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California semiconductor maker goes public in billion-dollar deal amid chip shortage

Russ Mitchell, Los Angeles Times on

Published in Science & Technology News

An California semiconductor company took its stock public Wednesday — straight into the maw of a global chip shortage that could pose either a threat or an opportunity.

The company is Navitas, based in El Segundo. Its stock offering created a company with an enterprise value of about $1 billion and brought in $320 million in cash. Navitas will use the cash to expand its core business — selling chips made of gallium nitride to makers of phone and laptop chargers — and move into new markets.

The vast majority of computer chips are made with silicon, but Navitas said its chips outperform that material for charging, making it faster, cooler and more energy efficient, with smaller charge units.

"Who doesn't want faster charging with smaller, lighter weight?" said Navitas Chief Executive Gene Sheridan, one of four co-founders.

With revenue of only $12 million and no profit yet, Navitas' valuation reflects tremendous growth expectations both for gallium nitride chips in general and the company in particular.

Semiconductor supply chain problems could constrain that growth. Perhaps that's why the stock was slow out of the gate, with the share price closing down 3.47% at $12.80.

 

But Sheridan said using gallium nitride chips gives the company a supply chain edge, allowing it to take advantage of unused or underused chip fabrication plants built in the 1980s and 1990s. Those plants etch a large number of chips onto 6-inch-diameter wafers that are then cut into individual chips. Modern silicon fab plants turn out 12-inch and sometimes 18-inch wafers.

Because these gallium nitride chips are smaller than their silicon counterparts, a lot more can be put on a single wafer. That, plus gallium nitride's current low-volume production, should help Navitas avoid the bottlenecks seen elsewhere in the chip business, Sheridan said.

Only 2% of the charger market today consists of devices made with gallium nitride chips, versus 98% for silicon chips. There are other gallium nitride power chip companies, but, according to Navitas' filing documents, the company's market share is bigger than the others' combined.

The company has deals with major manufacturers such as Dell and big aftermarket suppliers such as Anker. It's also pushing into new markets: data center computers, solar power inverters and power systems for electric vehicles. Sheridan plans to put much of the new cash into hiring, especially engineers. Today it has 160 employees, 60 in El Segundo.

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