer, for deployment by the customer of their product into the market. Total of $2m in orders received from the customer for 2021/2022
– New Patent granted in March 2021 that enables Ethernity to overcome operator issues with wireless transmission that are interrupted or slowed due to inclement weather.
– Following receipt of the Patent, the Company has introduced the the UEP-20 based bonding solution and went through different testing and interoperability with radio equipment vendors. Dependent on the vendors’ success in selling their radio equipment with our UEP-20 bonding solution for currently deployed radio installations, we expect to obtain orders for current UEP-20 to connect thousands of links in the range of $800k to $1M in the next 12 months.
– Furthermore, the Company is in commercial closing legal discussions with a customer on a $930,000 contract for a customised UEP-60 solution, the majority of which will be recognised in 2022. Based on the customers estimates of deployment, this contract could generate annual revenues of up to $3.0m from 2022 onwards. The total UEP-20 and customised UEP-60 with bonding function revenue for 2022 is estimated at $2.5m.
– With the residual COVID-19 disruptions worldwide and the current exponential outbreak of COVID-19 in India and Taiwan, there remains elements of uncertainty over the timing of near-term events due to the challenges faced by our customers regarding both timing of component supply and the meeting of their own plans. This may result in the Company encountering customer driven delays in deliverables dates and revenue recognition during the 2021 which could subsequently result in the deferral of revenues from 2021 to 2022
David Levi, Chief Executive, said “I am encouraged by our progress to date on the execution of our strategy for delivering functional acceleration coupled with virtual software appliances, and by the fact that finally the telecom cloud and NFV market has been realised and is now positioning towards mass deployment, allowing the Company to fulfil its goals. I am hopeful that the growing momentum around our 5G UPF, 5G DU and UEP based wireless backhaul Networking unit with an integrated bonding solution, will lead to the realisation of large scale growth in the coming years”
Annual Report and Notice of AGM
The annual report and accounts for the year ended 31 December 2020 is being posted to shareholders shortly and is available on the Company’s website at www.ethernitynet.com. The notice of annual general meeting, to be held at 9.00 a.m. UK time (11.00 a.m. Israel time) on 2 August 2021, will be despatched in due course and made available on the Company’s website.
Chairman’s Statement
It gives me great pleasure to present this, my first Chairman’s report since my appointment as Chairman of the Board on 10 March 2021.
At the outset, I see my role as Chairman as not only ensuring that the formalities of board procedure, governance and independence are maintained. I am here to stand with and behind the Board and to mentor management in areas of executing the strategy and plans of the Company drawing on my years of industry and board leadership experience.
Since my appointment as Chairman, I have spent considerable time with the CEO David Levi and members of the Board and management so as to fully appreciate the Company strategy. I firmly believe that the direction of diversifying the Company’s offering to include systems and solutions in addition to IP licensing and services is the correct strategy and this has been proven in the accomplishments and engagements attained over the past year. The continued level of engagement with more significant market players as well as progress being made to date is proof to me that the strategic direction of the Company is the right one and carries my full support.
We are progressing in achieving the desired mix of revenue streams from network solutions in addition to IP licenses and services. With the existing technology and resources available in the Company and the immense opportunities in the market for 5G deployment, I am comfortable that with the plan built and strategy in place the Company will be able to achieve its objectives of becoming a provider of advanced network solutions.
Having reviewed the past year, Ethernity has continued to develop its technology so as to become a provider of advanced network solutions to the market. In H1 2020, the Company experienced some delays in signing new contracts due to the COVID-19 situation yet managed to perform to expectations. It was anticipated that H2 2020 financial year would show a significant increase over H1 and the Company succeeded to recover and grow its revenue by approximately four times over H1 2020, increasing revenues from H1 of $359,375 to a FY 2020 revenue of $1,853,732 (FY 2019 $1,343,844) for the full year.
The Company has continued to test and develop its product both with OEMs and end-users including national telecoms operators. These initial testing phases have progressed well and the Company now anticipates that these will lead to larger scale field trials prior to eventual commercial deployments. Furthermore, there has been significant progress toward the implementation of OpenRAN, along with the continued anticipated demand for FPGA-based virtualised routing and other telecom applications. We are excited by the progress we have achieved and the inroads we are making toward meeting the Company’s growth ambitions. We believe that with our available technology and by integrating additional functionality on our existing DU implementation that will result in additional savings for the telecom operators, we will maintain our edge over the other solution providers in this market.
