The Imec Technology Forum in Brussels this week addressed the question: What is the business model for IoT?

Internet of Things – IoT

“People are looking for new business models for IoT,” said Harmke de Groot, Imec’s senior director perceptive systems for the IoT. “It is important to develop these – McKinsey says that the biggest problem with IoT is that business models need to be developed.

“We are developing this together with our partners,” de Groot added. “There will be many new business models.”

The thing about IoT is that everyone knows how to connect machines to each other, and everyone has been connecting things to other things for many years. Connecting things together is easy, but making money out of connecting things together is difficult.

“At Imec, IoT is not just about connecting devices,” said de Groot, “we concentrate on intuitive devices. In that respect we focus on IoT connected to cloud computers.”

The aim is to develop “intuitive and autonomous” systems, said de Groot.

david manners

After six competing bids, it looks as though ISSI is going to the Chinese. Although Cypress has upped its bid to $22.6 a share, this is below the $23 offer from Chinese private equity consortium Uphill Investments, led by Summitview Capital of Hong Kong.

It is believed that the China government wants ISSI to form the basis of a national DRAM industry.

Here is Cypress CEO T J Rodgers’ latest letter to the ISSI board, which looks like a withdrawal from the contest:

June 24, 2015

Jimmy S M Lee
Executive Chairman

Scott D. Howarth
President and Chief Executive Officer

Integrated Silicon Solution, Inc.
1623 Buckeye Drive
Milpitas, California 95035

Messrs. Lee and Howarth,

On behalf of Cypress Semiconductor Corporation (“Cypress”), I hereby submit our best and final offer for Integrated Silicon Solution, Inc. (“ISSI”) and attach a revised draft Agreement and Plan of Merger between ISSI and Cypress (the “Revised Definitive Merger Agreement”).  Cypress is increasing its offer to acquire ISSI to a price of $22.60 per share (the “Revised Offer”), while maintaining its previously outlined ticking fee of $0.10 per share per quarter beginning October 1, 2015.  Our strategic and financial analysis indicates this is the maximum price justified for ISSI in order for the deal to create long-term value for our shareholders.  Again, we are prepared to put the Revised Definitive Merger Agreement reflecting our Revised Offer, signed by me to demonstrate our sincerity and strong commitment to closing this transaction, into escrow through our lawyers today.  We strongly believe that our Revised Offer clearly represents a superior, risk-adjusted proposal to the transaction contemplated by the current Agreement and Plan of Merger (the “Uphill Agreement”) with Uphill Investment Co. (“Uphill”).

Cypress’s Revised Offer demonstrates committed financing, eliminates regulatory risk by agreeing to possible ISSI SRAM divestitures, and includes a ticking fee to compensate for any unforeseen delay in closing.  Additionally, we continue to believe that a transaction with Cypress would benefit not only ISSI shareholders, but also ISSI customers due to the increased breadth and strategic capabilities of the product offerings of the combined companies.  Conversely, the Uphill transaction continues to be burdened with risks and uncertainties with respect to the:

Continued existence of a contractual financing out clause for the lender supporting the Uphill transaction,
Continued complexities of the government-mandated Taiwan divestitures, and
A potential prolonged investigation by The Committee on Foreign Investment in the United States (“CFIUS”)—the inter-agency committee of the United States Government responsible for reviewing the national security implications of foreign investments in U.S. companies.
As we have noted previously, had we been included in your sale process, your shareholders would have reaped two significant benefits: a more time-efficient price-discovery process and the capture of a potential incremental $0.56 per share per quarter, which was instead misspent on an unnecessary breakup fee.  To the extent the ISSI board decides to proceed with the Uphill transaction, and that higher risk transaction faces significant delays or fails to close, Cypress may be interested in acquiring ISSI in the future, but expects that our offer at that time may be substantially below this Revised Offer.  Finally, we fully expect that Uphill, with its backing from the Chinese government, will increase its offer price subsequent to the release of this letter, thereby acknowledging and attempting to compensate for the higher level of risk in completing their transaction.

Sincerely,

T.J. Rodgers
President and Chief Executive Officer

david manners

Affordable scaling is the key to the semiconductor industry, it was said at the Imec Technology Forum in Brussels.

“If we are not getting scaling affordable there are trillions at stake,” ASML CEO Peter Wennink told the forum, adding that he is an accountant not a technologist so he understands about costs.

Affordable scaling depends on getting EUV (extreme ultraviolet lithography) into the manufacturing process at the 7nm node and on a successful
mix-and-match approach with immersion, said Wennink.

Double patterning will get the industry to 10nm but then it needs either multi-patterning or techniques like directed self assembly, Imec’s process senior vice-president An Steegen told the forum.

“At 10nm multi- patterning means exploding complexity, ” said Wennink.

EUV solves that problem, but it is not there yet. The light source which ASML uses from its San Diego subsidiary Cymer is currently 80W, and ASML has demonstrated 110W, but some people are saying 350W is needed.

Wennink said two years of “solid progress” had debunked scepticism about the viability of getting a sufficiently powerful light source.

Up-time for EUV steppers needs improving, he said. Currently it averages 55% and one customer has achieved 86% during one week. Wennink said ASML’s target is to reach 86% average by the end of 2015.

david manners