Item 1. Business
Item 1. Business.
Overview
We are a fabless semiconductor
company focused on the development and sale of: i) millimeter wavelength wireless technology, or mmWave, semiconductor devices and antenna
modules based on our proprietary semiconductor devices and ii) performance of non-recurring engineering, or NRE, services and licensing
of intellectual property, or IP. Our primary focus is the development of mmWave, which is generally described as the frequency band from
24 Gigahertz, or GHz, to 300 GHz. Our mmWave products enable a range of applications including: multi-gigabit point-to-point, or PtP,
wireless links with a range of up to 25 kilometers and operating in the 60 GHz frequency band; multi-gigabit point-to-multi-point, or
PtMP, links in the 60 GHz frequency band used to provide fixed wireless access, or FWA, services; FWA in the 5G operating bands from 24
GHz to 43 GHz to provide multi-gigabit capability and low latency connections; military communications; and consumer applications, such
as high performance wireless video streaming and untethered augmented reality and virtual reality. We also have a line of memory-denominated
integrated circuits, or ICs, for high-speed cloud networking, communications, security appliance, video, monitor and test, data center
and computing markets that deliver time-to-market, performance, power, area and economic benefits for system original equipment manufacturers,
or OEMs. As discussed below, we initiated an end-of-life of these products in 2023.
Business Combination
We
were formerly known as MoSys, Inc., or MoSys. On September 14, 2021, we and our subsidiaries, 2864552 Ontario Inc. and 2864555 Ontario
Inc., entered into an Arrangement Agreement, or the Arrangement Agreement, with Peraso Technologies Inc., or Peraso Tech, a privately-held
corporation existing under the laws of the province of Ontario, to acquire all of the issued and outstanding common shares of Peraso Tech,
or the Peraso Shares, including those Peraso Shares to be issued in connection with the conversion or exchange of secured convertible
debentures and common share purchase warrants of Peraso Tech, as applicable, by way of a statutory plan of arrangement, or the Arrangement,
under the Business Corporations Act (Ontario). On December 17, 2021, following the satisfaction of the closing conditions set forth in
the Arrangement Agreement, the Arrangement was completed, and we changed our name from MoSys to “Peraso Inc.” and began trading
on The Nasdaq Stock Market, or the Nasdaq, under the symbol “PRSO.” Certain previous shareholders of Peraso Tech elected to
convert their Peraso Tech common stock into exchangeable shares in 2864555 Ontario Inc., one of our wholly-owned subsidiaries. These exchangeable
shares, which can be converted into our common stock at the option of the holder, are similar in substance to our common stock .
Industry Trends and Market Opportunities
mmWave
Historically, virtually all wireless communications has utilized the
frequency spectrum below 6 GHz. Primary examples include cell phone communications, WiFi, Bluetooth, Internet of Things, or IoT, and more
recently, broadband internet access or FWA. In parallel, a broad array of applications continues to push the boundaries of available wireless
network capacity. These include video streaming services, such as those offered by Netflix, Apple and Amazon, user-generated video content,
such as TikTok and Instagram Reels, and broadly, personal video content generated by personal mobile devices.
While the sub-6 GHz band has traditionally been sufficient for these
services, with growing demand, the industry is migrating towards mmWave spectrum as an additional source of wireless capacity. Wireless
spectrum is an extremely valuable commodity and is highly regulated by federal governments around the world. Spectrum is broadly segmented
into either licensed frequencies or unlicensed frequencies, although most frequencies are licensed. This holds true for mmWave frequencies
between 24 GHz and 100 GHz. In the case of mmWave, the 3rd Generation Partnership Project, or 3GPP, has included the spectrum from 24
GHz to 43 GHz in its 5G specification. This is licensed spectrum in most jurisdictions around the world, and carriers must license this
spectrum if they choose to utilize the mmWave frequency bands within that spectrum. Alternatively, the spectrum from 57 GHz to 71 GHz
is generally unlicensed around the world, and, therefore, a license is not required to operate in this spectrum. To that end, the Institute
of Electrical and Electronics Engineers, or IEEE, has established two standards which utilize this unlicensed mmWave spectrum, IEEE 802.11ad
and IEEE 802.11ay. Peraso has developed silicon products that comply with both the licensed and unlicensed standards.
