EnSilica Plc

Share Issue/Capital Change • May 19, 2022

National Storage Mechanism | Additional information

RNS Number : 1096M

EnSilica PLC

19 May 2022

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This announcement is not an admission document or a prospectus and does not constitute or form part of, and should not be construed as, an offer to sell or issue, or a solicitation of any offer to buy or subscribe for, any securities in any jurisdiction. Prospective investors should not subscribe for or purchase any securities referred to in this announcement, except on the basis of the information in the final admission document to be published by the Company and any supplement thereto, in connection with the placing of its issued and to be issued ordinary shares and the proposed admission to trading on AIM.

19 May 2022

EnSilica plc

("EnSilica," the "Company" or the "Group")

Placing and Proposed Admission to trading on AIM

EnSilica, a leading designer and supplier of mixed signal ASICs (Application Specific Integrated Circuit), is pleased to announce its proposed admission to trading on the AIM market of the London Stock Exchange. Dealings on AIM are expected to commence at 8.00 a.m. on 24 May 2022, under the ticker ENSI and ISIN GB00BN7F1618 ("Admission"). Allenby Capital is acting as Nominated Adviser and Sole Broker to the Company and the placing.

In connection with Admission, EnSilica has raised £6 million through a placing and subscription of 12,000,000 Ordinary Shares at a price of 50p per share and will have a market capitalisation of approximately £37.6 million at the Placing Price.

EnSilica provides an end-to-end service for the design and supply of mixed signal ASICs, outsourcing certain elements such as the wafer fabrication of the manufacturing and packaging to third parties - otherwise known as a Fabless Semiconductor Model.

ASICs are Integrated Circuits or semiconductor chips developed for a particular use or product rather than for general purpose usage.  ASICs help differentiate products through optimised hardware making products smaller, faster, lower power, and/or more secure and can provide novel functionality, improve supply chain security and protect products from being copied.  The Company has expertise in designing complex mixed signal ASICs, which combine digital and analogue functions onto a single chip.

EnSilica has a broad international customer base. EnSilica's customers range from global corporations and original equipment manufacturers ("OEMs") to technology start-ups, including automotive Tier 1 suppliers, industrial enterprises, large software companies and service providers developing proprietary hardware. EnSilica is an approved supplier to some of the world's largest automotive and industrial OEMs and Tier 1 suppliers.

The Directors believe that the Group has reached a stage in its development where it will benefit from a quotation on AIM and that, as well as providing the Company with the net proceeds of the Fundraising, this will:

·    enhance both transparency and international profile of EnSilica with existing and potential customers;

·    allow the Company to access equity capital creating flexibility to fund growth and support potential M&A opportunities;

·    enable EnSilica to attract, recruit and retain key employees who may be further incentivised through share option schemes ; and

·    create a platform for existing shareholders to participate in the future growth of the Company.

Key business strengths include:

·    Global business with c. 120 employees

-    EnSilica is headquartered in Oxfordshire and has additional design centres in Wokingham, Sheffield, Bangalore, India and Porto Alegre in Brazil.

-    The senior management team has in-depth experience covering commercial, design engineering, IP licensing, fabless production, quality assurance and operations.

·    ASICs market forecasted to grow 8.2 per cent. through to 2026 and reach US$27.6 billion

-    ASIC benefits include: i) smaller size; ii) lower power consumption; iii) greater functionality; iv) improved data security - less exposed to hackers; v) enhanced IP security - harder to copy than a product populated with off-the-shelf components; and vi) supply chain resilience due to reduced risk of components reaching end of life

·    ASICs Design and Supply model - higher margin, longer term revenue streams

-    Customers pay an upfront fee towards the cost of design, tooling and test development of the ASIC and then purchase the finished ASICs from EnSilica or pay a royalty on production of devices

-    Significant revenues to EnSilica could occur when chip production is underway, which can be 2 to 5 years from project initiation

·    Increased investment into IP portfolio

-    IP reduces the time to market of developing an ASIC as well as providing an additional licensing revenue stream

·    Automotive and Satellite user terminals - both key target markets

-    Integrated circuits content per car are expected to increase from US$380 in 2017 to more than US$590 in 2025, leading to the automotive semiconductor segment TAM (total addressable market) growing from US$37.9 billion in 2020 to an estimated US$113.9 billion in 2030

-    In 2018 EnSilica was awarded a €2 million project from the UK Space Agency to develop an RF Integrated Circuit, 75 per cent. funded by the agency.

-    In addition, EnSilica was recently selected by AST SpaceMobile Inc (NASDAQ: ASTS) to develop their next generation ASIC for use in the company's planned space-based cellular broadband network.

·    Three ASICs now in supply phase and pipeline at an all-time high

-    Three ASICs have now been released for production with anticipated long-term supply revenue

-    A further three chips are now in the design phase

-    EnSilica is currently working on costings with potential customers for several further potential design and supply projects

Ian Lankshear, Chief Executive Officer of EnSilica commented:

"We are delighted to be floating EnSilica on AIM and believe this represents a major endorsement of our business.  Our quoted status will provide an ideal platform from which to accelerate a number of growth initiatives which will ultimately further expand both market reach and customer footprint.