Revenues for 2020 were $1.85m (2019 $1.34m) with a gross margin of $1.58m (2019 $1.15m) and an operating loss of $5.09m (2019 operating loss $6.74m before capitalisation of costs to Intangible Assets) respectively. This is further expanded upon in the Financial Report section of this Annual Report. The Company continues to invest significantly in planned Research and Development.
Fundraising
During the year under review the Company announced that it would need to raise additional funds so as to meet the Company’s operational and development goals. These efforts were successfully achieved during the second half of the year, with funds raised via a placing in July 2020 which included the issue of warrants, the exercise and completion of which at almost 100% was concluded in May 2021. Furthermore, the Company successfully concluded a Share Subscription Agreement with the 5G Innovation Leaders Fund LLC (“5G Fund”), a U.S.-based specialist investor, in relation to the issue of new ordinary NIS 0.001 shares (“Shares”), to raise up to £3.2m.
The July 2020 placing raised £2.66m, inclusive of warrants which closed on 12 May 2021, and which included £0.62m from the Executive Directors. As of the date of this report, the Company has received via the Share Subscription Agreement £2.45m of the £3.2m as well as a further £0.26m against the initial allotment shares, being a total of £2.71m.
These fundraising efforts have significantly strengthened the financial position of the Company and leaves the Company well-resourced to meet its operational and development goals.
At the Annual General Meeting held on 14 September 2020, resolutions were approved, inter alia, granting the Directors share issuance authorities in line with other growth companies on the AIM market to provide the Company with greater flexibility and funding options.
COVID-19
The Company had previously stated that in light of the continued uncertainty on the potential impact and duration of the COVID-19 pandemic, the Board had taken certain steps to both safeguard the well-being of staff and to position the Company for the future. These steps were successfully undertaken, and the Company managed to maintain its operational capacity and deliverables during the extremely difficult time the world endured due to COVID-19. I am pleased to report that due to the exceptional efforts of both the Israeli government and the population in general, the country has all but overcome the pandemic inside of its borders and the Company managed to continue meeting its deliverables within the constraints of its customers.
Thanks
The Board is very appreciative of the considerable efforts of the CEO, the CFO, the VP R&D and all our management and staff, who work tirelessly towards the development, sales, and administrative goals of the Company. I thank them especially during these testing times for their continuing hard work and commitment to the Company.
I would further like to thank the Board for the opportunity to Chair the Company and compliment the executive management on their tireless efforts in securing the financial future and growth of the Company during a very difficult and trying 2020.
Outlook
The current year will be both challenging and exciting as the Company continues to increase and capitalise on customer engagements, continues to develop and deliver its strategy as well as face the particular challenges, including the COVID-19 pandemic in India and the shortage of components, to grow the revenue delivery from current modest levels, into milestone new contracts. The Board is confident that, providing customers maintain their technology investment programs, progress will continue to be made this year resulting in longer term value for shareholders.
Yosi Albagli
Chairman
24 June 2021
Chief Executive’s Statement
Business and Market Overview
Ethernity Networks continues to operate in a market which is undergoing significant change. This includes the growing use of FPGA devices for networking appliances and the transition to disaggregated 5G and Open RAN networks which will provide higher data throughput and will utilise Cloud Native Architecture based on computer Servers and Virtualised Software. The Company’s disaggregated FPGA-based products and innovative IP coupled with software appliances covers the Open RAN space from tower to core. These will all contribute to the Company to positioning itself as a key player in this market.
While during H1 2020 we continued our 5G UPF engagement with various partners, operators and OEMs we experienced a challenging period, as due to COVID-19 our planned fund raise in Q1 was delayed. Furthermore customers delays in their procurement and project plans resulted in a need for a fundraise which was completed in July 2020 with significant support from the Company’s Directors. This, together with a Share Subscription Agreement with 5G Innovation Leaders Fund LLC (5G Fund) in September and the additional warrants from the July placement resulted in a significant boost to the Company’s cash reserves, ending the 2020 year with sufficient cash reserves for 2021. Subsequently during H1 21 additional funds were received from both the warrants relating to the July placement and the share Subscription facility to further support our growth plan.