1
IEEE 802.11ad/ay: License-Free mmWave
Market
A primary opportunity for
our mmWave products in unlicensed-band applications is the FWA market. In this market segment, wireless Internet service providers, or
WISPs, provide their customers with a fixed wireless link to a base station or small cell, thus providing the customer with high-speed
access to the Internet. mmWave can provide both upload and download speeds of over 1 Gbps. In addition, we believe mmWave can be a less
expensive alternative to installing fiber and allows FWA carriers a competitive advantage against other access technologies, such as cable
broadband. From an equipment perspective, this worldwide market has historically been serviced by FWA OEMs, such as Ubiquiti Inc., or
Ubiquiti, Cambium Networks, Ltd. and SIA MikroTik. WISPs are addressing a segment of the broadband market not served by the traditional
carriers, or, in some cases, underserved by the carriers.
The FWA market has been helped
in recent years with the advent of government incentives aimed at closing the so-called ‘digital divide’ between urban and
rural broadband access. The WISP market is experiencing strong growth. According to The 2021 Fixed-Wireless and Hybrid ISP Industry
Report prepared by the Carmel Group, the number of subscribers that WISP providers serve in the United States is expected to grow
from 6.9 million at the end of 2020 to 12.7 million by the end of 2025. Additionally, the U.S. government has allocated significant support
for the improvement of broadband access to underserved and unserved communities. In 2020, the U.S. Federal Communications Commission,
or FCC, established the Rural Digital Opportunity Fund, or RDOF, to award up to $20.4 billion for the development of improved broadband
in rural communities. In 2023, the U.S. government established the Broadband Equity, Access, and Deployment, or BEAD, program, which has
allocated $42.45 billion to expand high-speed Internet access by funding planning, infrastructure deployment and adoption programs in
all 50 states.
A related opportunity for
us in the license-free FWA space is dense urban markets, many of which have a high saturation of informal settlements. As of August 2023,
the World Economic Forum estimates there are over 1.1 billion people living in informal settlements around the world. Traditional last
mile technology, such as WiFi, is not able to handle to the congestion of users in such communities. This is because WiFi radio signals
spread out in all directions, much like a bare incandescent light bulb. Due to the very high population density in informal settlements,
many WiFi transmitters are required, and as such, tend to cancel each other out with overlapping signals. Because our mmWave technology
utilizes beamforming, the signals are more like beams from a car headlight, very narrow and controlled. Therefore, in a dense environment,
mmWave is much better at handling high congestion, as the radio signals generally do not overlap. Another advantage our mmWave technology
provides in the dense urban environment is reduced power consumption. The power grid in an informal settlement can often be unreliable.
Our technology can operate under 12 watts, which enables communications networks to continue to operate on a backup battery power supply
for several hours.
An additional market for Peraso
60GHz mmWave products is military applications. Specifically, as a result of our RF beamforming and beamsteering capability, the military
is considering the use of mmWave for stealth tactical communications. Unlike traditional wireless technology that radiates equally in
all directions (omni), mmWave technology utilizes phased-array RF beams to focus the RF energy into a specific intensity and direction.
The military refers to mmWave as an inherently stealthy protocol – Low Probability of Interception (LPI)/Low Probability of Detection
(LPD)/Anti-Jamming (AJ). An additional benefit of using the 60GHz spectrum, is since this band is generally unlicensed around the world,
these communications will not interfere with locally licensed spectrum. Also, as our devices operate at under 12 watts, a light battery
can be used for simple deployment in combat settings. Further, as our mmWave technology can support gigabit speeds, military personnel
are able to transmit and receive information in a timely manner. In 2023, we were awarded a proof-of-concept license and technology development
contract to enable mmWave-based communications between soldiers and their vehicle.
