I think about a dozen of the video views were mine. Enjoy your weekend reading.

Rogue

[Agoracom]

Welcome to “Beyond the press release” a production of Agoracom in which we take the time to speak to small cap executives right after they put out important news. With us today… happy to have them all, the gang from Poet Technologies, we’ve got Suresh Venkatesan chairman and CEO, Vivek Rajgharia President and General manager, and Thomas Mika, Executive VP and CFO.

[0:40] Poet for those of you new to the story... and you know we have a split crowd, because it’s such a massive crowd of Poet investors on Agoracom but we also know there are going to be a lot of people who are going to be watching this for the first time. Trades on the TSX venture under stock symbol PTK and for our friends in the US on the OTCQX, the senior board there, under POETF.

[1:02] Little description about the company. Because it is high tech, I want to give you abit of a 30000 foot summary here and we’ll get into today’s press release. Photonics. These are critical to the next phase of semiconductor development. Semiconductors as you know are an essential component of every electronic device on the planet. So photonic devices, what they do, is create, detect, and manipulate light.

[1:30] Essentially laser generated light is fundamental to sensing, computing, data, and telecommunications which require the fastest transfer of data possible. So that’s why you hear about lasers and photonics. So, for example, the biggest trends in that kind of computing today: cloud computing, AI, 5G.

But here are the problems. Making photonics devices that are reliable is expensive in terms of both capital and labor. For example, cost declines have not kept up with Moore’s Law. Most photonics are still built one at a time if you can believe that. Multiple different components must be able to seamlessly interconnect without constant testing. So as a result, integration of components at the wafer scale, right, we’ve seen those before, hasn’t been fully implemented even by the largest companies in the world working over the last 20 years. Until now.

[2:28] Poet’s developed a unique, disruptive, differentiating new entry into the photonics market. Essentially their optical interposer platform is a patented photonics integration platform. What it does is, it enables lower cost, higher performance across a wide range of applications. Some of the costs, dramatically lower costs, 25% to 40% less on the operating side. Capital investment 10% of conventional silicon based. That’s pretty massive. And the chip scale package the sizing is 50% to 90% reduction in real estate needed. So this is pretty superior stuff despite how difficult it is to understand. And you get a sense now of what Poet is really accomplishing.

Todays press release: “Poet launches lightbar solution for data centers.”

[3:24 Agoracom] Gentlemen welcome to the show. Thanks for being here today to discuss this. Gents this is an advanced remote laser light source for transceivers and data center switches. Vivek let’s start with you, alright. Why is a remote laser source useful, and who will use it?

[3:44, Vivek R] So yeah, George, as we have seen the growth of data traffic with video streaming, mobile connectivity, remote users and what not. The cloud companies that manage the movement of the data, have to transmit a lot of data within their data centers. So, in order to do that, what is happening is the switch, which is the switch ASIC, is expanding in capacity… doubling every two years. So, a year ago we had switches that were 12.5Tb/sec. Now we are seeing 25Tb/sec, and in a couple of years it will go to 50Tb/sec. So, in order to make this data move those switches need to be connected to an optical module. And with the growth of capacity of these switches it is very difficult to manage what we call the electrical power consumption between the switch ASIC and that optical module. That has to become shorter and shorter with this growth of capacity.

[4:55] So now what we are reaching is where the optical module actually has to be packaged alongside with the switch ASIC -- what we call co-packaged optics. And, in order to do that, you need what is called a chiplet. Now the light that is used to transmit the data, the optical connectivity, is the most sensitive to heat. And these switch ASICS and other silicon that goes with it, and with increased capacity, generates a lot of heat.

[Agoracom] So there’s a need for more power but that comes with those kinds of problems now.

[5:37, Vivek R.] Yeah… Well, it’s needs, but you’re actually generating because you are increasing the capacity. And the laser is the most sensitive to heat. So, what our remote laser, this Lightbar, does is provides a remote laser source so you can separate or remotely power up, optically power up, these chiplets so that it does not get impacted by the heat. Also, lasers are the least reliable element or chip in the system. So, by having a remote laser source, if something happens to the laser, you don’t have to open the entire system to rectify it. You can change that remote laser source, the Lightbar. So, we see a tremendous value of this Lightbar in the growth of optical systems in the data center.

[6:30, Agoracom] It’s amazing how we all take, even this, this zoom call for granted. It’s going to be recorded to the cloud and then is going to be downloaded onto Youtube for everyone to watch. So, the amount of data that is being pushed is unbelievable. And you all wouldn’t believe how important Poet is in that process. Vivek who are potential customers of Lightbar?

