FormFactor : Quantum's Hidden Gem: FormFactor's Critical Role in the Quantum Computing Revolution
FORM Offers what essentially is currently priced as a free call option on the future of Quantum Compute
The recent parabolic move in the quantum computer stocks, is something to hard for a investor to ignore, unfortunately at the current prices it’s hard to get involved with any amount of conviction given the risk of ruin these stocks carry at their current evaluation. Even after the inevitable meaningful pullback these stocks are still at a point where they would be overvalued at any metric. Which makes the possibility of getting a risk free exposure to quantum computing at the largest companies in the world a compelling offer.
The Quantum Investment Paradox
Quantum computing stocks exist in what you might call a "quantum state" - simultaneously full of potential yet fraught with uncertainty. There's no consensus among experts about which companies (if any) will achieve the breakthrough that transforms the industry. However, one certainty emerges: quantum computing spending is poised for explosive growth, with research firms projecting CAGR between 20-32% over the coming years.
This uncertainty makes a "picks and shovels" investment approach particularly compelling. Just as during the gold rush, when suppliers of essential mining equipment often proved more profitable than the miners themselves, companies providing crucial infrastructure and testing equipment for quantum computing development could offer more reliable returns than betting on individual quantum computing players.
FormFactor: The Overlooked Quantum Infrastructure Play
FormFactor (FORM) represents exactly such an opportunity, yet the market appears to be overlooking its quantum computing potential. A thorough review of analyst coverage reveals virtually no mention of this aspect of their business. While quantum-related revenue currently represents a small portion of their business, even conservative CAGR projections suggest it could account for approximately 30% of revenue by 2030.
Here's a detailed overview of FormFactor's quantum computing offerings:
Cryogenic Systems
LF-600 Cryogen-free Dilution Refrigerator
This system provides a quiet environment down to 5 mK, which is crucial for quantum computing operations
. The ultra-low temperatures are essential for maintaining qubit coherence and reducing noise in quantum systems.
It is important to note that currently Cooling Systems represent 5 to 20% of a Quantum PC total Cost.
HPD XLF-600 Large Scale Dilution Refrigerator
Designed specifically for quantum computing processor development, this system enables researchers to work with larger-scale quantum processors in an extremely cold environment
.
Adiabatic Demagnetization Refrigerator (ADR) Cryostats: These systems are used for qubit prescreening, ensuring known-good qubits before deployment in a dilution refrigerator
.
.
Probing Systems
HPD IQ3000 Cryogenic Wafer Prober
This fully automated 4 K prober can handle wafers up to 300 mm in size
. It allows for high-precision testing of quantum devices at the wafer level, significantly speeding up the development process.
HPD IQ2000 Rapid Chip-Scale Prober
This system enables testing of singulated photonic and electronic die at 4 K or 2 K
. It's particularly useful for rapid testing of individual quantum components.
IQ2000™ Cryogenic Chip Scale Probe System
This system can test 10 times more devices at 4 Kelvin compared to previous systems, greatly enhancing the efficiency of quantum device testing
.
PQ500 Cryogenic Probe Socket
This revolutionary solution allows for testing quantum ICs at temperatures as low as millikelvin (mK)
. It's a crucial tool for evaluating the performance of quantum chips under actual operating conditions.
Specialized Instruments
HPD IQ1000 Scanning SQUID Microscope
This automated system enables unattended and high-throughput characterization of trapped magnetic flux in superconducting circuits
. It helps quantum device designers eliminate guesswork and reduce development time by locating and capturing detrimental magnetic vortices.
Software and Integration
EureQa Qubit Characterization Software
This open-source software facilitates easy operation of quantum systems, making it more accessible for researchers and engineers to work with quantum devices
.
Significance and Importance
FormFactor's offerings are critical to the advancement of quantum computing for several reasons:
Enabling Research and Development: These tools allow researchers to test and characterize quantum devices with unprecedented precision and efficiency, accelerating the pace of innovation in the field.
Overcoming Technical Challenges: The extreme low-temperature environments provided by FormFactor's systems are essential for maintaining qubit coherence, one of the biggest challenges in quantum computing.
Scaling Quantum Systems: As quantum computers grow in complexity, FormFactor's wafer-scale and chip-scale testing capabilities become increasingly important for quality control and yield improvement.
Bridging Lab to Fab: FormFactor's solutions support the transition of quantum technologies from research laboratories to commercial fabrication, a crucial step in making quantum computing practical and widely available.
Interdisciplinary Support: The company's offerings cater to various aspects of quantum computing, from superconducting circuits to silicon photonics, supporting diverse approaches to quantum technology development.
Industry Standardization: By providing widely-used testing and measurement tools, FormFactor is helping to establish standards in the quantum computing industry, which is essential for its maturation and commercialization.
Although FormFactor cannot release the names of all their coustomers we have been able to independently confirm they are currently powering the quantum computing operations at Google, IBM, Intel, PsiQuantum, KeySight,SeekQC and Northrup Grunman, and Rigetti.
