Atomera, the semiconductor IP licensing company, has long been a story of potential. With its innovative Mears Silicon Technology (MST) promising to enhance transistor performance across a wide range of applications, the company has spent years courting major players in the industry. While progress has been made, particularly with the recent installation of MST at STMicroelectronics' fab, the road to widespread adoption and consistent revenue has been long and winding. Investors have grown accustomed to waiting, their patience tested by the cyclical nature of semiconductor development and Atomera's reliance on the internal schedules of its potential licensees.

But hidden within Atomera's Q1 2024 earnings transcript lies a tantalizing hint of a potential shortcut to profitability, a backdoor strategy that could see the company generating significant revenue much faster than anticipated. This strategy centers on a new application for MST, not in its traditional domain of silicon transistors, but in the burgeoning market for compound semiconductors, specifically gallium nitride (GaN).

GaN, a wide bandgap material, has emerged as a game-changer in power electronics, enabling devices capable of operating at higher temperatures, frequencies, and voltages than their silicon counterparts. This has led to a surge in demand for GaN-based devices, particularly in mobile and consumer applications, with the automotive sector poised to become a major driver in the coming years.

The problem with GaN, however, lies in its manufacturing. Compound semiconductor materials are notoriously difficult to produce due to inherent crystal defects, often exacerbated by a mismatch with non-native substrates. This mismatch creates stress at the interface, propagating through the wafer and causing cracks and other defects that limit both wafer size and yield, hindering economical manufacturing.

This is where Atomera's MST enters the picture. The company's silicon lattice films possess a unique ability to relax or de-strain the interface between differing crystal lattices, a property for which Atomera has diligently secured a number of patents over the years. Recognizing the potential of MST to address a critical bottleneck in GaN wafer production, Atomera embarked on a collaboration with Professor Edwin Pinar at Texas State University, a leading expert in compound semiconductor fabrication.

The results of their initial experiments have been promising. Growing GaN wafers using MST has shown significant improvements in wafer quality, paving the way for larger wafer sizes and, crucially, higher yields. While further research is necessary, the current trajectory suggests that Atomera could enter the GaN market with a commercially viable solution much faster than in its traditional semiconductor engagements, potentially generating revenue before the end of 2024.

Why is this so significant? While Atomera's core business of licensing MST for silicon transistor enhancement continues to hold immense potential, it remains dependent on the lengthy and often unpredictable development cycles of major semiconductor players. The GaN market, on the other hand, presents a unique opportunity for quicker entry and faster revenue generation.

Consider the numbers. According to The Yole Group, the power GaN market grew by a staggering 41% in 2023 and is projected to expand at a compound annual growth rate (CAGR) of 46% over the next five years, potentially surpassing $2 billion annually by 2028. A material that can dramatically enhance GaN wafer quality and unlock larger wafer sizes is a highly sought-after solution in this rapidly expanding market.

Atomera's GaN strategy, therefore, represents a potential game-changer for the company. If successful, it could create a new and rapidly growing revenue stream, supplementing Atomera's core licensing business and potentially propelling the company to profitability much sooner than anticipated.

This 'GaN gambit' is not without its risks, of course. Further research is required to fully validate the effectiveness of MST in GaN wafer production, and the competitive landscape in the compound semiconductor market is fierce. However, the potential rewards are substantial, and Atomera's early success coupled with the rapidly growing GaN market suggests that this strategic pivot could be a billion-dollar backdoor to profitability.

Projected Growth of the Power GaN Market

Source: The Yole Group

Atomera's Potential Revenue from GaN

Source: The Yole Group (market size projections), Author's calculations (potential revenue based on 10% market share assumption)

"Fun Fact: Despite being a relatively small company, Atomera holds over 150 issued patents and pending patent applications related to MST, showcasing its dedication to protecting its intellectual property and establishing a strong foundation for future growth. This robust patent portfolio underscores the innovative nature of MST and highlights the potential for the technology to be applied in a wide range of applications, both within and beyond its traditional semiconductor focus."