[6:58, Vivek R.] So the supply chain partners of these cloud companies, the optical system companies that make these switches and routers. So, they will use our remote laser when they put the optical connection in their switches. As well as their supply chain partners, who are the module integrators or optical module providers, will also be customers of our remote lasers.

[Agoracom] So a lot of little component people inside the box at the end of the day. How big is that market? It has to be massive.

[7:32, Vivek R.] Yeah. As we talked about the switch capacity is expanding or doubling every two years. And these data centers are growing like… tremendous growth in the data centers. The large cloud companies are building data centers every month they are increasing their systems.

[7:53] So the markets that… leading market research companies like Lightcounting are determining is called “400 Gigabit”, where our remote laser source Lightbar can be used, is going from $0.5 billion of market size, the addressable market that we will play in, next year, to more than $3 billion in 2025, over 4 years. And the co-packaged optics that I talked about will start in say 2022..2023 timeframe, and will grow to about $4 billion market size by 2028. So tremendous opportunity for us to play in the market here.

[Agoracom] Suresh, you’ve said that the Lightbar is significantly better in coupling efficiency. Maybe describe for everyone just in layman’s terms what that means, and just how much is it more efficient, and why is that important?

[8:57, Suresh V.] Yeah, you know, this term coupling efficiency is something we use in the industry. Maybe a very high level analogy… Let’s say you need to wash your car and you’ve got a pipe. And you’ve got your tap at one end. And you’ve got the other end of the pipe your going to have a hose that your going to hose down the car. And sometimes you have a leaky faucet. And you know you connect the pipe at one end where the faucet is, turn it on and most of your water is leaking out at the faucet end, and very little comes out at the hose end. And it makes it far more difficult to wash your car. So, you know you can have a better faucet and ensure that all of the water that... when you turn the faucet on actually gets through the pipe and actually comes out the other end where its actually useful.

[9:42] So I think in this context you take the faucet is the laser. Our waveguides are the pipe. And what comes out the other end is “usable power” or the usable water in this context. So, the efficiency, what we call coupling efficiency, is how much water that leaves the faucet gets into the pipe. And without getting wasted right up in the beginning. And so typically with lasers, and the  kind of esoteric packaging technology that has been used over the years, only about 60%, best case 70% of the light kind of maybe gets through. And that becomes usable light. The rest of it is wasted.

[10:26] With Poet’s technology we’ve been able to demonstrate now that we can get over 80% of that light and for some of the best devices that we’ve now been able to demonstrate that thing is over 90% of that light. So, I think the idea is to try to get as much as that light that is generated. You spend a lot of time, power, effort to generate the light. So, you don’t want to waste much of it when taking it… to make…converting it to usable light.

So that’s the term we use. It’s called coupling efficiency. I think we’re quite a bit better than, I guess, today’s state of the art when it comes to coupling light. And we’ve done that using some proprietary technologies both on the laser as well as on the interposer. And the uniqueness of that interposer solution allows, if you will, the size of that pipe to change depending on the size of the faucet. You know, of course, if you have a very large pipe and a small faucet you’ll have a lot of leakage, and vice-versa. So, you really want the output of the faucet to equal the input of the pipe.

[11:32] And that’s what we’ve been able to do. We’ve been able to customize these things such that they fit well together when placed actively at wafer scale. And that’s the other big important thing. We’re not trying to do this one chip at a time. We’re assembling hundreds of chips at wafer level and still being able to achieve the level of performance that people have not been able to achieve so far.

So that’s the big breakthrough, if you will, associated with the interposer. And it not only just simplifies and addresses the cost equation for photonics assembly; it also does address some of these performance benefits that we believe we can bring to bear in conjunction with the cost benefits during volume manufacturing.

[12:18 Agoracom] Thanks a lot for that great analogy. There’s nothing better than that for people at home to be able to visualize, which is one thing that I think they really need with Poet. Because the technology is so powerful and understanding that way is great. But that efficiency, Suresh, if the standard now is 60% to 70% of the light gets through, and you are as high as 90%, I’ve got to assume that customers really want to see samples. Because that seems that in the technology world a massive increase. So how close are you to having samples that you can hand over to customers?

[12:55 Suresh V.] Our goal is to start sampling customers with various versions of the Lightbar in Q1. So, in about 3 to 4 months from today. During Q1. Like we announced some time back, we’ve just taped out our first product mask sets to the foundry. That cycle time is typically about a few months, a couple of months and so, and then we go through the assembly process. So, we do believe that we will have samples in customers hands in the first quarter of 2021.