Our 60 GHz products can also
be applied to consumer applications, as we believe our technology can provide key advantages to this market. For example, we are targeting
the high-performance, video-streaming market, specifically the virtual reality, or VR, market. In its market report, Virtual Reality
Data: Devices, Verticals, and Value Chain – 1Q 2022 , ABI Research estimates a market opportunity of over 6 million VR headsets
by the end of 2025, which we believe translates into a total available market for us in 2025 of approximately $180 million, assuming an
average selling price to us of $30 for an antenna module included in each VR headset. Uses of VR are envisioned in a broad variety of
markets, including gaming, real estate, healthcare, and transportation. We believe that our mmWave technology has certain characteristics
that are ideal for VR applications. First, mmWave’s high data rate of 3 Gbps supports high-resolution displays. Second, our proprietary
beamforming and beamtracking techniques keep latency to under 5 milliseconds, or ms, so the user does not experience lags in the experience.
Third, mmWave technology is less susceptible to interference and, as mentioned above in the context of dense urban environments, can operate
in highly congested environments, which limits interruptions in the VR user’s experience.
2
Other market opportunities
for 60 GHz mmWave technology include transportation safety, factory automation, and railway communications.
3GPP: Licensed mmWave Market
The frequency band from 24
GHz to 43 GHz has been designated as the mmWave band in 5G communications. In the United States, this band is generally licensed to carriers
by the FCC for expensive license fees that can reach billions of dollars. Carriers license this spectrum to ensure there is no interference
from other carriers using the same frequencies. We believe that the primary benefit of mmWave to carriers is the availability of additional
spectrum within the licensed band, to provide additional capacity to handle the growth of mobile users. In its report, 5G Millimeter
Wave 2023 , Mobile Experts Inc. predicts that, based on current user growth predictions, U.S. carriers will saturate the capacity of
their networks using existing spectrum by 2025, and will need to utilize mmWave to provide additional capacity.
Our initial target for
licensed-band applications is the FWA segment, as carriers can utilize the additional network capacity offered by mmWave to provide
FWA services. According to the Ericsson Mobility Report , as of November 2023, approximately 80% of mobile service providers
have an FWA offering and 121 service providers offer FWA services over 5G, representing 50% of all FWA service providers. According
to Mobile Experts Inc.’s report, 5G Millimeter Wave 2023 , mobile operators that have deployed 5G mmWave include
Verizon, T-Mobile, AT&T, NTT DoCoMo, KDDI, Softbank and Rakuten Mobile. We believe major Chinese mobile carriers have commenced
formal collaborations to advance mmWave solutions in the Chinese telecom market. Regarding U.S. carriers, FWA has become a bright
spot for their 5G roll out. According to Light Reading, fixed wireless services accounted for over 90% of all net broadband customer
additions in the U.S. during 2022. While U.S. carriers currently use the sub 6 GHz frequency band, eventually, as the network gets
saturated, we believe the carriers will commence a broad roll out of mmWave technology. In terms of FWA market potential in the
U.S., according to Fierce Wireless, T-Mobile is available to over 50 million homes, and Verizon is available to over 40 million
homes. In addition to being used to provide FWA services, our mmWave antenna modules can be utilized in consumer-premises equipment
or CPE, including hotspots, laptops and tablets. In its report, 5G Millimeter Wave 2023 , Mobile Experts Inc. forecasts a
total volume of approximately 2 million mmWave-enabled CPE units by 2026.
