Weebit's IP fuels ReRAM ambitions

The Australian

15 hours ago

ReRAM is rising as Flash runs out of road
Weebit's licensing model starts to deliver real dollars
Big customers, big market, $8.07 target on the table
Special Report: Weebit Nano's ReRAM tech is quietly locking into billion-dollar markets with a licensing model most ASX investors are only just starting to understand.
If you want to understand why Weebit Nano (ASX:WBT)is starting to draw attention in the semiconductor world, you've got to start with a deceptively small acronym: ReRAM.
Short for resistive random-access memory, ReRAM is part of a new breed of memory technology that's been waiting in the wings while Flash memory hogged the spotlight.
But as the world moves towards AI-powered edge devices and autonomous everything, Flash has hit a wall.
ReRAM, on the other hand, is built to scale - which is why Weebit is showing up on a few more investor radars.
The case for ReRAM
In today's world of edge computing - smartwatches, self-driving cars, factory floor sensors - devices are expected to do more with less.
They need to be smart, secure, fast and frugal with power.
The problem is that traditional Flash memory isn't playing ball. It simply can't shrink down to the chip sizes modern applications demand.
That's where ReRAM shines.
Read later: Why Weebit's ReRAM tech looks ready for the next era of smart devices
Instead of storing data using electric charge like Flash, ReRAM does it by tweaking resistance - meaning it's less power-hungry and easier to embed directly onto the same chip as the processor.
'ReRAM seems to be the number one replacement technology. But we're not there yet, Weebit's not there yet, although making good progress, last week announcing its first product licence,' said Andrew Johnston, a senior analyst at MST Access.
'But we know that people can get there, we've got the example of TSMC.'
Johnston said that TSMC, the world's most advanced chip manufacturer, was the only other company to successfully commercialise ReRAM.
But because they develop and use their own tech, that leaves the rest of the global market - 85% by Johnston's estimate - wide open for Weebit to chase.
Inside Weebit's IP engine
Unlike traditional chipmakers who spend billions building factories (or "fabs"), Weebit doesn't manufacture anything.
Instead, it licenses its ReRAM technology to other companies who integrate it into their chips.
'There's just not a lot of this sort of company listed in Australia,' Johnston observed.
And that's why many ASX investors might not yet grasp just how powerful an IP licensing model can be.
It's an asset-light approach that could prove highly rewarding, especially once the royalties start to roll in.
'The chip manufacturers license technology from Weebit to use in the manufacture of the chips they make.
'Receipts from customers that Weebit recorded is the payment of those licence fees. But it's the royalty payments where the big dollars are.'
Here's how the model works: A chip manufacturer like onsemi or DB HiTek signs a licence agreement and pays an upfront fee.
Then comes the technical dance known as 'qualification' - embedding Weebit's IP into their chipmaking process.
That alone can take 18–24 months. Once done though, royalties start flowing every time those chips are sold to end customers.
This isn't niche; it's the same licensing model used by industry giants like ARM, and even TSMC still licenses its IP.
And because Weebit doesn't need fabs, inventory or warehouses, its gross margins are, frankly, off the charts.
'Gross margins on these businesses are going to be 90% or more,' said Johnston.
'There's no massive investment in capex, and not a lot of friction in between.'
Validation from a giant
For those still questioning Weebit's commercial traction, the January licence deal with US$25-billion market-capped onsemi (NASDAQ:ON) marked a huge step forward.
onsemi is a Fortune 500 company, a Nasdaq 100 heavyweight, and, most importantly, a major supplier of chips to the automotive industry.
'They're a really important company,' Johnston pointed out.
'New cars have something like 1,000 chips in them and with Weebit's technology, the auto sector is a particularly important segment.'
That deal wasn't just symbolic. According to Johnston's estimates, the upfront payment from onsemi may have landed between $2–3 million, seven to nine times what DB HiTek paid.
That kind of cheque says more about the customer's conviction than the cash itself.
'The upfront fee is a rounding error compared with the dollars the chip manufacturers have to invest to get that technology into their manufacturing.
'It's a major sign they believe in the product.'
And once the IP is embedded, it stays put.
'The process is a long one but once it's embedded, it tends to stick, bringing in revenues for years to come.'
Why MST thinks Weebit could rise 4x
Weebit shares are trading around $2.17, but MST has a valuation of $8.07 on the stock, almost 4x upside.
That figure is based on a DCF model to FY33, with assumptions around licensing growth, royalty potential and business scalability.
'I can point you to a pathway to that $8,' Johnston said.
'The addressable market is probably number one. Number two, the quality of the IP and the validation. And then there's no capex, it can scale quickly.'
Still, investors need to be patient.
MST's forecasts only expect $4 million in revenue for FY25, rising to $9.6 million in FY26 and $30 million by FY27 - when royalty payments are expected to really kick in.
So for those chasing strong franked income, Weebit might not be the right fit - at least for now.
Licensing in a time of uncertainty
The chip industry is indeed going through a generational shift.
Building new fabs now costs tens of billions.
As a result, even global leaders are becoming IP customers, opting to license tech like Weebit's rather than reinventing the wheel.
Weebit has already signed two major customers, secured its first design licence with a product company last week, and is aiming to lock in two more IDM or foundry deals, plus two product company agreements, by year-end.
Qualification with DB HiTek is the next major milestone.
The company's tech has already passed AEC-Q100 automotive-grade standards and DB HiTek is preparing live demos of Weebit-enabled chips - a key signal to the market.
DB HiTek is a foundry, making chips for other companies. On the other hand, onsemi is what's known as an integrated device manufacturer or IDM; they make and use their own chips.
The difference matters, because IDMs often move faster from qualification to royalty generation, said Johnston.
In short, there are many doors, and Weebit's knocking on all of them.
This article was developed with support from Weebit Nano, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.