Kachoo
Regular
Nice to read that again.Whie we're talking MegaChips, a quick refresher:
BrainChip (ASX:BRN) clarifies MegaChips contract revenue arrangements
ASX News, Technology
ASX:BRN MCAP $768.6M
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Josh SmithEditor, Companies & Marketsjoshua.smith@***************.com.au25 November 2021 11:22(AEDT)
Processor maker BrainChip (BRN) has opened green on the ASX today after releasing some revenue forecasts relating to its MegaChips deal announced earlier this week.
- BrainChip (BRN) opens green on the ASX after releasing some revenue forecasts relating to its MegaChips deal announced earlier this week
- Brainchip on Monday announced the deal to license its Akida tech to external MegaChips customers and today breaks out of a trading halt to provide more contract details
- As it stands, BrainChip is expecting to table aggregate revenue of US$2 million (A$2.8 million) through to December 31, 2022, under the MegaChips deal
- However, the company says many potential revenue streams — such as royalty arrangements and proof-of-concept project fees — are not yet quantifiable
- Shares in BrainChip open 5.6 per cent higher at 66 cents each this morning
The company on Monday announced it had struck a deal with Japan-based semiconductor specialist MegaChips for an intellectual property (IP) licence over BrainChip’s Akida processor technology. Under the deal, MegaChips can integrate BrainChip’s tech into external customers’ system-on-chip designs for a licensing fee and royalties arrangement.
Today, BrainChip has broken out of a trading halt to announce some additional details regarding the revenue arrangements around the contract.
The company told investors some terms of the MegaChips agreement were subject to “strict confidentiality provisions” between the two companies, meaning some aspects of the deal are still shrouded in mystery.
BrainChip said it was expecting to table aggregate revenue of US$2 million (A$2.8 million) through to December 31, 2022, under the MegaChips deal. However, the company said some potential revenue streams under the contract were not yet quantifiable.
For example, on top of the standard licensing fee, BrainChip also stands to pocket royalties on the sale of products using the Akida technology to MegaChips customers.
The royalties are to be calculated as a percentage of the net sales price of products that have been designed and manufactured to include the Akida tech, though the percentage will be based on the volume of products sold.
Further, BrainChip said it was charging license fees for application-specific product development and project fees for proof-of-concept projects with MegaChips customers.
On top of all this, BrainChip expects to receive payments for support services and software licensing associated with its Akida IP.
While the nature of these additional potential revenue streams means accurate revenue forecasts might be difficult, BrainChip said in any case, the MegaChips deal was “highly significant” to its growth strategy given the access the agreement gives BrainChip to MegaChips’ global customer base.
There has been a lot of speculation about whether we would get 10 cents or 30 cents royalty per product, but, apparently in the MegaChips deal, it is a percentage of the sales price of the product, on a sliding scale, ie, the more the customer sells, the smaller the percentage.
As an example, assume there is a high volume $10 product and a lower volume $100 product.
So, according to the sliding scale (set according to volume of sales), if it's 2% for the $10 product, we get 20 cents a product, whereas if it's 3% of a $100 product, we get $3 per product.
Remember, these are just example royalty rates and sales proces, not the real thing.
Apparently, this is the model to which ARM wishes to move.
PS: What's 2% of a Mercedes?
So looking at this royalty scheme it's based on a percentage of sale price
Who else is going to their customers looking at raising there IP cost to a percentage of revenue ?
Is it possible that BRN partnership with Arm would require similar royalty schemes on the product? If that's the case in order for arm to sell the Akida IP they would need to adjust royalty payments IMO.