5G mmWave has support from
major industry players, such as Apple, which has incorporated mmWave wireless into substantially all versions of the iPhone for sale in
the U.S. market. The basic premise is the ever-increasing demand for bandwidth. The initial use case for cellular service providers is
to provide their customer base (primarily smart-phone customers) with continuity of network access in highly congested environments, such
as sporting events, public beaches, music festivals or generally any large gathering where thousands of users are attempting to access
the network simultaneously. We believe that mmWave will gain universal acceptance, as users will demand full continuity in terms of network
access, and we are well positioned to address the mobile opportunity for mmWave, which is expected to present an order of magnitude increase
in the total available market.
3
Memory
Our memory solutions deliver
time-to-market, performance, power, area and economic benefits for system OEMs. Our Bandwidth Engine memory ICs integrate our proprietary,
1T-SRAM high-density embedded memory and a highly-efficient serial interface protocol resulting in a monolithic memory IC solution optimized
for memory bandwidth and transaction access performance. Further performance benefits can be achieved to offload statistical, search or
other custom functions using our optional integrated logic and processor elements. As discussed below, we initiated an end-of-life
of these products in 2023.
Our Products
Our primary focus is the development,
marketing and sale of our mmWave products.
mmWave ICs
Currently, there are two industry standards that incorporate mmWave
technology for wireless communications: (i) license-free: IEEE 802.11ad/ay and (ii) licensed: 3GPP Release 15-17 (commonly referred to
as 5G). We have developed and continue to develop products that conform to these standards. To date, we have not sold any 5G products.
Our first mmWave IC product
line operates in the license-free 60 GHz band and conforms to the IEEE 802.11ad standard. This product line includes a baseband IC, several
variations of mmWave radio frequency, or RF, ICs, and associated antenna technology.
Our 60 GHz IEEE802.11ad products
have two very important advantages over traditional 2.4 GHz / 5 GHz Wi-Fi products: very high data rates (up to 3.0 Gigabits per second
(“Gbps”)) and low latency, i.e., less than 5 ms. The first application that had traction was outdoor broadband, including
applications such as PtP backhaul links or FWA using PtMP links. As the spectrum is unlicensed (free), WISPs can provide services without
having to procure expensive wireless spectrum licenses. We believe that our mmWave technology can be deployed quickly and cost effectively
in rural and suburban environments, including in remote and low-income regions where residents often have poor Internet quality. While
carriers can provide fiber access, the cost of fiber deployment can be prohibitive and trenching for fiber is time consuming and can limit
the rate at which new subscribers are added. Our mmWave products enable WISPs to deploy broadband service using low-cost terminals and
infrastructure and avoid the costs of deploying cable or fiber.
We are a leading supplier
of semiconductors in the mmWave PtP and PtMP markets. We are currently shipping to leading equipment suppliers in this space, as well
as directly to service providers that are building their own equipment. We believe we bring certain advantages to the market. First, our
products support the spectrum from 66 GHz to 71 GHz, which is often referred to as channels 5 and 6 in the 802.11ad/ay specifications.
The key advantage in supporting these channels is that the signals are able to propagate much further than channels 1 through 4; this
is a result of significantly lower oxygen absorption at frequencies above 66 GHz. To date, our FWA customers have achieved links in the
range of 25 kilometers, which is substantially longer than any past 60 GHz links.
In the indoor area, the 802.11ad
technology is ideal for high-speed, low-latency video applications. In indoor applications, our products can support 3Gb/s links with
under 5 ms of latency. Example applications include:
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AR/VR links between the headset and the video console;
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USB video cameras for corporate video conferencing;
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wireless security cameras; and
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smart factory safety and surveillance.
Our mmWave ICs have been in
volume production since 2018. A core competency of the Company is phased-array technology, or beamforming, in which an array of antenna
elements work in unison to create a focused RF beam. Through adjustment of the relative phase of the antenna signals, the beams can be
directed to support robust wireless connection. We are a leader in the production of mmWave devices and have pioneered a high-volume mmWave
production test methodology using standard low-cost production test equipment. It has taken us several years to refine performance of
this production test methodology, and we believe this places us in a leadership position in addressing operational challenges of delivering
mmWave products into high-volume markets.