Having developed a reputation of excellence and innovation over the past 21 years, we firmly believe our mixed signal and RF design and supply capabilities are ideally placed to further capitalise on the significant demand for ASICs across our key markets.

We are excited by the numerous opportunities that being a quoted company will bring and we look forward to further developing EnSilica over the coming years."

EnSilica plc Ian Lankshear, Chief Executive Officer Matthew Wethey, Chief Financial Officer	Via Vigo Consulting +44 (0)20 7390 0233
Allenby Capital Limited, Nominated Adviser & Broker Jeremy Porter / Vivek Bhardwaj	Tel: +44 (0)20 3328 5656 info@allenbycapital.com
Vigo Consulting (Investor & Financial Public Relations) Jeremy Garcia / Tara Benniman ensilica@vigoconsulting.com	+44 (0)20 7390 0233

ADDITIONAL INFORMATION

Background and history of the Company

EnSilica was established in 2001 to initially provide consultancy services to the global semiconductor industry and was primarily involved in helping their customers design ASICs. EnSilica opened its first office in Wokingham, Berkshire in 2002 and gained ISO9001 certification in the same year. EnSilica continued to grow with multiple repeat design services projects and gained preferred design services supplier status with many companies. Customers included Nokia, ARM, Panasonic, Sony, Wolfson, Dialog Semiconductor and Tier 2 automotive companies.

The Company developed a number of semiconductor intellectual property designs which have been licensed to a range of customers. EnSilica's IP technology focus was on radar signal processing and encryption accelerator hardware, which has been supplied to many major semiconductor suppliers.

Following the conclusion by EnSilica that India offers the ability to scale and balance the cost base effectively, in 2012 EnSilica opened an office in Bangalore. The Indian office supports the UK operations as well as direct customers in India and internationally.

The high level of industry expertise, knowledge and contacts built up over the years working with a prominent client list, combined with the more attractive economics, led to the 2016 decision to pivot from consultancy to an ASIC design and supply model. Within the ASIC design and supply model EnSilica runs the end-to-end process through to final chip delivery, which requires upfront investment, however, delivers longer term and higher margin income streams. To accelerate this move, in October 2016, EnSilica acquired a team of mixed signal IC engineers and further intellectual property. Thereon, the Company made further internal investment and won customers and mandates for applications for the automotive and industrial sectors, as well as licensing its radar technology to major Tier 1 and Tier 2 automotive companies.

The majority of the Company's growth to date has been funded from retained earnings. More recently, growth has been funded via unsecured long-term growth company debt facilities and the proceeds from the issue of £1.38m of Convertible Loan Notes that convert to ordinary shares on Admission, negating the need to seek finance from sources such as private equity.

The Company was awarded the Queen's Award for Export Growth in 2018. The Company also featured in The Sunday Times' SME Exporter 100 List in 2018, coming in fifth place.

Business model

EnSilica operates under the Fabless Semiconductor Model and, as well as design and consultancy services for ICs, provides an end-to-end service for development, production and supply of ICs from initial scoping and design through to the delivery of product.

Under the Fabless Semiconductor Model, fabrication of ICs is outsourced to specialised semiconductor wafer foundries, following which the processed wafers are sent for dicing, testing and packaging by other third parties, keeping capital requirements for manufacturing low. EnSilica has a wide network of suppliers as well as a strong reputation in the market which provides EnSilica with security of supply.

The move from consultancy to focusing on ASIC design and supply embeds EnSilica further within the electronics value chain. ASIC customers pay an upfront fee towards the costs of design, tooling and test development of the ASIC, otherwise known as non-recurring engineering costs ("NRE"). Customers subsequently purchase the ASICs that EnSilica supplies or, in some cases, pay royalties to EnSilica for the ASICs that a third party will manufacture on the customer's behalf.

EnSilica often co-invests in the development of the ASICs with the customer and depending on the sector, it takes two to five years to reach full production. At the production stage, revenues can be high, last several years. and generate gross margins in the circa 35 to 60 per cent. range. The gross margin will depend on the market and the level of co-founding funding of the NRE required. Part of EnSilica's expertise therefore is in the assessment of whether to proceed and invest in a particular IC project resulting in long-term component supply or royalty revenue for the Company.

EnSilica's reputation within the semiconductor industry has been reinforced through its strong network of partners. EnSilica works with a range of partners to build and maintain an end-to-end best in class supply chain. Partners include, but are not limited to, foundries (TSMC and Global Foundries), assembly and testing organisations (AES Technology Holding), IP vendors (Alphawave, ARM and Rambus) and EDA vendors (Cadence).

EnSilica is an Arm® Approved Design Partner. The Arm Approved Design Partner programme is a global network of design service companies endorsed by Arm. To secure Arm endorsement, EnSilica demonstrated a track record of success using Arm IP and successfully completed an audit by Arm.

