Anda di halaman 1dari 5

MAC EQUITY PARTNERS | Equity Research 4DS Memory

Mac Equity Partners


Equity Capital Markets

4DS Memory Limited (ASX: 4DS)

THE SOLUTION TO THE WORLD’S DATA STORAGE CRISIS March 2017


Information
GICS Sector
Technology
Humanity is facing a data storage crisis. 90% of data in the world today was Share Price ($) 0.021
created in the last 2 years and most of this data will never be deleted.
30 Day VWAP ($) 0.025
Traditional technology cannot meet the future needs for more storage in less
physical space. An innovation in memory technology is needed… Shares on Issue (m) 845.8
Market Cap Fully Diluted
19.89
($m)
INVESTMENT HIGHLIGHTS Cash ($m) Dec 16 3.787
Enterprise Value ($m) 16.1
 A Technological Necessity: 4DS Memory have created a product that could 52 Week High / Low 0.04/0.02
solve tomorrow’s data storage problem in a market currently valued at US$40 90 Day Average Volume
2,081,810
billion p.a. ReRAM is the new generation of Storage Class Memory that can
facilitate the growing demand for more storage capacity, slimmer devices and real 12 MONTH SHARE
time digital content. ReRAM combines characteristics of both Flash and DRAM PERFORMANCE
Vol (m) ($)
technology. 35.00 0.05
30.00
0.04
25.00
 Strong IP: 4DS owns a strong patented intellectual property portfolio, consisting 0.03
20.00
of 17 US patents granted and patents pending. 4DS’ product differentiation is
15.00 0.02
likely to be sustained as all patents are unique IP that is wholly owned and 10.00
developed in-house through the company’s facilities in Silicon Valley. 5.00
0.01

0.00 0
 Joint Development Agreement: 4DS have a strategic Joint Development DIRECTORS
Agreement (JDA) with HGST a subsidiary of Western Digital that has now Guido Arnout
CEO, Managing
Director
spanned three years. This partnership will allow 4DS to have access to the David McAuliffe Executive Director
technical expertise of an international industry leader in digital storage hence
Howard Digby Non-Executive Director
reducing the amount of R&D required and therefore costs. Non-Executive
James Dorrian
Chairman,

 Potential Target: 4DS could be acquired by Western Digital and HGST given
their significant investment in 4DS’ patents and due diligence. In 2016, Western MAJOR SHAREHOLDERS
Digital publically announced their intentions to back ReRAM as the future for Jim Dorrian 5.23%

Storage Class Memory. ABN AMRO Nominees 4.8%


BNM Holdings 3.27%
Top 20 Total 40.59%
ABOUT THE COMPANY
4DS Memory Ltd. (“4DS”) is a company that is developing the next generation of
cloud and data storage: Interface Switching Resistive Random Access Memory (“ IS MAC EQUITY PARTNERS
ReRAM”). This technology could be utilised in the new emerging memory hierarchy
called Storage Class Memory. This is a class of memory storage that is combining
Matthew Sheldrick | M: +61 417 923 155
elements of the traditional Flash and DRAM products. IS ReRAM development has msheldrick@macequity.com.au
been ongoing since July 2014 under a JDA with Western Digital subsidiary HGST.
Hugh Pilgrim | M: +61 449 581 256
hpilgrim@macequity.com.au
The non-filamentary, non-volatile 40nm memory cells may enable silicon storage in
smaller dimensions whilst operating cooler, faster and more reliably than current
market alternatives. Established in 2007 in Perth, WA and with facilities in Silicon
Valley, 4DS own a patented IP portfolio developed in house through a US$10 million
R&D program.
1
MAC EQUITY PARTNERS | Equity Research 4DS Memory
4DS’ ReRAM: The next storage-class memory technology
The Market The 4DS Solution
The industry for data storage services has been There is a significant opportunity for 4DS to disrupt the
performing well over the last five years with 90% of data cloud and data storage market. 4DS’ patented IS ReRAM,
in the world today created in the last 2 years, most of could potentially address tomorrow’s impending data
which will never be deleted. Computer systems have storage problems. The company has been refining IS
continuously advanced, enabling technology to execute ReRAM to be equipped with the proper combination of
ambitious applications: managing growing internet performance, cost efficiency, power and reliability in order
traffic, on-demand digital content, cloud computing and to fulfil the needs of future high-end applications. This
the rapidly growing Internet of Things. This strong technology needs to be faster than Flash with strong
growth in data generation is unsustainably reliant on hard endurance and have retention abilities between that of Flash
disk drives and silicon NAND Flash (“Flash”) memory and DRAM.
chips in which the data is stored.
The innovation is non-volatile, and contains non-
Since Flash storage was first introduced by Toshiba in filamentary cells; information will be retained in the
1984, the $US40 billion p.a. data storage industry has absence of a power supply. Cell currents can scale down to
been dependent on its ability to handle data-intensive smaller geometries, enabling more data to be stored on a
workloads. Flash-based solid-state storage drives enable memory chip. There are noticeable advantages to the non-
information to be compressed and stored efficiently filamentary approach undertaken by 4DS as illustrated in
whilst retaining data without the presence of a power Figure 1.
supply.
4DS have announced they are closer to proving the
This technology is embodied in laptops, smartphones and commercial viability of their storage class memory
tablets. Memory storage demands are growing technology, as they have achieved size and yield milestones
exponentially and Flash is limited by its ability to meet relevant to memory manufacturers. Since 2014, 4DS has
the demands for more storage, faster access and slimmer consistently decreased the size of their working cells from
wearable devices, the same being true for hard disk drives 800nm to 40nm. 40nm is a breakthrough as it is below the
current size of conventional 3D Flash memory of between
Due to this demand, a multi-billion-dollar emerging 45nm to 50nm. The ability to scale down to this size is
market could dominate an industry currently growing at fundamental to creating stacked IS ReRAM’s into 3D
16.5% annually.2 IBM researchers predict that non- structures essential for storage class memory. In late 2016
volatile memory technologies, such as ReRAM, will 4DS achieved an endurance yield of 97% as measured by an
overcome the limitations of Flash and compete independent technical expert signifying how often the state
effectively with current flash storage – potentially of a memory cell can be changed without failure.4 This high
replacing them by 2020.3 endurance rate is essential for supporting high capacity data
storage applications.5 4DS will continue to follow their
development timeline to ensure essential milestones are
attained in 2017.