4
Our second product line addresses
the 5G mmWave opportunity. Given our extensive experience in the development of mmWave technology, 5G mmWave is a logical adjacent and
larger market. We have commenced sampling a highly integrated 5G mmWave beamformer IC, which operates from the 24 GHz to 43 GHz frequency
range. The device supports dual-stream multiple input, multiple output, or MIMO, with two 16-channel beamforming arrays. In June 2023,
we announced a collaboration with pSemi, a Murata company, for the development of a 5G customer premise receiver utilizing our beamformer
IC and pSemi’s up-down converter IC. The goals of the collaboration are to reduce the number of components and cost of each RF module
to promote faster time to market for more rapid deployment by prospective customers.
mmWave Antenna Modules
In the second half of 2021,
we augmented our business model to produce and sell complete mmWave antenna modules for license-free 60 GHz applications. The primary
advantage provided by our antenna modules is that our proprietary mmWave ICs and the antenna are integrated into a single device. A differentiating
characteristic of mmWave technology is that the RF amplifiers must be as close as possible to the antenna to minimize loss. With our module,
we can guarantee the performance of the amplifier/antenna interface and simplify customers’ RF engineering, facilitating more opportunities
for customer prospects that have not provided RF-type systems, as well as shortening the time to market for new products. It is possible
for third parties to provide competitive module products, but, because we utilize our mmWave ICs and incorporate our proprietary mmWave
antenna IP, we can provide a highly-competitive solution based on our internally-owned and developed module components.
During 2022, we launched our
PERSPECTUS family of mmWave antenna modules to enable WISPs to offer high-capacity FWA networks in the unlicensed 60-GHz spectrum. The
PERSPECTUS product family includes a new generation of integrated 60 GHz mmWave antenna modules and enhanced software for PtMP FWA applications.
Our PERSPECTUS products allow rapid development of low-cost network equipment utilizing over 14 GHz of spectrum to provide multi-gigabit
access services. Leveraging our integrated phased-array antennas and operating in the upper channels of the band, link ranges from 1.5
kilometers up to extended ranges of 30 kilometers can be achieved using a parabolic reflector.
Additionally, we have established
an innovative user arbitration protocol called DUNE that is specifically designed to optimize network performance in dense urban environments
using our PERSPECTUS antenna modules. DUNE is a result of our decade-long experience in mmWave technology and in-house development of
the intellectual property incorporated in media access control, which controls the hardware, the physical layer, which controls the physical
connection and software drivers, as well as novel antenna designs and beamforming algorithms. DUNE takes a multi-level approach to reducing
contention and interference by incorporating both physical, e.g. antenna and beamforming, and protocol-level innovations.
Memory
Our memory products comprise
our Bandwidth Engine ICs, which are memory-dominated ICs that were designed to be i) high-performance companion ICs to packet processors
and ii) targeted for high-performance applications where throughput is critical. These products integrate our proprietary, 1T-SRAM high-density
embedded memory and a highly-efficient serial interface protocol resulting in a monolithic memory IC solution optimized for memory bandwidth
and transaction access performance. Taiwan Semiconductor Manufacturing Corporation, or TSMC, is the sole foundry that manufactures the
wafers used to produce our memory IC products. TSMC has informed us that it would be discontinuing the foundry process used to produce
wafers, in turn, necessary to manufacture our memory ICs. As a result, in May 2023, we initiated an end-of-life, or EOL, of our memory
IC products. We notified our customers to provide purchase orders by December 22, 2023, and we commenced initial EOL shipments during
the quarter ended September 30, 2023. We have requested customers to pay a deposit upon purchase order placement to reserve supply and
provide funding for our required inventory purchases. In addition, we have requested customers to accelerate payments to improve our cash
flows. Under our EOL plan, we expect shipments of our memory products to continue until at least December 31, 2024. However, the timing
of EOL shipments will be dependent on receipt of purchase orders from customers, deliveries from our suppliers, and the delivery schedules
requested by our customers. As of March 1, 2024, we have received EOL purchase orders totaling approximately $14.0 million, of which $3.7
million of these orders were shipped during 2023.