Subsequent to the delays experienced in H1 20, we recovered well during second half of 2020 and grew the revenue by approximately four times over H1 20 and over the same period in 2019. A notable contract during H2 was a contract with an Indian OEM that licensed our UEP-60 (60Gbps) and UEP-300 (300Gbps) design including hardware design, the ENET Flow Processor FPGA firmware and Routing Software Stack for 60Gbps and 300Gbs Cell Site Router. Upon deployment of the products this will further result in recurring revenues from both FPGA SoC and the software, however with the current COVID-19 situation in India we anticipate a number of months delay in the fabrication of the licenses based products. The Company will propose the UEP-60 and the UEP-300 as customised version to global vendors which is planned to serve as one of our growth engines over the forthcoming years, to be positioned as differentiated Cell Site Gateway with various FPGA loads for Fronthaul, Midhaul (CU to DU) and Backhaul (bonding).
UPF is the User Plane Functions element on the 5G core, and this market is classified as Virtual Evolve Packet Core (vEPC) that combines control software and data plane handling, where data plane handling is managed by the UPF element. The global virtualised Evolved Packet Core (vEPC) market is priced on a per subscriber licenses/service and therefore is expected to grow from USD 3.9 billion in 2020 to USD 13.7 billion by 2026,
Ethernity currently proposes its ACE-NIC100 as a functional acceleration card for UPF software, however in collaboration with TietoEVRY we plan to propose a joint offering that will include the UPF software element that allows us to supply into a larger market for Private 5G market and IoT.
During 2020 we continued our 5G UPF solution engagements with operators, OEMs and partners based on the ACE-NIC100 Functional Acceleration Card, and we are currently in progress towards field trials for end of 2021 and plan for deployment during 2022. Our 5G UPF offering employs the ACE-NIC100 to offload User Plane traffic forwarding from the CPU resulting in reductions of latency, power and cost.
Furthermore, in Q4 20 we introduced our DU NIC offering that runs in complete R&D synergy to our activities related to the Cell site router appliances (UEP-60 and UEP-300), that over and above the Fronthaul aggregation and timing synchronisation technology offers notable and innovative solution that can offload vRouter functions from the server, reducing the need for external Cell site Router, and allows the building of a complete Cloud native offering. This offering was nominated as one of 4 nominees at the 2021 GLOMO Awards (Global Mobile Awards) under the category Best Mobile and Network Breakthrough product of the year on 24 May 2021. A recent report published and as highlighted in our Blog https://ethernitynet.com/market-for-dus-in-openran/ calls for 1 million DUs in use by 2024 (excluding China), representing an average 400,000 DUs per year during 2023/24. In this market Ethernity is positioned as a differentiated and innovative offering with integrated routing and security offload that utilises our existing IP.
Resulting from the market’s intentions for 5G NFV based deployment and OpenRAN along with the Company’s growing engagements with server vendors, integrators, operators and OEMs for our ACE-NIC family that embeds a Router-on-NIC implementation, the Company has continued and is now focussing its efforts on the ACE-NIC offering and other appliances based on the ACE-NIC, various FPGA firmware and software stack, with the intention being to capture a greater market share of the upcoming 5G market.
Current Trading
During H1 2021 our activities have progressed in multiple domains:
· Subject to accounting and revenue recognition, revenue for first Half of 2021, is expected to be approximately $1m that is 2.5 times more than revenue in H1 2020.
· With Xilinx who supply the FPGA device used by Ethernity along with procurement from other sources, we have succeeded to secure supply for the majority of FPGA’s required for 2021 so as to fulfill our FPGA SoC orders.
· Following on from our market update of 2 December 2020, we received a $400,000 order for our ENET FPGA SoC for Point to multi point fixed wireless platforms. Further to this order the Company has received further orders resulting in total orders received to date of $2m, with $740,000 to be delivered during 2021 and the balance of $1.26m in 2021. We are hopeful these orders will increase with further engagements through the product deployment and introduction.
