EnSilica: Would You Like To Super-Size Your Chips Order?

We live in a rapidly changing and increasingly digitally connected world, with over 207 billion connected devices at the end of 2024 according to Forbes¹ and 5.35b Internet users worldwide from a population of about 8 billion². What seems probable given the dramatic increase in devices and Internet users over recent years is that the number of devices in use will continue to grow significantly, particularly as the Internet of Things expands, military connectivity increases through drones use, and connectivity for harder to reach places improves, through satellite communication for example.

What increasingly underpins this digital world are the integrated circuits (chips!) needed, especially those designed for a specific purpose such as connecting to the Internet via satellite. Specialised chips such as these are called Application Specific Integrated Circuits or ASICs for short. I must admit I did not intentionally seek out an investment in ASIC design however after seeing the potential opportunity at SES A.S. and investing in it last week, I investigated where their competitor Starlink has had an advantage, which is with their lower cost terminals to access their satellite constellation.

On looking into this advantage, which is particularly evident in the consumer market where costs can often be the principal buying criteria, I came across EnSilica plc who make ASICs. They are a small British company, growing year-on-year, with customers such as Siemens and TSMC as well as AST Space Mobile for whom they are helping to develop the next-generation ASIC for its planned space-based cellular broadband network. They have also recently been awarded a relatively notable grant³ (for the size of their business) from the British government’s UK Space Agency to develop technology to potentially reduce the cost and power demands of terminals, as well as provide national self-reliance for this now critical technology, not only for consumers but also government and the military.

Within the companies press release about the grant³ Ian Lankshear, EnSilica’s CEO, commented: ‘We are honoured and proud to have won this highly significant award from the UK Space Agency under the C-LEO programme, as we believe satellite communications is an incredibly important sector for EnSilica and one that is fast expanding globally. This funding will enable us to advance our technology and bring innovative solutions to the satellite broadband market, with the project expected to be hugely beneficial to society, offering resilient internet connectivity in times of crisis, as well as providing high speed internet connectivity in remote communities not well served by terrestrial networks. We welcome the ongoing support from the UK Space Agency, which provides the framework for EnSilica to develop the technology required to address a market worth many hundreds of millions.’

Currently an American firm, Hughes of EchoStar, makes over half of the satellite terminals in use⁴, including being a key supplier to SES A.S. and Eutelsat (OneWeb)⁵. However given the seemingly increasing political chaos emanating from the U.S. and a possible move away from American firms in certain parts of the world, particularly in Britain, Canada, the European Union and Mexico, I expect opportunities for significant growth will occur in the months and years ahead for non-US makers of terminals, not to mention satellite communication service providers in general. For example billionaire Carlos Slim has recently announced⁶ plans to cancel orders worth $22b with Starlink and redirect the business too European and Chinese firms.

While EnSilica is small, I am hoping its size is an advantage given potentially quicker decision making, although one outstanding question I have is whether they have the talent already in-house to design a complete terminal chipset. If they do, then that should improve the timescales to market. When you read on EnSilica’s website that it has ‘approaching 20 years experience helping its customers deliver 100’s of successful designs time-after-time and across a broad range of industries.’ that suggests to me that they may already have the expertise. Their case studies, partner relationships and press releases also attest to their success over the years.

Talent and experience aside, the relatively significant influx of cash may well allow EnSilica to surprise the market in time with technology that may secure significant new sales from opportunities that did not exist, or were not within reach, only a month or two ago. I am currently awaiting a call from Paul Morris, EnSilica VP RF and Comms Business Unit, to hopefully discuss the grant and their plans in more detail, however I was sufficiently confident from analysing their business last week to make an initial investment, buying 60,000 shares. In time I may increase this position, given I hope to have found a company on the cusp of significant future growth.

It should be noted that EnSilica is currently what some would describe as a penny stock, which comes with reduced share liquidity (i.e. a small number of shares are usually traded) making it harder to gauge the share price you will actually buy or sell for when you invest or divest (given the need to find a corresponding seller or buyer). I therefore chose to make a limit order on my share purchase and will probably need to do the same should I sell, and then be patient waiting for the limit order to fill so that the value of my sale is not hammered down unpleasantly on exit.

That said, given EnSilica’s possible newly established trajectory I am currently considering holding the stock and possibly accumulating more over the coming months and years. I hope EnSilica may one day be as widely known as another British chip designer; CSR plc (formerly Cambridge Silicon Radio) who went on to be acquired for $2.5b by Qualcomm.

¹ Source. ² Source. ³ Source. ⁴ Source. ⁵ Source. ⁶ Source.