5
Research and Development
Our ability to compete in
the future depends on successfully improving our technology to meet the increasing demand for higher performance and lower cost solutions.
Development of new IC products requires specialized chip design and product engineers, expensive computer-aided design software licenses,
and significant fabrication and testing costs, including mask costs.
We have over 14 years of technical
know-how in the design and manufacturing of mmWave technology. The most important aspect of this knowledge is knowing how mmWave circuits
will perform in a real-world environment. Traditionally, semiconductor design utilizes sophisticated computer-aided design software to
simulate the performance of a device that is manufactured at a specific semiconductor manufacturing plant. However, mmWave is extremely
difficult to model precisely. Therefore, the only path to understand how well a device will perform is to produce the device and test
it in a real-world application. Over the last decade, many companies have attempted to develop mmWave semiconductor devices, however,
given that the devices had inconsistent or weak performance, a number of the companies were unsuccessful and abandoned their design and
product development efforts. As an example of our leadership and expertise in the development of mmWave technology, we were an active
participant in the development of the IEEE 802.11ay wireless specification and, to date, have been granted nine essential claims patents
with respect to this standard.
At a system level, there are
additional technical challenges presented by mmWave technology that we have overcome and form a key part of our internal know-how. For
example, a key technology of mmWave is the concept of beamforming and beam steering using a phased-array antenna. This technology is utilized
to concentrate the RF energy into a narrow beam to improve the range and coverage of mmWave devices. We have developed effective beamforming
and beam steering technology for phased-array circuits and antennas. While there are many academic examples of successful phased-array
implementations, there is a vast barrier between a “laboratory” version of phased-array technology and a version that is deployed
for commercial use. One such aspect is the implementation of the beamforming procedure, which seeks to maximize throughput and do so while
not impacting latency. While the details of achieving this are complex, it is important-intellectual property that we have gained through
real-world experience.
mmWave is not without challenges,
as mmWave signals do not typically travel as far as traditional wireless signals and are more attenuated by solid objects. Mitigation
strategies must be deployed, particularly with regard to the management of signal propagation. Whereas traditional wireless devices utilize
a broad, omni-antenna pattern, mmWave systems rely on phased-array technology, which focusses the radio signal into a narrow beam to improve
propagation characteristics. We consider ourselves to be a global leader in implementing these sophisticated radio systems and one of
the few providers in the market successfully shipping phased-array devices in mass production.
While we have developed products
for the 60 GHz and 5G mmWave markets, we believe there are other market opportunities that could utilize mmWave technology. For example,
in the WiFi Alliance there is a pending proposal to utilize mmWave technology in WiFi 8, which is the next generation of WiFi technology.
We believe this proposal is primarily driven by the anticipated use of mmWave to support VR applications, which require very high data
rates, and to reduce congestion in multi-dwelling units. In the mobile carrier market, there is some early research in the use of terahertz
technology to make even more spectrum available for network capacity. While the proposed frequencies are higher than mmWave (above 100
GHz), we believe that many of our technological developments, particularly our beamforming and beamsteering concepts, can be applied to
terahertz technology.
With regard to our memory
products, we have ceased and do not intend to expend any development efforts or funds to develop new memory products. We believe our Bandwidth
Engine IC products will provide us with meaningful revenue and gross margin contributions through at least the end of 2024, as we complete
the EOL of these products. We intend to continue to devote substantially all of our research and development efforts toward further expanding
our mmWave technology portfolio and expanding our product offerings.