· UPF:
o Ethernity continues to progress on the collaboration with TietoEVRY in bringing a joint UPF offering that includes a UPF software and acceleration card as a complete UPF product to serve the 5G Private Networks.
o Ethernity is currently engaged with an Asian service provider that has completed integration of our ACE-NIC with their UPF data plane and who now plans larger field trials during Q4 21 with deployment expected during 2022.
o Chinese open UPF testing for private 5G market is planned for Q4 21 through our OEM customers that integrated their UPF software and the ACE-NIC100, with anticipated deployment during 2022.
· Distribution Unit : Our DU NIC that embeds vRouter data plane offload that can be equipped with our own routing software stack, gained significant interest from operators, server vendors and integrators and as a result we shipped an early version of our ACE-NIC adapted to support Fronthaul and Midhaul requirements within the DU, progressing towards trials during H2-21 who anticipate deployment in 2022. Such recognition resulted in with the understanding by the market that Ethernity provides an offering for the Open RAN that will result in a seamless cloud native deployment for Open RAN versus current offerings in the market that are based on physical Cell Site Router
· Virtual Router: The Company is collaborating with a Tier1 Networking vendor on a joint offering that will include their well-known Cloud native virtual router software package and our ACE-NIC100, that will offload the router data plane. Within the framework of the collaboration, Ethernity will benefit from the inclusion in their substantial market position that they hold with system integrators and service providers.
· The Company was granted a Patent for wireless bonding. Practically, this patent enables Ethernity to overcome operator issues with wireless transmission that are interrupted or slowed due to inclement weather. The primary applications for this patent are SD-WAN and wireless backhaul deployments.
· Following the introduction of the UEP-20 based bonding solution the Company went through different testing and interoperability with radio equipment vendors, and dependent on the vendors’ success in selling their radio equipment with our UEP-20 bonding solution for currently deployed radio installations, we expect to obtain orders for current UEP-20 to connect thousands of links in the range of $800k to $1M in the next 12 months.
· Furthermore the Company is in commercial closing legal discussions with a customer on a $930,000 contract for a customised UEP-60 solution, the majority of which will be recognised in 2022. Based on the customers estimates of deployment, this contract could generate annual revenues of up to $3.0m from 2022 onwards. The total UEP-20 and customised UEP-60 with bonding function revenue for 2022 is estimated at $2.5m.
· We are also in discussions relating to various other UEP customised offerings and further licensing for our Software and firmware.
Outlook
As detailed, NFV deployment is now here to stay and will become the norm as 5G networks will be based on NFV and virtualisation technologies, with a need to support extensive performances. With the new virtualisation concept that has finally been accepted and adopted by the market, 5G will supply 10 times more in throughput than 4G and alongside the virtualisation concept functionality acceleration card as provided by Ethernity, this will be a key element in the 5G network.
The Company revenue during 2021 and 2022 will be derived from mixture of sales of FPGA SoC embedding our ENET flow processor firmware, routing software stack, customised UEP offerings, and the FPGA Smart NIC solution for UPF and DU, with anticipated contracts during 2021, leading to confirmed orders for 2022.
Our DU and UEP offerings are offerings of combined hardware (or FPGA Firmware) that will be equipped with our routing software stack, of which the first version is schedule for release by Q3 21 followed by an advanced version planned for 2022. The Company anticipates that as soon as the Company completes the development of the routing software stack integration, orders for customised UEP routing platforms together with vRouter offload and DU based FPGA Smart NIC (ACE-NIC ) offerings for deployment into cloud native environments, Open RAN and 5G core will increase in exponentially.
With the disaggregation framework that is progressing within the CSPs (Communications Service Provider), delivery to the CSPs will be undertaken by system integrators such as TietoEVRY, server manufacturers, the Company’s OEM customers, or other channels that will supply and support the deployment at the CSP. The Company does not plan to sell its products directly to CSPs for large scale deployment and intends to deliver to the market through the above channels.
I am encouraged by the fact that finally the telecom cloud and NFV market has been realised and is now positioning towards mass deployment, allowing the Company to fulfil its goal. I am hopeful that the growing momentum around our 5G UPF, 5G DU, UEP based wireless backhaul networking unit with an integrated bonding solution will lead to the realisation of large scale growth in the coming years.