[13:30] Also, it’s important to understand, while we call it a Lightbar, It’s an extremely customizable solution. So, we do have a portfolio of lasers as well as a portfolio of filters and other functionality that we’ve established on the interposer and so its possible to customize these solutions for different applications and for different people’s needs. The first application is for a couple of different form factors, as we call it for this Lightbar… for data communications and those are the ones we will be sampling in the first quarter.

[Agoracom] What does the sampling process look like. So, if I’m George-Comm and I take on samples of this Lightbar, customized for me, how long am I typically using these samples to see if it works for me? And if the data, in fact, looks good, how long do you expect the qualification process to take?

[14:33 , Suresh V.] The qualification process for data communications or in the telecom industry is typically 6 months to 9 months. And so, we expect to begin the qualification… I mean, I guess the piece about semiconductors that you have to understand, especially with photonics and lasers, is every time you build a new laser you have to go through that qualification. And it doesn’t really matter that you might have already pre-qualified another laser.

[15:00] We have, I mean, as Poet gone through various stages of qualification, because that’s kind of what you do in a development. That you have an early warning signal. If something goes wrong you know how to fix it. So, we [garble] go through qualification through I guess even the development phase, but now we’re kind of in this final product launch phase. And so these do have to go through another round of qualification, even though we might have done it before. Because the lasers are slightly different, they are customized for a specific application, and so on. We kind of starting that process. We’ve bought the capital necessary to, what we call burn-in, or put these lasers through reliability. We expect to have that installed this quarter. So this month. And we will be starting this qualification process or reliability check early next year, but that process typically takes about 6 to 9 months.

[15:55, Agoracom] So if the process takes 6 to 9 months, reasonably (because I can feel shareholders asking the question), when would you start seeing first revenues from this product?

[16:09 Suresh V.] Well, like we announced in our press release, we expect our first revenues to start in the 4th quarter of 2021, with this, at least the first form factors of the Lightbar. Ultimately, we expect the Lightbar to be a portfolio, you know, of various powers, various form factors, various numbers of channels… But the initial rev is a 4-channel CWDM and a couple of different output configurations.  So those will be the first couple of form factors that we will be taking to market.

[16:45 Agoracom] Is this Lightbar, Suresh, as big of a game changer as it sounds like? When those revenues start coming in do you expect it to be significant? Do you expect the market to really love the product? Or is it just a really good, solid, incremental growth kind of product?

[17:05 Suresh V.] We believe there is disruption. You know, obviously we are also stepping our way up in the levels of complexity as we roll out the interposer platform. We think that the big pinch point, or pain point, has been the coupling of lasers. And that’s the problem that we’ve solved. One of the problems that we’ve solved with the interposer. There are others. So, we are kind of trying to monetize that aspect of our development with this Lightbar family of product. But we do expect fully integrated TxRx optical engines and some other products to be coming out over the next couple of months.

[17:45, Agoracom] Curious. Before I move on to questions for Tom. And this is just me asking. Because I know at Agoracom sometimes when we go through an upgrade and we’re going to have new features we talk to some of our clients, say “hey what do you think if we add this feature on. Do you think it will be helpful?” And so on and so forth. You know you talk to some of your clients anyways… your customers. Have you, and maybe you haven’t, but have you had a chance as an organization to speak to some customers, potential customers, about the specs and Lightbar coming to get any sense of what their appetite would be for it if it in fact lives up to its billing? Have you guys got any sense for what potential excitement could be?

[18:26 Suresh V.] Yeah, we’ve had some discussions with potential prospective customers on specifications and so we’ve let those guide us in term of our product development. But also, we are selling into a standards-based end market with data communications, specifically for 400G etc., and there are some very specific power levels, for example, that need to be met, you know, for that market. And those are fairly easy to know and understand because they are standard.

[19:00] The Lightbar however, also enables some other non-standard applications, in terms of, you know, it doesn’t necessarily have to conform, if you will, to the data communications standards. We have in the past have some discussions with potential customers on some of these non-standard applications, and we would be reviving a lot of these discussions now that we have samples and products to put in customer’s hands as opposed to Powerpoints which was the pitch we had about a year, a year and a half ago. But now you know that we have actually reduced it to practice, we would be reprising a lot of these conversations with customers.

[19:42] Of course, with some of the restrictions we have with Covid, I think the actual manner in which we provide samples may be some combination of virtual and hardware and demos that might be done via zoom or a zoom-like platform. So, we are going to need to alter, if you will, your more traditional go-to-market in the first quarter. And we will be obviously doing that. And Vivek and his team obviously have a plan in place to reach a lot of our potential customers virtually.

