US-based SkyWater Technology, a Category 1A Trusted Foundry accredited by the Defense Microelectronics Activity (DMEA) under the US Department of Defense, has reported its financial results for fourth-quarter and fiscal 2022 (ended January 1, 2023) on Febuary 13.
In the company's Q4 earnings call, SkyWater president and chief executive officer, Thomas Sonderman, indicated that 2022 was a year in which the foundry achieved a number of key strategic objectives. Notably, its record Q4 revenues of US$65.1 million, a 69% YoY increase, helped driving fiscal 2022 revenue growth above SkyWater's long-term target of 25% - reaching a record revenue of US$213 million for 2022, marking a 31% YoY growth. Gross margin for 2022 also increased to 12.2% on a GAAP basis, compared to -4.6% in 2021.
Looking forward, SkyWater expects a new baseline for quarterly revenues of approximately US$60 million from which to grow. "This is a significant achievement compared to this time last year, a testament to the team's improved execution driving increased factory efficiency and productivity, along with better pricing in our Wafer Services business," said the SkyWater president. SkyWater expects the new baseline to provide the foundation for the company to meets its long-term target of achieving 25% annual growth.
Though macroeconomic environment in 2023 is expected to remain challenging in 2023, SkyWater sees growth in 2023 to be "largely de-coupled from areas of macroeconomic weakness." "We expect to expand our revenue base above the US$60 million level with established, funded and relatively secure Advanced Technology Services (ATS) programs," according to Sonderman. Consequently, the foundry expects gross margins to range between 15% and 20% in 2023, built on the US$60 million quarterly revenue baseline.
In a previous inrerview with DIGITIMES Asia, the SkyWater president indicated that the consumer sector accounted for less than 10% of SkyWater's revenue.
In the latest earnings call, SkyWater especially noted a nearly 50% YoY growth (net of tool sales) in its ATS business, reaching US$139.4 millions in revenue for 2022, accounting for 65% of SkyWater's total revenue of US$212.9. In comparison, SkyWater's Wafer Services revenue for 2022 was US$73.5 millions, making up 35% of total revenue. ATS and Wafer Services are integral components of SkyWater's 'Technology as a Service (TaaS)' business model that emphasizes co-creation with customers.
The strong ATS revenue growth, according to the company, partly reflected the US government's increased commitment to SkyWater with its strategic radiation-hardened (rad-hard) investments. Based on the foundry's FDSOI technology, SkyWater's 90 nm process enable a range of applications from being rad-tolerant (>300 krads, for medical and low-earth orbit application), rad-hard (>500 krad, for deepspace deployments), to strategic rad-hard (> 1 Mrad).
"This increased confidence from the US government achieved during 2022 has set the stage for anticipated continued revenue growth on multiple mission critical programs," noted the SkyWater president.
In September 2022, SkyWater was awarded US$99 million from the Department of Defense after the Department determined that SkyWater has successfully completed the base prototype project for its 90nm rad-hard platform (RH90). The award was a part of the Department's US$170 million investment committed in October 2019 to boost onshore strategic rad-hard production capability. An initial US$80 million investment was made in 2019 for SkyWater to lay the cleanroom and supporting infrastructure for its rad-hard production line. With the US$99 million second-phase investment, SkyWater expects to bring the RH90 platform to qualification by the end of 2024, paving the way for RH90 to enter the Defense Department's qualified manufacturers' list.
As ATS customers transition to production later in 2023, SkyWater also expects continued growth in the Wafer Services, bolstered by the pricing improvements enabled by the foundry's unique capabilities in the market.
Overall, while SkyWater expects its 2023 growth to be "uniquely driven by strategic government programs", it expects to exit 2024 with its TaaS model coming together, with improved gross margin "in the high 20s to low 30s level." The foundry looks to 2025 to be the first year when its target long-term financial model comes to fruition.
