Prospectus Summary
PROSPECTUS SUMMARY This summary highlights information presented elsewhere in this prospectus and is qualified in its entirety by such information. This summary does not contain all of the information you should consider before investing in our common stock. Before you decide whether to invest in our common stock, you should read and carefully consider the entire prospectus, including our consolidated financial statements and the related notes thereto appearing elsewhere in this prospectus and the matters discussed in the sections in this prospectus entitled “Risk Factors,” “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Some of the statements in this prospectus constitute forward-looking statements that involve risks and uncertainties, as discussed under “Special Note Regarding Forward-Looking Statements.”SKYWATER TECHNOLOGY, INC.
Our Business
We are a U.S. investor-owned, independent, pure-play technology foundry that offers advanced semiconductor development and manufacturing services from our fabrication facility, or fab, in Minnesota and advanced packaging services from our Florida facility. In our technology as a service model, we leverage a strong foundation of proprietary technology to co-develop process technology IP with our customers that enables disruptive concepts through our Advanced Technology Services for diverse microelectronics (integrated circuits, or ICs) and related micro- and nanotechnology applications. In addition to differentiated technology development services, we support customers with volume production of ICs for high-growth markets through our Wafer Services.
The combination of semiconductor development and manufacturing services we provide our customers is not available to them from a conventional fab. In addition, following this offering, our status as a publicly-traded, U.S.-based, U.S. investor-owned pure-play technology foundry with Defense Microelectronics Activity, or DMEA, Category 1A accreditation from the U.S. Department of Defense, or DoD, is expected to position us well to provide distinct, competitive advantages to our customers. These advantages include the benefits of enhanced IP security and easy access to a U.S. domestic supply chain. In September 2019, we entered into a contract with the DoD to receive up to $170 million to expand and upgrade our manufacturing capabilities, specifically to build next-generation radiation hardened, or rad-hard, wafer solutions for the aerospace and defense sector which will have significant benefits for other commercial markets. Our fab expansion supporting this project began operations in October 2020. In January 2021, we entered into an agreement with Osceola County, Florida to take over operation of the Center for NeoVation facility in Kissimmee, Florida to accelerate pure-play advanced packaging services for differentiated technologies.
We primarily focus on serving diversified, high-growth, end users in numerous vertical markets, including (1) advanced computation, (2) aerospace and defense, or A&D, (3) automotive and transportation, (4) bio-health, (5) consumer and (6) industrial/internet of things, or IoT. By housing both development and manufacturing in a single operation, we rapidly and efficiently transition newly-developed processes to high-yielding volume production, eliminating the time it would otherwise take to transfer production to a third-party fab. Through our Advanced Technology Services, we specialize in co-creating with our customers advanced solutions that directly serve our end markets, such as superconducting ICs for quantum computing, integrated photonics, carbon nanotube technologies, or CNTs, microelectromechanical systems, or MEMS, technologies for biomedical and imaging applications, and advanced packaging. Our Wafer Services include the manufacture of silicon-based analog and mixed-signal ICs for our end markets. Our focus on the differentiated analog and mixed-signal and complementary metal-oxide-semiconductor, or CMOS, markets supports long product life-cycles and requirements that value performance over cost-efficiencies, and leverages our portfolio of IP. Our Advanced Technology Services and Wafer Services customers total 36 active accounts, and include Infineon, D-Wave, L3Harris, Leonardo DRS, Microsoft, MGI and Steifpower, compared to 11 customers in 2014.
Before we began independent operations, our fab was owned and operated by Cypress Semiconductor Corporation, or Cypress, as a captive manufacturing facility for 20 years. We have leveraged the Cypress system, manufacturing technology and process development capabilities to advance our product offerings. We became an independent company in March 2017 when we were acquired by Oxbow Industries, LLC, or Oxbow, as part of a divestiture from Cypress. Our multi-year Foundry Services Agreement, or FSA, with Cypress, which ended in June 2020, created a runway for us to operate the foundry at a high utilization rate while continuing to expand and diversify the customer base transferred by Cypress.
Our Industry
Semiconductor designs require sophisticated manufacturing expertise and large capital investments for fab build-outs. This had led to the creation of pure-play technology foundries, which focus exclusively on providing semiconductor manufacturing based on processes and technologies that are developed for other semiconductor companies to utilize. Pure-play technology foundries neither offer nor design their own semiconductor products, and spread the cost of the fab across multiple customers.
We seek to help meet the growing and significant demand for specialty ICs. Electronics have become increasingly sophisticated and connected, increasing demand for analog and mixed-signal and specialty microelectronics, such as rad-hard, discrete power devices, superconducting, photonics, MEMS, carbon nanotubes and silicon interposers/advanced packaging solutions. These semiconductors and specialty microelectronics require higher levels of customization and are produced in lower volumes than other electronics. Traditional pure-play foundries generally have been unwilling or unable to manufacture these products either for financial reasons or because they do not possess the necessary IP. Security and IP protection also have become important as governments focus on developing their domestic supply chains.
The demand for these specialty ICs continues to grow due to demand from advanced computing, A&D, automotive and transportation, bio-health, consumer and industrial/IoT markets.