Figure 1: 4DS’s approach to ReRAM is unique as it is non-filamentary, therefore does not exhibit the scaling issues that other developers
face. Source: Company

2
MAC EQUITY PARTNERS | Equity Research 4DS Memory
4DS’ ReRAM: The next storage-class memory technology

Joint Development Agreement Future Opportunities


In July 2016 4DS and HGST, a subsidiary of Western Upon establishing viability of IS ReRAM, 4DS is well-
positioned to attract a potential IP licensing deal or strategic
Digital, renewed their 2014 JDA for another 12 months.
acquisition to commercialise its technology. The industry’s
Western Digital is a world leader in digital storage with a
major licensees are organisations that generate a large amount
market capitalisation of USD$19.33 billion. This strategic
of data that needs to be safely stored, in both physical and
alliance enables exposure to HGST’s technical knowledge digital terms. The strategic result for 4DS may be an outright
and experience, whilst minimising 4DS’s cash expenditure. acquisition by Western Digital, due to 4DS’ unique IP and
4DS is the only known IS ReRAM manufacturer with a HGST’s option for a non-exclusive licence with the company.
JDA, which has been significant in the company meeting The semiconductor manufacturer and development space is
all milestones and fast tracking technical achievements. acquisitive in nature, with many such companies having been
acquired by other dominant players (see Figure 2).
Utilizing the resources of HGST, 4DS is able to carry out
validation and demonstration without incurring the expense Western Digital confirmed at the 2016 Flash Summit that 3D
of fabricating fully functional 3D ReRAM prototypes. ReRAM technology is its memory technology of choice for
Storage Class Memory offering improved scalability and
The parties do not share costs or intellectual property, with superior endurance. Western Digital also mentioned the
4DS wholly owning their patents and background IP. This capital efficiency of ReRAM which suggests the company
partnership better enables the optimisation and evolution of plans to invest its manufacturing capabilities and
4DS’ memory technology. infrastructure into this new technology.6

Figure 2: Notable acquisitions in the data storage services market involving companies similar to 4DS. Source: Company

Acquirer Transaction Date Value Technology Market


Western Digital Acquired start-up Virident 2013 US$685 million Flash Controllers Cloud

Western Digital Acquired sTec 2013 US$340 million Solid State drives Cloud

Seagate Acquired LSI 2014 US$540 million Flash Controllers Mobile


Cypress Merger with Spansion 2015 US$5 billion Flash Memory Flash systems
Western Digital Acquired Sandisk 2016 US$19 billion Flash Memory Cloud

Competition
4DS is the major player targeting non-filamentary ReRAM to the whole Storage Class Memory market, whilst many other
competitors are focusing their efforts on filamentary ReRAM to more specific markets (see Figure 3). The product
differentiation is likely to be sustained due to patents and other proprietary technologies. New entrants would find it difficult
to enter the market as the industry by its nature has high barriers to entry, requires technically astute staff and large capital
investment, and the difficulty in achieving commercialisation with large entities.

Figure 3: 4DS are targeting the storage class memory market as a whole whilst competitors are focusing on segments of this market. Note:
Market Cap numbers are as at March 10 2017. Source: Company

Company Exchange Code Type Market Cap Market


Crossbar Private Filamentary ReRam NA Internet of Things, SSDs,
wearables
Weebit Nano ASX:WBT Filamentary ReRam A $13.85 M Internet of Things, Wearables
Adesto Technologies NASDAQ:IOTS Filamentary ReRam US $54.89 M Internet of Things, Wearables
Strategic Elements ASX:SOR Nano Cube ReRam A $20.6 M Printable Memory
4DS Memory ASX:4DS Non-Filamentary A $19.89M Storage class memory- mobile,
ReRam cloud