Strategy

Historically, the majority of EnSilica's revenue was generated from its consultancy engagements. However, following a shift away from consultancy engagements to the design and supply model using the Fabless Semiconductor Model, EnSilica's revenue stream has started to diversify. EnSilica also benefits from R&D tax credits.

EnSilica intends to leverage the success of the scalability of the design and supply model and generate the majority of its revenue from full-service design and supply arrangements rather than its traditional consultancy arrangements. Although EnSilica has been developing ASICs for many years, it was only recently in 2020 that first production ASICs, under the Fabless Semiconductor Model, were shipped. EnSilica intends for ASIC production volumes to increase significantly over the next three years under the Fabless Semiconductor Model.

EnSilica's long term vision is to be the leading European supplier of choice for mixed signal ASICs for automotive, industrial, healthcare and satellite connectivity applications. The Board expects that growth will be fuelled by the global drive for greener, safer, smarter, connected vehicles and industrial mixed signal devices. This is expected to be achieved initially through ASICs but eventually lead to market driven catalogue parts. Furthermore, the Lower earth orbit satellite broadband market is being targeted by EnSilica to drive further growth and value in the business through the supply of mmWave chips. Accordingly, while EnSilica has received various RFQs/RFIs for ASICs from major global organisations, EnSilica intends to capitalise on the growth in their key market segments by providing a full turnkey mixed signal ASIC design, manufacture and supply offering.

In line with the broader industry, where major semiconductor manufacturers have seen growth through consolidation and vertical integration, EnSilica will seek to expand its offering in a similar fashion where appropriate

Directors

Mark Hodgkins, Executive Chairman

Mark is a qualified Chartered Accountant and a former partner with Grant Thornton and Ernst & Young. Since leaving Ernst & Young in 2005, he has served as CEO of several engineering businesses and a private industrial holding company. Mark is currently CFO of AIM-listed Trackwise Design PLC an innovative PCB manufacturing company. Mark previously announced that he will be stepping down from his role as CFO of Trackwise Design PLC in June 2022. Mark started working with EnSilica in May 2016.

Ian Lankshear, Chief Executive Officer

Ian co-founded EnSilica in 2001. Under his stewardship, the Company has enjoyed sustained growth based on market leading opportunities, innovation and export success. Ian has a strong technical and commercial background covering semiconductors and adjacent markets. Ian's early career was in Radar systems development for Siemens Plessey Systems. He moved into semiconductor development in 1996, working for Hitachi and then for Nokia. Ian holds a First-Class Honours degree in Electrical & Electronics Engineering.

Matthew Wethey, Chief Financial Officer

Matthew is a qualified Chartered Accountant. He has held senior finance roles at Unipart Group, British American Tobacco PLC, Cosine UK Limited and PV Crystalox Solar PLC (PVCS). Between 2009 and 2020, Matthew was Chief Financial Officer and Group Secretary at PVCS, a long-established supplier of photovoltaic silicon wafers, listed on the main market of the London Stock Exchange. Matthew started working for EnSilica in July 2021.

David Tilston, Non-Executive Director

David is a Fellow of both the Institute of Chartered Accountants in England and Wales and the Association of Corporate Treasurers. He has over 30 years' experience in finance functions within public companies, including at Group CFO level. His most recent executive positions were as Interim Group CFO of Northgate plc and before that Interim Group CFO at Consort Medical plc. He is currently Audit Committee Chairman at AIM listed SDI Group plc and is a member of the Remuneration and Nomination Committees. David was formerly non-executive director and Chairman of the Audit Committee and member of the Remuneration Committee at Sepura plc between 2007 to 2013, having joined the Board prior to its IPO. He is also Trustee and Treasurer at British Exploring Society, a youth development charity.

Janet Collyer, Non-Executive Director

Janet is an experienced senior international group director with a proven strategic and ecosystems management track record in the key commercial and technology aspects of the semiconductor systems industry. As an engineer by trade, with a MA in Engineering from the University of Cambridge, Janet spent 30 years working at NASDAQ-listed, Cadence Design Systems - eventually securing senior account positions and C-Suite level exposure. Janet is currently a non-executive director at the Aerospace Technology Institute and the Chair at Machine Discovery Ltd.

Wasim 'Woz' Ahmed, Non-Executive Director

Woz is a seasoned senior executive with an established track record in the semiconductor industry, spanning strategy, M&A, marketing and business development. With a BEng (Hons) in Electronics from Kingston University and a Henley MBA, Woz spent 15 years at Imagination Technologies, latterly as Chief Strategy Officer and Chief of Staff. He previously held management roles at Arc and Hitachi. Woz is currently working as a C-level consultant.

Noel Hurley, Non-Executive Director

Noel is a senior executive in the semiconductor business. He has held various commercial and managerial roles at ARM Ltd including Vice President responsible for Product Marketing, General Manager of the CPU group as well as forming and leading ARM's Business segments and Strategy and Incubation groups. He was a co-founder of XMOS Semiconductors and the COO of healthcare company Toumaz. Noel also sits on the board of Bodle Technologies as Chair. Noel holds a BSc in Electrical and Electronic Engineering.

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