Considering the worldwide components shortage issue that albeit has been currently resolved for the Company, along with the residual COVID-19 disruptions worldwide and the current exponential outbreak of COVID-19 in India and Taiwan, there remains elements of uncertainty over the timing of near-term events due to the challenges faced by our customers regarding both timing of component supply and the meeting of their own plans. We recognise that this may result in the Company encountering customer driven delays in deliverables dates and revenue recognition during 2021 which could subsequently result in the deferral of revenues from 2021 to 2022. However, this is not expected to affect our high-level growth plans and further investment in R&D. Furthermore as highlighted above we anticipate securing orders for 2022, and along with the 2021 carry over, will result in achieving the planned growth for 2022 from the current existing customer base and that the market evolution, uptake and deployments as have been long anticipated will now be realised from the latter half of this year and the long anticipated and expected growth will now come to fruition.
David Levi
Chief Executive Officer
24 June 2021
Strategic Review
The industry’s 5G mobile network deployment plans for 2021 is constructed using the underlying principles of Network Function Virtualisation (NFV), Software Defined Networks (SDN) and Edge Computing resulting in 5G ultimately being a flexible, programmable, and distributed cloud network.
We live in an age of massive demand for data. Today’s devices and associated applications, whether streaming media, online gaming, online storage for data backup, remote surgery, or artificial intelligence demand far greater throughput than today’s networks can provide, and they also require that the data be served with high availability, security, and reliability. To meet the ever-increasing application needs, operators have begun using Edge Computing to locate the content closer to the end users and performing faster security authorisations with SDN/NFV technology that, when coupled with infrastructure improvements, allows delivery of 10 to 100 times more throughput.
NFV is part of a larger trend known as disaggregation, which has enabled the industry to move toward agile networks. Whereas once the standard was for networks to rely on ASIC (application-specific integrated circuit) based monolithic hardware appliances that bundled proprietary software into a vendor-locked device and integrated only with other offerings from that vendor, disaggregation has changed the paradigm to overcome such limitations.
Thanks to the use of X86 as a standard platform for server hardware, today’s networks can disaggregate software applications from the underlying hardware bare metal server. Software-based functions run on top of CPUs inside standard servers from any of several different vendors, and open stacks that are used to communicate between virtual machines for application and service chaining dictate the overall appliance functionality that runs on the server.
Disaggregation within the data centre provides the flexibility to choose a software vendor separately from the choice of a hardware server platform, moving the industry away from monolithic ASIC-based appliances. It ensures that the resulting appliance is futureproof because the software can be upgraded or replaced without needing to replace the hardware that hosts it.
FPGAs are the natural hardware solution for NFV, as they are flexible, quick to market, efficient, scalable, and comes with different size options to serve different markets and solutions. FPGA platforms are being widely deployed in automotive, aerospace, industrial, storage, and networking systems.
Gartner’s February 2020 research report entitled “Market Trends: Function Accelerator Cards Disrupting Traditional Ethernet Adapter Market” defines Function Accelerator Cards (FACs) as “a class of network interface hardware that help improve and accelerate server availability, bandwidth performance and data transport efficiency in a network, besides enabling connectivity to a network. While all FACs are essentially NICs, not all NICs are FACs.” The report also defines the size of the market, by claiming that “by 2023, we estimate that one in three NICs (network interface cards) shipped will be a FAC,” and further adds that “as 5G adoption also starts to grow, FACs will also be handy at the edge for offloading NFV functions. Product leaders at semiconductor providers must, therefore, optimise their NIC hardware for capabilities to support such use cases and redraw their product roadmaps for traditional NICs to include FAC functionalities.”
Ethernity’s FAC delivers the FPGA SmartNIC hardware, the functional acceleration FPGA firmware code, DPDK APIs to allow connectivity to any virtual network function (VNF) for acceleration, and control software supporting the majority of today’s L2/L3 network control protocols operating seamlessly on top of the FPGA data plane code.
