Resonant: A Clear Buy Signal Coming Through (Part 1)

Resonant posted its Q4 and FY2016 report on Thursday, March 30, and like most early-stage companies, the company reported sizable losses. The sole Wall Street analyst who covers RESN, Cody Acree of Drexel Hamilton, projects no revenues through 2018. Yet, the stock traded up prior to earnings and was up again on Friday. Obviously, there is more here than meets the eye. In this Part 1 of a 2 part series, Tailwinds digs deeper into the business of Resonant and what makes it, in our mind, a compelling time to be investing in their industry…next, in Part 2, we will discuss their business model in greater detail.

Filtering Out The Noise…No Longer A Simple Solution

Remember back when you were a kid and your parents would listen to AM radio (something your kids will never have to endure, most likely). When you were in a city, the radio had so much noise you could hardly discern the voices. Moreover, multiple channels overlapped, making it virtually impossible to listen to your intended channel. There is only so much broadband and the more radio stations, the more clutter of the airwaves.

This is highly reminiscent of the evolution of the cellular market where different mobile operators control different pieces of spectrum. As more and more data has been transmitted wirelessly, the spectrum has become increasingly crowded.

RF, or radio frequency, filters have been the solution to this. Every mobile device has a filter (or lots of filters) on the antenna to assist in the delivery of a clear signal. Sounds like a fairly simple problem (for a techie at least) and, in the recent past, RF Filters have been a fairly simple solution and not a big issue in the cell phone market.

Fast forward to today’s markets, including the next generation of LTE cellular service, and the challenge of filtration changes. This is due to “Carrier Aggregation.”

“LTE Carrier Aggregation enables a network operator to combine radio channels within the same frequency band or across different bands to achieve much higher data rates and lower latency than otherwise would be possible. In principle the LTE Advanced standard will allow for the aggregation of up to five carriers.” (1)

In the new network, the demand on the receiver end of a cell phone is intense. They need to be able to handle different bandwidths and multiple channels all at the same time. The problem could be solved simply, just by adding more filters. Unfortunately, we would then be walking around like people in the 70’s with shoebox-sized phones in our briefcases.

“The ongoing challenge of multiband/multistandard RF solutions for smartphones requires the addition of more bands into the same or smaller physical space in the handset.” (2)

And that, in a nutshell, is where the problem lies. How do you handle all these different bands without increasing the area used by antennas and filters? The solution lies with broad scale improvements to filters.

Resonant’s Response

“In long-term evolution (LTE) carrier aggregation (CA) and beyond, the need for multiple bands operating simultaneously through one antenna necessitates so many added challenges for filters and duplexers.” (3)

The filtering problems of RF front-ends are rapidly becoming so complex that very few companies can solve them. Resonant is developing a fundamentally new technology called Infinite Synthesized Networks®, or ISN®, to configure and connect resonators, the building blocks of RF filters.

The platform allows RESN to develop unique, custom designs that address the increasing complexity of the RF Filter, by both reducing the size of the filter and improving performance. This is, of course, the Holy Grail for filter suppliers, improving performance while taking up less space. It’s a grand goal, but one that is achievable.

What makes Resonant so unique, their secret sauce so to speak, is that their technology is a software solution that allows companies to design custom filters in a much shorter time and cost.

In their own words: Resonant believes that its patented ISN technology will enable the company to design complex filter products at approximately half the unit cost and in approximately half the time of traditional approaches. The company’s large suite of proprietary mathematical methods, software design tools and network synthesis techniques enable it to explore a much larger set of possible solutions and quickly derive the optimum solution.

 

These improved filters still use existing manufacturing methods (i.e. SAW, TC SAW & BAW/FBAR) and depending on the requirements and capabilities of the given foundry, the company’s technologies have the ability to improve design efficiency through shorter design times and deliver designs utilizing lower cost manufacturing processes with performance comparable to designs using higher cost methods (i.e. BAW/FBAR).

While most of the industry designs surface acoustic wave filters using a coupling-of-modes model, Resonant uses circuit models and physical models. Circuit models are computationally much faster, and physical models are highly accurate models based entirely on fundamental material properties and dimensions. Resonant’s method delivers excellent predictability, enabling achievement of the desired product performance in roughly half as many turns through the fab.

In summary, the RF Filter market is at a turning point. The traditional model of designing simple filters, and testing them through trial and error, is coming to a rapid conclusion. Instead, filters are increasingly complex and the design and testing phase is more complicated and advanced than ever before. Thus, new technologies for the research and design cycle will take increasing market share. RESN believes that their proprietary technology will allow filters to be designed in half the time and at half the cost. I get that signal loud and clear.

  1. Alastair Brydon, Unwired insight, April 24, 2013
  2. Steve Taranovich, Passive Components, September 08, 2016
  3. Steve Taranovich, Passive Components, September 08, 2016
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