[20:20, Agoracom] Well, sounds like a great product and I can’t wait to see what early customer reaction is going to be like. Tom who is going to build the Lightbar? Because you know at the end of the day you’ve got to have the capacity. You’ve got to have the right partner. Is it going to be the recently formed joint venture in China?

[20:38, Tom M.] Yeah George. I think people should understand that that facility, which is being built now and being equipped with assembly and test equipment, involves a capital commitment that Poet couldn’t afford. You know its $25-30 million US. So, we partnered up with Sanan optoelectronics, which is the largest compound semiconductor company in the world. It also produces half the world’s LEDs. 25 million wafers a year.

[21:16] So, the joint venture does a couple of things for us. One, it’s an objective validation of the technology that Poet has developed. And it’s a way to build a manufacturing facility, fabrication facility, without our capital. It absolutely makes sense for us to use what’s there to fabricate and test these devices and get them ready for shipping to customers.

[21:50, Agoracom] Do you have a sense for… I’m sure when you are having these conversations you start talking about capacity and what kind of production runs you might need. Are you able to discuss what kind of production numbers you are looking at?

[22:12, Tom M.] Let’s just say that the capital that we’ve planned to be installed over the next 4 years is sufficient to meet our expectations for unit volumes which we’ve told our shareholders is going to equate to revenues in the area of $250 million by 2024, 2025. So that’s going to be sufficient to cover that volume.

[22:46, Agoracom] Let’s talk about price points and margin. Not that you are going to give away your price points and margin. I don’t have a sense yet… Lightbar, how expensive of a component is that.. ballpark. Can it be produced at a really good profit margin?

[23:00, Tom M.] Well the way that we’ve set up the joint venture is that each party is contributing components at an agreed price which is supposed to be close to our cost, so that we can actually have the JV company be the profit center. When you are talking about the gross margin, it really does depend on the application because there are some really high value added applications that aren’t as price sensitive as the transceiver market, for example. So, we are going to be in this tradeoff between how high we want the margins in the joint venture to be versus what kind of cost savings we want to provide to our customers. Especially in the transceiver market, we believe that we can bring profitability back to transceiver module manufacturers who are largely operating without any profit margin today. We can bring profitability back and still make 40 to 50% gross margin, which is entirely respectable, in that kind of operation.

[24:25, Agoracom] Clearly, investors have a good understanding that what you’ve done here is significant and meaningful. But it does involve product in a world that most of us find hard for most of us to relate to… to touch and feel. How excited should shareholders be with this latest development and how excited should shareholders be about what the company’s prospects look like in 2021?

[25:04, Vivek R.] As a product what we have validated here... The key building block of Poets optical interposer, you know. Lasers… how lasers, as Suresh described, get coupled to the waveguides in a very effective manner with high coupling efficiency, which he described. In a very low cost manner, very similar to a traditional semiconductor pick-and-place and attach process.

So we can scale this and with, as Tom described, with our facility, a joint venture in China, is... it’s a virtual, vertical accretion model, so we can be highly competitive and scale this tremendously. So in a way this product, which will be one of our first products to generate revenue, is really validating our multiple optical engines that we will be rolling out as per Suresh mentioned. So I think its very, very exciting.

[26:12, Suresh V.] I think to our shareholders who’ve been with this company and invested with us for a while... You know, this is our first product. This is our…I mean the culmination of a development period and a culmination of a lot of innovation that has gone into the interposer, and we are finally getting to the point of announcing a product and getting to more of the product release cycle as opposed to having research and development, which has fundamentally consumed our organization over the past couple of years. So, I think we are getting to the exciting monetization part of that effort, which I think shareholders should find exciting, which is, that there is a fruit at the end of all this labor, that we are going to be able to all taste, I guess, shortly.

[27:11, Tom M.] George I just wanted to add, you know, that as a CFO I’m supposed to be very conservative and not get too excited about things. But I can tell you, this is an inflection point for the company. It really is truly an inflection point. We are at the point where we can go back to customers with real data which we’ll be collecting…we’re collecting it now. And we’ll be able to give demos even before we give samples over. And you know there have been a couple of major companies that have already committed capital to us for completing designs, or for just proving out the technology. And they are in one sense household names, but we just can’t say who they are, because their names are confidential. So, this is going to be huge. And I think that 2021 and 2022 are going to be amazing years for the company.

[Agoracom.. wrap up]