FPGA SmartNICs are often considered as high-end and expensive compared to SmartNICs that are based on multicore programmable ASICs, but Ethernity’s approach to the SmartNIC market enables the use of FPGA SmartNICs at the same price point of ASIC-based multicore devices such as those offered by Mellanox and Broadcom. The goal is to change the paradigm and to allow FPGA SmartNICs to capture larger market share compared to ASIC-based SmartNIC offerings.
While there are other FPGA SmartNIC providers, most only provide the physical hardware FPGA card coupled with a piece of FPGA reference design code. Others provide solutions specifically for data centres, focusing on flow classification and load balancing. Ethernity is actually the only vendor today that provides a complete network processing for implementation of router and security engine on FPGA (versus an ASIC offering), as well as offering a complete Router-on-NIC for FPGA SmartNIC that can operate with control software. Such an offering is uniquely positioned far beyond the functionality provided by general-purpose multicore programmable ASIC-based SmartNICs by providing complete router data plane functionality coupled with other unique data processing elements on top of the general SmartNIC functions.
Ethernity’s 5G offering.
The Networking and security FPGA IP that the Company holds well serves the entire 5G network from the tower to the core of the network, including offerings for different gateway appliances together with offerings for DU, CU and UPF as highlighted in the diagram below.
The depth of Ethernity’s IP for the 5G market presents an outstanding technology offering for the 5G User data traffic processing, allowing the Company to provide solutions for special deployment scenarios that will result in significant added value for the service provider.
Following the execution of the UPF offering the Company progressed with an offering for a 5G Distribution Unit (DU) in conjunction with the UEP based offering for customised Cell Site Router
The UPF and CU Smart NIC offering can operate well in conjunction with FPGA offering, however the standard DU NIC business is served by different semiconductor company offerings such as Intel, NVIDIA and others, as currently the OpenRAN service providers it represents provides a large enough volume business for ASICs. ASIC based NIC cards are offered by the said semiconductors vendors or vendors that manufacture NIC cards based on the said ASICs. To cope with the limited functionality offered on off the shelf ASICs, Ethernity positioned its DU FPGA NIC offering as a differentiated offering, through the introduction of the embedded router data plane to offload vRouter and distributed CU security offload, together with the other features that are included on standard ASICs, allowing us to serve this large market with a differentiated offering and higher margin based FPGA. In addition, our Sync and timing Technology today offers superior performance versus that which is proposed by the standard ASIC based offering. The result is that we may also see business opportunities for our DU NIC card without routing. For this such configuration offering we intend on collaborating with the FPGA vendors in a joint go-to-market plan which will allow us to meet the target price versus cheaper ASIC offerings, but with excellence of DU offload and the Sync/timing solution.
The DU market will be served by Ethernity in one or all of the following business models:
1. Sell the Company’s proprietary ACE-NIC FPGA NIC hardware (and future generations), that will embed the Company’s IP and software stack, which may result in the Company requiring additional working capital to fund the manufacturing process for large volumes.
2. For high volume NIC deployments such as DU market as indicated above, the Company will seek to build a disaggregate business where hardware will be delivered directly to the customer through a 3rd party FPGA vendor and the Company will sell the software, allowing reduced costs for the customer and the ability to propose a joint competitive offering to the customer.
3. Subsequent to obtaining a large enough market share, given that the Company holds a complete ownership over the code running on the FPGA without any dependency on 3rd parties, the Company may consider converting the FPGA design to an ASIC with the intention of entering and capturing a larger market segment at higher margins.
In summary the unique positioning of Ethernity Networks as a leading innovator of software-defined network processing and security solutions on programmable hardware, that will include a complete Virtual Networking Function software control stack, will uniquely position the Company to serve the network disaggregation market. This will be achieved due to offering accelerated performance software based solutions for the server, utilising our UEP and FPGA NIC as the hardware platform for the innovative software and firmware solution.
With this strategy, the progress achieved to date together with the recent increases in customer interest in and acceptance of our complete UPF, DU equipped with vRouter Offload and our Router software stack, I firmly believe that the direction undertaken of diversifying the Company’s offerings to include systems and solutions in addition to IP licensing and services is the correct strategy, and this has been proven in the accomplishments and engagements achieved during the past year.
