IoT chip and module maker Sequans Communications has gained entry to the Chinese market, via an unnamed partner—and it expects the results to be very, very big. The firm announced that it has struck a five-year strategic licensing deal that gives the Chinese partner the exclusive rights to manufacture and sell Sequans’ Taurus platform in the Chinese market. The first three years of revenue from the deal is expected to be more than $50 million, the company says, and it will get 25% of that upfront.
For some sense of scale, Sequans’ annual revenues were about $50 million per year in both 2021 and 2020.
The deal also means Sequans will receive royalty fees for up to 20 years on Chinese sales of products that are based on Sequan’s 5G tech, which the company says could exceed a few million dollars per year. Taurus, which is expected to be 3GPP Release 16-compliant, is not yet finished; Sequans chairman and chief executive Georges Karam said on a call this morning (August 31) that funds from this licensing deal are “expected to fund the balance of Taurus’ development.”
Sequans bumped up its financial guidance for the year based on the deal.
“This strategic partnership strengths our capabilities to deliver on our 5G roadmap by expanding our SAM to a region previously excluded from our addressable market and enhancing our financial position,” Karam said on the call, adding, “Today’s announcement and our robust product pipeline reinforce our confidence in our ability to navigate our business in the current economic environment and to deliver long-term growth. With the development of the 5G platform secured, we are firmly positioned to expand our market share, grow revenue and improve profitability.”
He thanked shareholders for their patience and “standing by us during the extended period it took to close this deal.”
Karam said on the call that the deal doesn’t preclude Sequans from striking similar deals in other markets and that it has other discussions underway. Asked about the status of Taurus’ development, he explained that there are three parts to the chip solution: The radio frequency portion, the baseband and the software, all three of which must be integrated. Sequans has already received RF samples that are “very promising,” he said, and the company expects the full, integrated solution to be in sampling in the second half of next year, with mass production the following year, in 2024.
“The coming year is an important year for us,” he added.