6
Sales and Marketing
In addition to our direct
sales personnel, we sell through sales representatives and distributors in the United States, Asia and Europe. Our distributors have a
global presence with offices and technical selling and applications engineering capabilities, which we believe will enable us to reach
new potential customers for our products.
We also have applications
engineers who support our customer engagements and engage with the customers’ system architects and designers to propose and implement
our products and solutions to address system design challenges and improve performance.
In the markets we serve, the
time from a design win to production volume shipments of our IC products can range from 12 to 36 months. We believe that networking, wireless
and wired communication and security appliance systems can have a product life from a few years to over 10 years once a product like ours
has been designed into the system. Historically, our revenue has been highly concentrated, with a few customers accounting for a significant
percentage of our total revenue.
In the FWA market, our primary
customer base is OEMs, but we also have multiple WISP customers in the U.S. and Canada. Our OEM customers in the fixed wireless space
include Ubiquiti, WeLink, which operates as both an OEM and a WISP, Tachyon Networks, or Tachyon, and China Unicom. Ubiquiti, an OEM in
the unlicensed fixed wireless space, relies on us as its sole source mmWave IC supplier for its “Wave” products, which Ubiquiti
introduced in 2022. Ubiquiti introduced three new Wave models in 2023. WeLink has relied on us as its sole source supplier for WeLink
designed equipment used to deliver WISP residential service since 2022. WeLink currently deploys 60 GHz technology in multiple U.S. cities,
including Las Vegas, Dallas and Los Angeles. Tachyon utilizes our mmWave antenna modules in its TNA-30X family of PtP and PtMP solutions
for 60 GHz unlicensed FWA networks. Peraso and Tachyon jointly announced production readiness of the TNA-30X product family in June 2023.
Finally, China Unicom is a Chinese mobile carrier that uses our 60 GHz technology for 5G PtP backhaul. In addition to OEMs, we have partnered
with several WISPs in the U.S. and Canada that have deployed our 60 GHz technology, including WeLink. We continue to focus on securing
new OEM and WISP customers.
During the year ended December
31, 2023, three customers accounted for 10% or more of our net revenues, including Nokia Corporation at 35%, F5/Flextronics at 22% and
Alltek Technology Corp at 18%. During the year ended December 31, 2022, four customers accounted for 10% or more of our net revenues,
including Nokia Corporation at 26%, WeLink Communications LLC, or WeLink, at 21%, CEAC International Limited, or CEAC, a distributer selling
to Ubiquiti, at 16%, and F5, Inc. at 11%.
Intellectual Property
We regard our patents, copyrights,
trademarks, trade secrets and similar intellectual property as critical to our success and rely on a combination of patent, trademark,
copyright, and trade secret laws to protect our proprietary rights.
As of March 1, 2024, we held
96 United States patents and 67 foreign patents on various aspects of our mmWave, antenna, memory and other technology, with expiration
dates ranging from 2025 to 2041. We also held 13 pending patent applications in the United States and abroad. There can be no assurance
that others will not independently develop or patent similar or competing technology or design around any patents that may be issued to
us, or that we will be able to successfully enforce our patents against infringement by others.
We were also an active participant
in the development of the IEEE 802.11ay wireless specification and, to date, have been granted nine essential claims patents with respect
to this standard. Essential claims patents are of particular value as a specification cannot be implemented without obtaining a license
to the patents from us.
The semiconductor industry
is characterized by frequent litigation regarding patent and other intellectual property rights. Our IC customers, licensees or we might,
from time to time, receive notice of claims that we have infringed patents or other intellectual property rights owned by others. Our
successful protection of our patents and other intellectual property rights and our ability to make, use, import, offer to sell, and sell
products free from the intellectual property rights of others are subject to a number of factors, particularly those described in Part
I, Item 1A, “Risk Factors.”
