Item 1. Business
ITEM 1. BUSINESS.
In General
NVE Corporation, referred to as NVE, we, us, or
our, develops and sells devices that use spintronics, a nanotechnology that relies
on electron spin rather than electron charge to acquire, store and transmit information.
We manufacture high-performance spintronic products including sensors and couplers
that are used to acquire and transmit data.
NVE History and Background
NVE is a Minnesota corporation headquartered in
a suburb of Minneapolis. We were founded in 1989 by James M. Daughton, Ph.D.,
a spintronics pioneer. Our common stock became publicly traded in 2000 through
a reverse merger and became NASDAQ listed in 2003. Since our founding, we have
been awarded more than $50 million in government research contracts. These
contracts have helped us develop products and build our intellectual property
portfolio. We have adopted a March 31 fiscal year, so fiscal years referenced
in this report end March 31.
Industry Background
Much of the electronics industry is devoted to the
acquisition, storage, and transmission of information. We have focused on three
applications for our spintronic technology: magnetic sensors, couplers, and memories.
Sensors acquire information, couplers transmit information, and memories store
information. In that sense, our technology can provide the eyes, nerves, and brains
of electronic systems.
Magnetic sensors can be used for a number of purposes
including detecting the position or speed of robotics and mechanisms, or for communicating
with implantable medical devices. We believe our spintronic sensors are smaller,
more precise, and more reliable than competing devices.
Couplers are widely used in factory automation,
providing reliable digital communication between electronic subsystems in factories.
For example, couplers are used to send high-speed data between robots and central
controllers. As manufacturing automation expands, there is a need for higher speed
data and more channel density. Because of their unique properties, we believe
our couplers transmit more data at higher speeds and over longer distances than
conventional devices.
Near-term potential MRAM applications include mission-critical
storage such as military, industrial, and antitamper applications. Long term,
MRAM could address the market for ubiquitous high-density memory.
Our Enabling Technology
Our designs are generally based on either giant
magnetoresistance or tunneling magnetoresistance. These structures produce a large
change in electrical resistance depending on the electron spin orientation in
a free layer.
In giant magnetoresistance (GMR) devices, resistance
changes due to conduction electrons scattering at interfaces within the devices.
The GMR effect is only significant if the layer thicknesses are less than the
mean free path of conduction electrons, which is approximately five nanometers.
Our critical GMR conductor layers may be less than two nanometers, or five atomic
layers, thick.
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The second type of spintronic structure we use is
based on tunneling magnetoresistance (TMR). Such devices are known as Spin-Dependent
Tunnel (SDT) junctions or Magnetic Tunnel Junctions (MTJs). SDT junctions use
tunnel barriers that are so thin that electrons can tunnel through
a normally insulating material to cause a resistance change. SDT barrier thicknesses
can be in the range of one to four nanometers (less than ten molecular layers).
In our products, the spintronic elements are connected
to integrated circuitry and encapsulated (packaged) in much the same way
as conventional integrated circuits.
Our Strategy
Our vision is to become the leading developer of
practical spintronics technology and devices. Our spintronic technology provides
eyes, nerves, and brains for electronic systems, breathing life and intelligence
into inanimate objects. Our unique products support global trends of smart, low-power
end nodes for the Internet of Things. We plan to monetize our technology
by selling the products described below and licensing our MRAM technology. To
grow product sales, we plan to broaden our sensor and coupler product lines, and
longer term to target larger markets such as automotive electronics.
Our Products and Markets
Sensor Products and Markets
Our sensor products detect the strength or gradient
of magnetic fields and are often used to determine position or speed. The GMR
changes its electrical resistance depending on the magnetic field. In our devices,
GMR is combined with conventional foundry integrated circuitry and packaged in
much the same way as conventional integrated circuits. We sell standard or catalog
sensors, and custom sensors designed to meet customers exact requirements.
Our sensors are quite small, very sensitive to magnetic fields, precise, and reliable.
Standard sensors
Our standard, or catalog, sensors are generally
used to detect the presence of a magnetic or metallic material to determine position
or speed. We believe our spintronic sensors are smaller, more precise, more reliable,
and lower power than competing devices. Our major market for standard sensors
is the Industrial Internet of Things (IIoT) for factory automation.
