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CHIPS Act to ‘scale up’ the smartphone market, Akoustis CEO says

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Akoustis Founder and CEO Jeff Shealy joins Yahoo Finance Live to discuss the CHIPS Act, easing the semiconductor shortage, boosting production, and being able to scale up for the smartphone market.

Video Transcript

[MUSIC PLAYING]

AKIKO FUJITA: Well, the long-awaited CHIPS Act destined for President Biden's desk this week, with the landmark industrial legislation being touted as a potential game-changer for the US tech industry. There are, of course, a raft of potential beneficiaries. Let's bring in one of them, Akoustis CEO Jeff Shealy joining us today.

Jeff, before we get into the specifics of this bill, there's been a number of companies, Intel, Texas Instruments among them, that have been touted as the biggest beneficiaries. Talk to me about what specific part of this chips market Akoustis addresses.

JEFF SHEALY: OK, well, first, thanks for having me. And the market that we service is in the RF segment of the wireless. We make a critical silicon chip that allows a Wi-Fi router or a smartphone to connect to the internet. For example, in a Wi-Fi router, you may have as many as 25 of these chips. In a smartphone, you could have 75 to hundreds of these chips. So they serve a very critical function in allowing users to access high-speed data.

BRIAN CHEUNG: Hey, Jeff, Brian Cheung here. That's super-helpful.

So then now we can kind of segue way over to the CHIPS Act. That's a major kind of story for you and your industry. What does the CHIPS Act mean for Akoustis specifically? Is that going to help you ramp up for the types of technology and products that you do help serve?

JEFF SHEALY: Yeah, I think to understand how it helps us, it really may make sense to just take a step back. If you look over the last 40 to 50 years, investment in semiconductors, I think it's pretty well-documented how that decline has occurred from a high 30% down to barely double digits.

So in terms of how it would help us, we currently service the ability to make approximately 500 million chips. And we service that into the Wi-Fi market. We've got north of 10 customers in mass production. And we currently make our platform on a 6-inch diameter silicon wafer.

What exactly the CHIPS Act means to us is the ability to scale up for the high-volume smartphone market, which requires an order of magnitude higher manufacturing. And it would allow us to scale our wafer diameter to the next node, which is 8-inch.

So in terms of those benefits, it's extremely capital-intensive to be able to make these investments. And so Senator Schumer, who's been a staunch supporter of this bill and a torchbearer of this bill, has certainly identified the greater Rochester area as one of the areas for revitalization. And our chip fab happens to be just on the outskirts of Rochester, New York.

AKIKO FUJITA: Yeah, Jeff, what are the cost implications of all this? I mean, you talked about the dramatic decline in market share of US manufacturers in chips. I mean, a lot of that got shipped out to Asia because it was much cheaper to manufacture there as well. It's great to bring it back. But what does that mean from a cost perspective? And how much of that cushion can this chips bill, the incentives that are included in that, how much of that can actually cushion the cost increases that come from manufacturing in the US?

JEFF SHEALY: Well, let's talk about not only cost. But let's also talk about the innovation. The innovation lies with where the semiconductor is manufactured. So if you're going to continue to innovate, you have to continue to make the chips because you're building off the last generation. So if you're putting manufacturing overseas, you're putting your intellectual property overseas because the trade secrets, frankly, are some of the most valuable things that you use in building these.

In terms of cost, cost is a curve that you have to traverse down in a factory by producing more wafers. And ideally, you want to produce those on a larger-diameter substrate. So if you look cost overall, it's really driven by the capital investments and the depreciation of the assets rather than, particularly, in the labor, as most of the manufacturing is major robot-driven as well as automated. However, there's significant human resources behind that as well.

AKIKO FUJITA: Jeff, finally, I wonder if you can address the criticism or concerns, I should say, about the fact that those who are against the bill, like Bernie Sanders said, this is about the government picking winners and losers. Intel obviously a big beneficiary of this. They are a much bigger company than you are. Do you think that the incentives should be doled out equally? I mean, how do you think about that?

JEFF SHEALY: I think each company has to make the case of why they're the right candidate. I think you have to look at why you're the right candidate. You have to look at the geographical location. Do you have the ability to bring in the talent in order to scale up manufacturing?

But I can tell you, from Akoustis' perspective, being one of the smaller players in the semiconductor manufacturing, as I mentioned earlier, it's extremely capital-intensive to scale up. We have successfully done that. We've been producing chips for five years, have shipped in into multiple consumer devices.

But this is the type of program which should not only address the larger manufacturers but also the emerging growth companies, like Akoustis, which are coming up the curve and innovating and developing the next generation of technology, which we want manufactured onshore.

BRIAN CHEUNG: Akoustis CEO Jeff Shealy, thank you so much for joining us. We really appreciate it.