3
MAC EQUITY PARTNERS | Equity Research 4DS Memory

SHARE PRICE HISTORY: Since the acquisition of 4DS Memory

0.07
7
1 2 3 4 5 6 8 9 10
0.06

0.05

0.04

0.03

0.02

0.01

0
Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17

Number Date Announcement Number Date Announcement


Acquisition of 4DS Memory 4DS Achieves Working 40nm
1 13/08/2015 6 18/10/2016
by Fitzroy Resources Ltd ReRAM Cells
4DS demonstrates Cell Cell Resolution driven down to
2 02/02/2016 7 21/10/2016
Scalability to 50nm 40nm
US Patent Granted to 4DS Achieves Endurance
3 23/03/2016 8 6/12/2016
ReRAM Developer 4DS Milestone
4DS granted their 17th patent
4DS Renews HGST JDA
4 11/07/2016 9 23/01/2017 that protects their Interface
Agreement
Switching ReRAM technology
4DS have attained After the completion of further
analysis cycling endurance is in
consistent Achievement of
5 25/08/2016 10 20/02/2017 excess of 100,000 and initial
Strategic & Technical
data retention measurements
Milestones look encouraging.
KEY RISKS
 Commercialisation risk: 4DS need to establish marketable feasibility. If the multi-faceted development process is
not attained, future licensing opportunities may be unlikely for the company.
 Termination of JDA with HGST: This strategic alliance is pivotal for 4DS to continue refining their product in a
cost efficient manner.
 Development risk: ReRAM product development may run into unpredictable performance or manufacturing
problems.
 Execution risk: Fragmentation of the management team could occur if a key person were to leave the team. A quality
management team would ensure 4DS is aligned with achieving key milestones on the journey to commercial viability.
 Competing alternative technologies: Given the looming global data storage problem, competitors may enter the
market with superior technology to 4DS.

4
MAC EQUITY PARTNERS | Equity Research 4DS Memory

REFERENCES

1. 4DS Memory, 2016. ‘Addressing the massive memory storage demands of tomorrow’. ASX Announcement, 07/2016
2. IBISWorld, 2016. ‘Data Storage Services in Australia’, IBISWorld Industry Report J5922.
3. IBM Research, Available at: http://researcher.watson.ibm.com/researcher/files/us-gwburr/SCM_IBMJRD.pdf
4. 4DS Memory, 2016. ‘4DS ACHIEVES ENDURANCE MILESTONE’. ASX Announcement, 05/12/2016
5. 4DS Memory, 2016. ‘CONSISTENT ACHIEVEMENT OF STRATEGIC AND TECHNICAL MILESTONES. ASX
Announcement, 25/08/2016
6. http://www.anandtech.com/show/10562/western-digital-to-use-3d-reram-as-storage-class-memory-for-
specialpurpose-ssds

DISCLAIMER
This document has been prepared by the Sales, Trading and Investment Advisory department and not by a Research department. Mac Equity Partners
seeks to and does business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict
of interest that could affect the objectivity of this report. Investors should consider this as only a single factor in making their investment decisions. The
company featured in this document should be considered speculative in nature and carry a high degree of investment risk. Please consider if
investments in these types of companies are appropriate for your personal circumstance.

This document accurately expresses the personal view of the Author at the time of writing. Mac Equity Partners Pty Ltd (AFSL 338731, ABN 32 126
369 640), its directors, associates and employees advise that they may hold securities, may have an interest in and/or earn brokerage and other
benefits or advantages, either directly or indirectly from client transactions arising from any advice mentioned in publications to clients. Directors,
associates and employees of Mac Equity Partners Pty Ltd from time to time may hold shares in the security/securities mentioned in this Research
document and, therefore, may benefit from any increase in the price of those securities.
This research note has been prepared for and is intended for Wholesale Investors only as defined by Section 761G of the Corporations Act, 2001. In
accordance with Section 949A of the Corporations Act 2001, this document contains unsolicited general financial information only. In preparing this
document Mac Equity Partners Pty Ltd did not take into account the investment objectives, financial situation and particular needs (‘financial
circumstances’) of any particular person and no recommendation (whether express or implied) contained in this document should be considered
reliable. Accordingly, before acting on any information contained in this document, you should assess whether the information is appropriate in light
of your own financial circumstances or contact your Mac Equity Partners Pty Ltd adviser.
Mac Equity Partners Pty Ltd believe that the information herein is accurate however no warranty of accuracy or reliability is given in relation to any
information or information contained in this publication and no responsibility for any loss or damage whatsoever arising in any way for any
representation, act or omission, whether express or implied (including responsibility to any persons by reason of negligence), is accepted by Mac
Equity Partners Pty Ltd or any officer, agent or employee of Mac Equity Partners Pty Ltd. © 2015. No part of this report may be reproduced or
distributed in any manner without permission of Mac Equity Partners Pty Ltd

Mac Equity Partners Pty Ltd AFSL: 338731 ABN: 32 126 369 640
Suite 7, 29 The Avenue, Nedlands, WA 6009, Australia
T: +618 9386 4787 F: +618 9389 1464 E: info@macequity.com.au W: www.macequity.com.au