Custom and medical sensors
Our primary custom products are sensors for medical
devices, which are customized to our customers requirements and manufactured
under stringent medical device quality standards. Most are used to replace electromechanical
magnetic switches. We believe our sensors have important advantages in medical
devices compared to electromechanical switches, including no moving parts for
inherent reliability, and being smaller, more sensitive, and more precise. Our
sensors can be customized using customer-specific integrated signal processing
and design variations that can include the range and sensitivity to magnetic fields,
electrical resistance, and multisensor elements configuration. Future custom sensor
target markets include consumer electronics, automotive electronics, and biosensors.
Coupler Products and Markets
Our spintronic couplers combine a GMR sensor element
and an integrated microscopic coil. The coil creates a small magnetic field that
is picked up by the spintronic sensor, transmitting data almost instantly. Couplers
are also known as isolators because they electrically isolate the
coupled systems. Our IsoLoop couplers are faster than the fastest optical couplers.
Our major coupler market is currently the Industrial Internet of Things (IIoT)
for factory automation. We are targeting the automotive market longer term.
MRAM Products and Markets
MRAM uses spintronics to store data. It has been
called the ideal or universal memory because of its potential to combine the speed
of SRAM, the density of DRAM, and the nonvolatility of flash memory. Data is stored
in the spin of the electrons in thin metal alloy films, and read with spin-dependent
tunnel junctions. Unlike electrical charge, the spin of an electron is inherently
permanent. We have invented several types of MRAM memory cells including inventions
related to advanced MRAM designs and MRAM for tamper prevention or detection.
Our strategy is to develop, manufacture, and sell
low bit-density MRAM for applications such as tamper prevention and detection.
For high bit-density MRAM, our strategy is to license our technology to companies
with large-scale memory manufacturing capabilities.
Product Manufacturing
The heart of our fabrication facility is a cleanroom
area with specialized equipment to deposit, pattern, etch, and process spintronic
materials. Most of our products are fabricated in our facility using either raw
silicon wafers or foundry wafers. Foundry wafers contain conventional electronics
that perform housekeeping functions such as voltage regulation and signal conditioning
in our products.
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Each wafer may include thousands of devices. We
build spintronics structures on wafers in our fabrication facility. We either
saw wafers to be sold in die form, or send wafers to Asia for dicing and packaging.
Other production operations include wafer-level inspection and testing. Packaged
parts are returned to us to be tested, inventoried, and shipped.
Sales and Product Distribution
We rely on distributors who stock our products and
sell them in more than 75 countries. Distributors of our products include
America II Electronics, Inc., Angst+Pfister
Sensors and Power , Avnet companies, and Digi-Key
Corporation. Our distributor agreements generally renew annually. In addition,
we distribute versions of some of our products under private-brand partnerships
with large integrated device manufacturers. These private-brand partnerships broaden
our distribution and enhance our sales support, technical support, and brand awareness.
New Product Status
In the past year we began marketing a number of
new and improved products, including:
new smart sensors for the Internet of Things;
new TMR magnetic sensors and magnetic switches;
data couplers with isolated power convertors; and
couplers with improved Common-Mode Transient Immunity for more efficient
power control.
Long-term product development programs in fiscal
2021 included:
new TMR sensors;
custom integrated circuits for smart sensors; and
power conversion integrated circuits.
Our Competition
Industrial Sensor Competition
Several other companies either make or may have
the capability to make GMR or TMR sensors. Also, several competitors make solid-state
industrial magnetic sensors including silicon Hall-effect sensors and anisotropic
magnetoresistive (AMR) sensors. We believe those types of sensors are not as sensitive
or power-efficient as our GMR or TMR sensors.
Medical Sensor Competition
Our sensors for medical devices face competition
from electromechanical magnetic sensors and from other solid-state magnetic sensors.
Electromechanical magnetic sensors such as reed and micro-electromechanical system
(MEMS) switches have been in use for several decades. Because our sensors have
no moving parts, we believe they are inherently more reliable than electromechanical
magnetic sensors. We also believe our sensors are smaller than the smallest electromechanical
magnetic sensors, more precise in their magnetic switch points, and more sensitive.
Compared to other solid-state sensors, our medical sensors may have advantages
in size, sensitivity to small magnetic fields, or electrical interface simplicity.
Coupler Competition
Competing coupler technologies include optical couplers,
inductive couplers (transformers), capacitive couplers, and radio-frequency modulation
couplers. Prominent optical coupler suppliers include Broadcom Limited, Fairchild
Semiconductor International, Lite-On Technology Corporation, Renesas Electronics
Corporation, Toshiba Corporation, and Vishay Intertechnology.
