approaching a technology transition because the front-end functions can’t be easily reconfigured in conventional, gallium arsenide-based chips. In promoting the introduction of its new Global 1 chip, Peregrine says the power amplifier embedded in the chip provides the same level of performance as gallium arsenide-based power amplifiers.
Cable says the process for syncing different types of smartphones to operate on different LTE networks can be done far more easily by using a silicon-on-insulator (SOI) chip design. He also contends that Qualcomm (NASDAQ: [[ticker:QCON]]) validated the industry’s need for such technology last year by introducing its RF360 chip, which also is an integrated CMOS front-end design.
Peregrine Semiconductor has been focused on silicon-on-insulator technology since the company was founded 24 years ago, initially using ultrathin layers of sapphire as an insulating substrate. Unlike silicon, which is a semiconductor, sapphire is nonconducting. So radio frequency and logic circuits that were previously built in separate chips because of radio interference could be combined in one microcircuit.
Manufacturing costs and a high defect rate prompted the mainstream semiconductor industry to abandon further development of silicon-on-sapphire technology. “The usual knock on us was that it was too expensive,” Cable told me.
Yet Peregrine founders Ron Reedy and Mark Burgener persevered, demonstrating that sapphire offered better thermal expansion properties, strength, and durability. Peregrine’s silicon-on-sapphire chips tended to be limited to satellites and military projects, where performance and durability were more important than cost.
“We sort of did what people said was impossible,” Cable said. “We built a business out of silicon-on-sapphire.”
Cable pushed the company into the wireless industry in 2004, with the introduction of a silicon-on-sapphire chip for cellular handsets. These days, “pretty much every 4G smartphone has a Peregrine chip in it, at least one or two,” Cable says. “We really changed the industry in that regard.”
Peregrine became a public company in 2012, raising $77 million in its IPO. Nevertheless, it has been a very tough business. Cable says a typical smartphone antenna switch sells for 25 cents to 30 cents per unit. Peregrine has sold more than 2 billion units since it was founded, but Cable concedes it hasn’t been easy to build a business out of designing, manufacturing, and selling a 25-cent part. (Peregrine also sells its chips into cellular base stations, wireless test equipment, automotive parts, and MRI medical imaging machines.)
In the process, Peregrine has amassed more than 150 patents and patent applications for its technology—and protecting its intellectual property has been a central part of Cable’s strategy. (The company is locked in patent litigation with RF Micro Devices, and the trial is scheduled to begin in November.) “If you’re working in a field where everyone thinks you’re crazy, there’s not a lot of prior art,” Cable told me.
In short, Peregrine is doubling down on its contrarian semiconductor technology, betting the company will be well-positioned once the wireless industry changes course.
“While I see a number of headwinds in 2014, I am actually very confident in our outlook for 2015,” Cable told analysts yesterday. “We believe we are about to see a major technology transition for the industry. Peregrine is entering a new stage in its strategic development. We have been preaching the benefits of silicon in the RF front end for years and we see concrete signs that this will become a reality soon. Chief among these signs is our own progress in developing an integrated silicon front end and the interest we see in this solution from the market.”
