The average electric vehicle contains 3,000 semiconductors; the chips are also used to run fridges, phones and credit cards. They are so integral to our digital lives that consultancy McKinsey predicts the semiconductor industry will average 8 per cent annual growth to hit a $1 trillion value by 2030.
Meanwhile, the global chip shortage, which began in 2020, triggered mass industrial delays and saw European giants look for supply chains closer to home.
Oxfordshire-based fabless chip-designer EnSilica, which joined Aim, the junior market, in May 2022, is ready to capitalise. Its niche is application-specific integrated circuits (Asics) used in semiconductors for planes, cars, heart monitors and mobiles. EnSilica’s revenues rose by a third to £20.5 million in the year to May, with underlying earnings up 60 per cent at £1.64 million.
The numbers are small but growing steadily, and the shares don’t reflect that. The stock, which rose to £1.18 a year ago, is now loitering back around its 50p list price.
EnSilica currently has six chips at design stage, including an industrial Asic going into production this year, which is forecast to bring in $30 million over seven years. A further three chips are already being supplied to customers, including one for a luxury car which first hit production lines in June. One indication of the firm’s positive momentum is that this contract was initially valued at $25 million over six years, then hiked to $40 million as EnSilica’s chip is now to be used in additional models.
In recent months the firm has also signed deals to originate chips for e-mobility clients and satellite broadband, a project part-funded by the European Space Agency.
EnSilica’s chief executive Ian Lankshear, who previously worked on semiconductors for Hitachi and Nokia, founded the firm in 2011 initially as a consultancy; this part of its work is steadily growing, too. Turnover from consultancy fees increased 30 per cent last year as EnSilica’s reputation spread.
Lankshear still has plenty of incentive, owning a 20 per cent stake. Broker Allenby Capital expects EnSilica to post a £3.4 million pre-tax profit next year, on £32 million of sales, up from just £8 million in 2021.
The firm has also been paying down debt in recent months: its £3.1 million cash leaves net debt at a manageable £1.1 million.
There are clear risks — the British government is investing £1 billion in the UK’s semiconductor industry, but the sector claims that’s insufficient compared to the protection and subsidies offered to international rivals. Recruiting is also a struggle: chip engineers are scarce, and expensive.
But British chipmakers have form — and a legacy of selling out (some say too soon). Arm, another chip developer, was sold to Japan’s SoftBank in 2016; Wolfson Microelectronics, a microelectronics and fabless semiconductor company was acquired by US rival Cirrus in 2014 and Cambridge Silicon Radio, another fabless semiconductor business was bought by Qualcomm in 2015.
A suitor could yet emerge for EnSilica but, in the meantime, there’s cash in these chips: buy.