Our Competitive Strengths
We are a leader in technology innovation services, and believe that we have significant points of differentiation that will enable us to continue to succeed in the pure-play technology foundry industry. Our core strengths include the following:
January 3, 2021, we had 34 Advanced Technology Services customers, including five Fortune 300 companies.
Our Growth Strategy
We intend to become a prominent U.S.-based foundry by leveraging our core competencies in specialty process development and advanced manufacturing, while expanding our customer base and presence in high-margin end markets. To achieve this goal, we intend to pursue the following key strategies:
several decades enable us to provide customized process development and Advanced Technology Services. We believe that investing in these capabilities will enable us to maintain our market leadership and attract customers that require lower volumes and intricate engineering specifications.
Our Customers
We serve a diverse array of customers across our Advanced Technology Services and Wafer Services businesses, ranging from designers producing near-commodity volume chips to those requiring highly-specialized next-wave technology solutions. Through our Wafer Services, we support customers producing ICs and devices either on our standard process or on a co-developed process that was produced using our Advanced Technology Services. Customers of our Advanced Technology Service develop chips with a wide range of special processing needs, ranging from light customizations to next-generation technologies. As of January 3, 2021, we had 36 customers.
Corporate Conversion
Prior to the effectiveness of the registration statement of which this prospectus is a part, we intend to change our form of business organization by converting from a Delaware limited liability company into a Delaware corporation and to change our name from CMI Acquisition, LLC to SkyWater Technology, Inc. In connection with these changes, which we refer to as the Corporate Conversion, all of the outstanding limited liability company interests of CMI Acquisition, LLC, which we refer to as units and which are comprised of Class B preferred units and common units, will automatically be converted into shares of our common stock. In connection with the Corporate Conversion, each Class B preferred unit and common unit will convert into a number of shares of common stock determined by dividing (1) the amount that would have been distributed in respect of each such unit in accordance with CMI Acquisition, LLC’s operating agreement if all assets of CMI Acquisition, LLC had been sold for a cash amount equal to the pre-offering value of CMI Acquisition, LLC, as such value is determined by CMI Acquisition, LLC’s board of managers based on the fair value of each share of our common stock (net of any underwriting discounts, fees and expenses), by (2) such per share fair value. As discussed more fully in the section titled “Corporate Conversion,” the amounts that would have been distributed for this purpose in respect of Class B preferred units and common units are determined by reference to the terms of CMI Acquisition, LLC’s operating agreement, with different values applicable to each series of units. For purposes of the Corporate Conversion, pre-offering “per share fair value” will be determined taking into account the assumed initial public offering price of our common stock.
Accordingly, and based on an assumed initial public offering price of $ per share of common stock, which is the midpoint of the price range set forth on the cover page of this prospectus, our outstanding units will be converted as follows:
Risks Associated With Our Business
Our business is subject to a number of risks that you should be aware of before making a decision to invest in our common stock. These risks are discussed more fully in the section titled “Risk Factors” and include, among others:
Corporate Information
Our principal executive offices are located at 2401 East 86th Street, Bloomington, Minnesota 55425. Our telephone number at that address is (952) 851-5200. Our website is www.skywatertechnology.com. Information appearing on, or that can be accessed through, our website is not a part of this prospectus.
We were originally formed on October 3, 2016 as a Delaware limited liability company under the name CMI Acquisition, LLC. We are a holding company that conducts operations through our wholly-owned subsidiaries, SkyWater Technology Foundry, Inc., which we refer to as SkyWater Technology Foundry, SkyWater Federal, LLC, which we refer to as SkyWater Federal, and SkyWater Florida, Inc., which we refer to as SkyWater Florida. SkyWater Technology Foundry is our principal operating subsidiary through which we provide our custom design and development services and wafer manufacturing. SkyWater Federal was established to bid on specific procurement contracts and operate as a prime contractor for the U.S. Government. Once approved, SkyWater Federal will coordinate support services for our U.S. Government contract-related activities within SkyWater Technology Foundry. SkyWater Florida was established to operate a center for technological research and development, including certain semiconductor manufacturing equipment, and an advanced water treatment facility in Osceola County, Florida.
Our operations were acquired in March 2017 as part of a divestiture from Cypress. In our current corporate structure, CMI Oxbow Partners, LLC, which we refer to as CMI Oxbow, a Delaware limited liability company affiliated with Oxbow Industries, LLC, owns all of our outstanding voting interests. Before the closing of this offering, we will convert into a Delaware corporation and change our name to SkyWater Technology, Inc. as described above under “Corporate Conversion.”
Emerging Growth Company Status
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act. For so long as we remain an emerging growth company, we are permitted and currently intend to rely on the following provisions of the JOBS Act that contain exceptions from disclosure and other requirements that otherwise are applicable to companies that conduct initial public offerings and file periodic reports with the SEC. The JOBS Act provisions:
We will remain an emerging growth company until:
Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company” (as we do as of the date of this prospectus), which would allow us to take advantage of many of the same exemptions from disclosure requirements, including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.