Rim Semiconductor Company (fka RSMI)

[McCloud]

Presidents letter out.

http://www.rimsemi.com/letters/071707.html






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President's Letter

July 16, 2007

Dear Fellow Shareholders,

Rim Semiconductor Company is aggressively attacking the broadband marketplace because of the very strong revenue growth potential for our Cupria™ line of transport processors. Cupria™ allows data to be transmitted at greater speed and across extended distances over existing copper wire—all with the highest quality of service—for a better end-user experience.

Our target is the huge and expanding demand for chips that drive broadband across copper wire. This marketplace is several hundred million dollars per year now, and is set to reach one and a half billion dollars. Our success will come as we create market share in this billion dollar marketplace.

To understand the scope of our opportunity for revenue, start with the scale of the copper loops in the world. In the past six years it has grown from around a billion loops to almost 1.4 billion. That’s a 400 million line add! Compare that 400 million to the 5 million line growth of fiber[1]. So, our product is targeted at the hottest segment of telecom. It’s the largest and the fastest growing.



One of our business partners tell me that the reason his company is so committed to working with Rim Semi is because there are very few new chip opportunities that have a chance to address a marketplace that is this big. Most of the other new companies that he works with are playing in markets that are measured in the tens of millions, or if they’re lucky, hundreds of millions. Rim Semi’s marketplace is a $1.5 billion – per year – one.

So if copper is so hot, then why don’t US investors hear more about it? One reason is that the US is losing two or three million lines (about 2%) per year to the cable companies[2]. But the rest of the world more than offsets this loss. China alone adds about 40 million copper loops per year. They are building the equivalent of a new AT&T every two years! (By the way, the number two country that people who visit our web site come from is China. Number one is the US.)

So if the number of copper loops is growing so quickly, then how many of them get broadband service? Increasingly, the majority of them do. For the rest of this decade, about 100 million lines per year will be upgraded or installed as broadband. Each of those needs a chipset like Cupria™. 100 million lines per year, at fifteen dollars per line[3] equals, a one and a half billion dollar revenue opportunity per year.

We want our fair share of the market. Broadband chips that are a hit product routinely generate revenues in excess of one hundred million dollars per year. A chip that does $100 million is only a 7% market share. We certainly believe that we will achieve much more market share than that. In fact, just the existing customer relationships and the memoranda of understanding[4] that we have announced would achieve this goal.

Since the opportunity is so large, then our efforts here are worth it. There is virtually no limit on the time, the sacrifice, the expense and the passion that we should spend in order to stake our place. Why do we believe that we will indeed achieve our goals? Because the IPSL technology that underlies the Cupria™ product is simply better than the competition. Not better by a little. It’s better by a lot. Enough better that the telcos who control these 1.4 billion loops are taking notice of Rim Semi.

The opportunity is so big, and the customers are so open, that we are taking the time and spending the money necessary to ensure that our chip, and the Cu5001 line card that we use to demonstrate it, are of a very high quality. Our engineering team is working hard to get it right the first time so that the ASSP only needs to be fabricated once. Our goal is to ramp revenues quickly based on a high quality product that needs no rework. We believe that we will achieve this goal.

The revenue opportunity is enormous. The price is worth the prize. We are committed to reaching this enormous income potential, and thus driving shareholder value.



Sincerely,

Brad Ketch
President and CEO
Rim Semiconductor Company