Our strategy is to compete based on product features
rather than to compete solely on price. IsoLoop couplers are smaller and therefore
require less circuit board space per channel than most competing couplers. Our
other advantages over competing technologies may include less signal distortion,
longer product life, and lower power consumption.
MRAM Competition
A number of companies compete or may compete with
us for MRAM research and development or service business, or may be attempting
to develop MRAM intellectual property for licensing to others. Emerging technologies
that could compete with MRAM include graphene and carbon nanotubes, phase-change
memory (PCM; also known as chalcogenide, 3D XPoint, or Ovonic memory), resistive
RAM (ReRAM or RRAM), conductive bridge RAM (CBRAM), memory resistors (memristors),
and conductive metal oxide (CMOx) memory. MRAM may have advantages over these
technologies in either manufacturability, speed, bit density, data retention,
or endurance.
Sources and Availability of Raw Materials
Our principal sources of raw materials include suppliers
of raw silicon and semiconductor foundry wafers that are incorporated into our
products, and suppliers of device packaging services. Our wafers sources are based
around the world; most of our packaging services take place in Asia.
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Intellectual Property
Patents
As of March 31, 2021 we had more than 50
issued U.S. patents assigned to us. We also have a number of foreign patents,
a number of U.S. and foreign patents pending, and we have licensed patents from
others. There are no patents we regard as critical to our current business owned
by us or licensed to us that expire in the next 12 months.
We have patents on advanced MRAM designs
that we believe are important, including patents that relate to magnetothermal
MRAM, spin-momentum MRAM, and synthetic antiferromagnetic storage. Although
it is not critical to our current business, we have identified U.S. patent 6,744,086
titled Current switched magnetoresistive memory cell as particularly
important for successful high-density, high-performance MRAMs. The patent has
been reissued as RE 44,878 and expires May 15, 2022.
Much of our intellectual property has been developed
with U.S. Government support. Under federal legislation, companies normally
may retain the principal worldwide patent rights to any invention developed
with U.S. Government support.
Trademarks
NVE and IsoLoop are our
registered trademarks. Other trademarks we claim include GMR Switch
and GT Sensor.
Dependence on Major Customers
We rely on several large customers for a significant
percentage of our revenue, including Abbott Laboratories,
Sonova AG, certain other medical device manufacturers, and certain distributors.
The loss of one or more of these customers could have a material adverse effect
on us.
Government Regulations
We are subject to government regulations including,
but not limited to, regulations related to environment, tax matters, securities,
conflict minerals, ethics and foreign corrupt practices, import and export controls,
product safety and liability, workplace health and safety, labor and employment,
and data privacy. We incur and expect to continue to incur costs and expenses
to comply with these regulations and may incur penalties for any failure to
do so.
Additionally, certain contracts required us maintain
facilities and personnel security clearances to protect classified information.
Such clearances are subject Government audits and investigations, and any deficiencies
or illegal activities identified during the audits or investigations could result
in the forfeiture or suspension of payments and civil or criminal penalties.
Environmental Matters
We are subject to environmental laws and regulations
particularly state and local laws and regulations relating to industrial waste
and emissions. Compliance with these laws and regulations has not had a material
impact on our capital expenditures, earnings, or competitive position to date.
Existing and future environmental laws and regulations could result in expenses
related to emission abatement or remediation, but we are currently unable to
estimate such expenses.
Human Capital Resources
We had 44 employees as of March 31, 2021,
all of whom were full-time.
We have policies to prevent discrimination based
on gender, race, disability, ethnicity, nationality, religion, sexual orientation,
gender identity, or gender expression. We take affirmative action to ensure
that applicants are employed, and that employees are treated during employment,
without regard to their race, color, religion, sex, or national origin. We also
take affirmative action to employ and advance veterans in employment.
We offer employees free health risk assessments,
wellness programs, and financial incentives for healthy biometrics.
None of our employees are represented by a labor
union or are subject to a collective bargaining agreement, and we believe we
maintain good relations with our employees.
Available Information
All reports we file with the SEC, including our
annual reports on Form 10-K , quarterly
reports on Form 10-Q , current reports
on Form 8-K , and proxy statements
and additional proxy materials on Schedule 14A, as well as any amendments
to those reports and schedules, are accessible at no cost through the Investors
section of our Website (www.nve.com). These filings are also accessible through
the SECs Website (www.sec.gov).
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.