Company Background

The Company was incorporated in Malaysia under the Act on 27 September 2021 as a private company limited by shares under the name of Oppstar Sdn Bhd. On 22 December 2021, the company completed the Acquisitions which resulted in Oppstar Technology and Alpha Core becoming wholly-owned subsidiaries. Subsequently, on 3 January 2022, the Company was converted to a public limited company to facilitate the Listing. After the completion of the Sophic Automation Subscription on 17 January 2022, Alpha Core became the 57.50% owned subsidiary of Oppstar. On 19 May 2022, they completed the AIRIS Labs Acquisition which resulted in AIRIS Labs becoming the indirect wholly-owned subsidiary via Oppstar Technology.

The company is an investment holding company. Through the subsidiaries, the company is principally involved in the provision of IC design services covering front-end design, back-end design and complete turnkey solutions. They also provide other related services such as post-silicon validation services, training and consultancy services.

As at the LPD, the group structure is as follows:

Use of proceeds

1. Business expansion through expansion of the workforce - 47.96% (within 36 months)
2. Establishment of new offices - 23.98% (within 36 months)
3. R&D expenditure - 11.51% (within 36 months)
4. Working capital - 12.14% (within 24 months)
5. Estimated listing expenses - 4.41% (within 2 months)

Business expansion through expansion of the workforce - 47.96% (within 36 months)

Due to the nature of the business, the company labour costs accounted for more than 90% of the total cost of sales for the Financial Years Under Review and Financial Periods Under Review.

The company intends to earmark approximately RM50.00 million for the expansion of the workforce to support the demands of the existing and potential customers and to continue developing the human resources capabilities, thus ensuring its long-term sustainability. They aim to achieve this by increasing the total workforce by 280 comprising design engineers for IC design and engineers/technicians for post-silicon validation services. Such an amount is expected to be utilised over 36 months. The company intends to hire the new design engineers and post-silicon engineers/technicians locally and may also hire expatriates from countries such as India and Indonesia. These design engineers and post-silicon engineers/technicians are expected to be based in Penang and Kuala Lumpur.

The details and number of design engineers and post-silicon engineers/technicians to be hired are as follows:

The timing for the Group’s recruitment plan is as follows:

The cost of the Group’s recruitment plan is as follows:

The company believes that the expansion of its workforce will allow them to meet the demands of existing and potential customers. This in turn will continue to enhance the Group’s earnings and will also facilitate its business strategies.

Establishment of new offices - 23.98% (within 36 months)

At the LPD, the company operates from rented offices in Penang, Kuala Lumpur and Shanghai.

Currently, they have ODC facilities of approximately 10,500 sq ft in the rented offices in Penang and approximately 3,000 sq ft in the rented office in Kuala Lumpur. There is no ODC facility in the rented office in Shanghai. ODC facilities represent the designated areas within its premises that provide design services for their customers. This will enable their customers to have their outsourced design centres and is based on the customers’ requirements in terms of planning, analyzing, designing and managing tasks. The ODC facilities consist of a dedicated design space with designated access and a server room with independent network infrastructure, fixed infrastructure protocol address and remote log-in features.

The company intends to use approximately RM25.00 million for the establishment of new offices, by renting, New Penang Office, India Office, Singapore Office and Taiwan Office.

The breakdown of the estimated costs of establishing these new offices are as follows:

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R&D expenditure - 11.51% (within 36 months)

Currently, customers engage the company to develop IPs within an IC and these IPs are owned by them.

The company completed R&D on AI ASIC, which is an IC for AI and machine learning capabilities in 2020 (tape-out was completed in 2019).

As part of the continuous R&D efforts, the company intends to earmark approximately RM12.00 million for the development of its own IPs for RISC-V-based SoC, IPs for AI and machine learning as well as IP for FPGA. This is expected to further enhance and differentiate its service offerings. The development of IPs for RISC-V-based SoC, IPs for AI and machine learning as well as IP for FPGA is expected to span over the next 36 months.

Typically, the designing of an IC involves the development of IPs that provide specific functionalities. Some of these IPs can also be applied to other ICs which require such IPs. In doing so, the designing process will have a shorter product development cycle. Through the development of its own IPs, the company can potentially increase the revenue stream by licensing these IPs, which is an industry norm.

The company intends to undertake the following:

1. IPs for RISC-V-based Soc
2. IPs for AI and machine learning applications
3. IP for FPGA

The estimated cost of the R&D expenditure includes the purchase of software (which includes EDA tools), fabrication and packaging costs, payroll expenses for 12 R&D employees over the next 36 months and registration of intellectual property rights. The breakdown of these costs is as follows:

Working capital - 12.14% (within 24 months)

The Group’s working capital requirement is expected to increase in tandem with the business expansion through the expansion of its workforce and the establishment of new offices.

The company intends to use approximately RM12.65 million for the Group’s working capital requirements for 24 months, the details of which are as follows:

Business model

The diagram below shows the business model:

The company business segments:

1. IC design service

        The company is engaged by the customers in manners as explained below

        a. Specific design service

The company provides specific design services to its customers based on the resources required for a specific project over a defined time frame.

The customers for this segment generally would already have in-house design teams and the services complement their existing teams. These customers include IDMs, fabless companies, fab-lite companies, and other IC design houses.

The designing of ICs requires multiple design teams with specialized knowledge in their respective fields of expertise and tight adherence to product development timelines. Customers engage us for specific design services to address their resource and/or skills gap required for their IC development needs.

        b. Turnkey design services

The company provides turnkey design services to its customers which comprise IP design turnkey and full IC design turnkey to be performed based on the customers’ specifications.

For IP design turnkey, the company provides IC design services for functional blocks within an IC based on the customers’ specifications. The customers for IP design turnkey generally would already have in-house design teams, but they may lack certain capabilities and/or resources. The customers for IP design turnkey include IDMs, fabless companies, fab-lite companies, and other IC design houses.

For full IC design turnkey, the company provides IC design services involving the designing of multiple IPs, integrating them into a single IC, managing the project and providing design automation functions based on the customers’ specifications. The customers for full IC design turnkey may not have the capabilities to design the entire IC, or they could be in a situation where they may choose to focus their resources on building other ICs. This allows us to supplement the customers’ range of ICs. The customers for full IC design turnkey include IDMs, fabless companies, fab-lite companies, and electronic system providers. 

Further, by providing turnkey design services, customers can reduce costs and project risks by engaging a single service provider instead of managing multiple service providers. 

In comparison with the specific design services segment, the turnkey design services are managed by the company. This allows them the flexibility to form the teams which are best suited for the project. Such projects are typically carried out at the customers’ premises or their premises through the setup of ODCs

        c. Others

The company provides other related services such as post-silicon validation services, training, and consultancy services.

Click here to continue the IPO - Oppstar Berhad (Part 2)

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