7
Competition
mmWave
mmWave circuit and system
design is a highly specialized engineering skill, as mmWave is a challenging technology to ship in mass production. At frequencies above
24 GHz, circuits are extremely vulnerable to small variances in the semiconductor manufacturing process. Designing circuits that minimize
susceptibility to these variances takes years of development, and we believe we are one of the few companies in the world that is skilled
in mmWave design. Further, we have shipped mmWave devices in volume, and ensuring all devices sold adhere to strict performance standards
is a core competency we have developed. In addition, we have developed our own mmWave phased-array antenna technology, which allows us
to be highly competitive in terms of overall system cost. Our customers do not need to engage with third-party antenna suppliers, thus
eliminating the additional cost for a third-party antenna.
Unlicensed IEEE 802.11ad/ay Market:
Our primary competitor in
the IEEE802.11ad/ay market is Qualcomm. The primary benefit that we provide to the market is the support of the higher frequency bands
from 66 GHz to 71 GHz. The advantage at these frequencies is that oxygen attenuation is significantly reduced, and signals can travel
much further.
We also have key points of
differentiation compared to Qualcomm for wireless video devices. We are well positioned in this market, as we have USB 3.0 built into
our devices, so our products generally support USB architectures. A prime example is the replacement of the USB cable with a wireless
version using our technology. There are many applications where this can be of use, including USB web cams, wireless displays, and AR/VR
headsets. We have invested significant software resources into providing the market with wireless USB solutions, and we believe there
is no other mmWave vendor in the world that can offer multi-gigabit solutions as a replacement for wired USB.
Licensed 5G Market:
With 5G, our efforts are focused
on the mmWave RF front-end phased-array component of the system. The 5G product instantiation is an RF module utilizing our proprietary
intellectual property. Key elements of our mmWave intellectual property include:
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RF circuits;
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phased-array antenna; and
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in-system circuit calibration, beam forming, and real-time system monitoring.
From a competitive perspective,
we believe we are currently the only pure-play, 5G vendor to offer a dual-band (28/39 GHz) RF solution for the FWA market. Qualcomm does
offer a 5G RF solution for the FWA market, however its solution is based on aggregating its mobile RF solution, which we believe requires
several compromises in terms of cost, performance, and power consumption. With an initial focus on FWA, we can derive advantages by optimizing
our silicon for that specific market. Furthermore, we have achieved traction in the unlicensed, 60 GHz, FWA market, and we believe we
will be able to transfer all of our knowledge gained from the 60 GHz market to the 5G market. However, this market opportunity is more
competitive, and potential competitors, in addition to Qualcomm, include MediaTek Inc. and Samsung Electronics Co., Ltd.
8
Manufacturing
We depend on third-party vendors
to manufacture, package, assemble and test our IC and module products, as we do not own or operate a semiconductor fabrication, packaging
or production testing facility. By outsourcing manufacturing, we can avoid the high cost associated with owning and operating our own
facilities, allowing us to focus our efforts on the design and marketing of our products.
We perform an ongoing review
of our product manufacturing and testing processes. Our IC products are subjected to extensive testing to assess whether their performance
meets design specifications. Our test vendors provide us with immediate test data and the ability to generate characterization reports
that are made available to our customers.
Employees
As of December 31, 2023, we
had 48 employees, including 13 located in the United States and 35 located in Canada. Our headcount consisted of 34 in research and development
and manufacturing-related operations and 14 in sales, marketing and general and administrative functions. These headcount amounts exclude
employees in Canada that were placed on temporary lay-off in November 2023. We believe our current headcount is adequate to conduct our
business.
Available Information
We were founded in 1991 and reincorporated in Delaware in 2000. Our
website address is www.perasoinc.com. The information in our website is not incorporated by reference into this report. Through a link
on the Investor section of our website, we make available our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as
reasonably practicable after they are filed with, or furnished to, the SEC. You can also read any materials submitted electronically by
us to the SEC on its website (www.sec.gov), which contains reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC, including us.