During my recent call with IR at FormFactor I was told that they are the ONLY North American based supplier of cyrogenic systems, IR mentioned they cannot release individual names but he did say around 99% of the U.S based QC programs are using our tech and mentioned some of the names a listed above as having independently confirmed as well as Microsoft, and Boeing Defense.
.
You can see FormFactor at work on Google’s Willow project here
But wait there’s more
Through a collaboration with Tabor Electronics FormFactor is also working on their own Quantum Computer called Echo-5Q
FormFactor, in collaboration with Tabor Electronics and QuantWare, has developed the Echo-5Q, a full-stack 5-qubit quantum computer designed for research and education. This innovative project aims to lower the barriers of entry for organizations interested in quantum computing
.
Key Features
Performance Improvement: The Echo-5Q demonstrates a 250% improvement in T1 times compared to similar small-scale systems, enabling higher qubit fidelity and more quantum operations per cycle
.Components:
FormFactor's LF-600 Cryogen-free Dilution Refrigerator: Provides a quiet environment down to 5 mK
.
Tabor Electronics' Proteus Direct to RF Control Electronics: Enables simple, robust measurements
.
QuantWare's Soprano-D Quantum Processing Unit (QPU): Features five superconducting transmon qubits
.
Tabor Electronics' open-source EureQa Qubit Characterization Software: Ensures easy operation
.
Accessibility: Priced under $1 million, the Echo-5Q is designed to be more accessible for research institutions and organizations looking to enter the quantum computing field
.
Applications and Benefits
Research and Education: The Echo-5Q offers scientists and engineers immediate access to high-quality physical qubits for staff development and testing of new technologies
.Workforce Development: As the quantum computing industry expands, the Echo-5Q addresses the growing need for practical test beds and a trained workforce
.Customization: The fully integrated solution is customizable to meet specific research needs
.
Technical Achievements
T1 Times: Initial setup has achieved T1s exceeding 100 μs, which is a significant improvement over similar full-stack computing solutions
.Open-Source Software: The system uses an open-source, Python-based software stack, making it accessible for beginners while still meeting the needs of experienced users
.
Summary, you have strong growing, profitable semi-conducter company that stands poised for explosive growth as a picks and shovels play on generative AI that has a completely free call option on growth of quantum computing as they are currently and will be providing integral services to all the major U.S based quantum computing programs in the world. FORM also has a strong investor base with institutional investors owning 96 percent of the shares outstanding led by Blackrock who owns 16% of the company
.
Investment Thesis
FormFactor represents a compelling investment opportunity for several reasons:
Established Foundation: A profitable semiconductor business provides stability and cash flow
Market Leadership: Dominant position in U.S. quantum computing infrastructure
Diversified Exposure: Benefits from quantum computing growth without betting on a single approach
Hidden Value: Market hasn't begun to price in quantum computing potential
After further looking into the companies main revenue drivers I uncovered a very compelling thesis.
The great @wolfejosh recently made a super compelling Non-consensus thesis on the near term future of AI compute.
Wolfe believes that despite the focus on data centers and GPUs, Apple and its ecosystem will drive a shift towards on-device AI inference.
Apple published a technical paper introducing two methods: "Windowing" "Row-column bundling" These methods allow devices to run AI models up to twice the size of their DRAM by storing model parameters in flash memory and loading them into DRAM as needed.
Near Term giga catalyst U.S. Department of Commerce announced new export sanctions on China's chip industry, effective December 31 This may lead to a rush of sales before the deadline.
Wolfe says the best way to bet on this thesis is through SK Hynix which trades on the Korean Stock Exchange. SK Hynix's Market Position 50% market share in High Bandwidth Memory (HBM) HBM is crucial for AI accelerators like NVIDIA's H100 GPUs Acquired Intel's NAND business for $9 billion, gaining 25% market share in that sector SK Hynix as well-positioned to capitalize on the growing AI market, particularly if there's a shift towards on-device AI processing.
I am just here to say that $FORM would be a direct beneficiary if this thesis plays out. SK hynix and FormFactor have a strategic partnership that combines SK hynix's expertise in memory manufacturing with FormFactor's advanced testing solutions.
This collaboration is instrumental in driving innovation in HBM technology, enabling the development of faster, more efficient, and higher-capacity memory solutions for the next generation of AI and high-performance computing.
SK hynix and FormFactor have a strong collaborative relationship centered around the development and testing of High Bandwidth Memory (HBM) technology. This partnership plays a crucial role in advancing semiconductor technology, particularly in the realm of high-performance memory solutions.
Key Aspects of the Relationship Supplier Excellence FormFactor has been recognized as an outstanding partner by SK hynix, receiving the prestigious Best Partner Award16. This award acknowledges FormFactor's significant contributions to SK hynix's growth and competitive strength in the semiconductor industry, particularly in DRAM and Flash memory manufacturing Advanced Testing Solutions FormFactor provides SK hynix with cutting-edge wafer probe cards specifically designed for HBM testing14. These advanced testing solutions are crucial for ensuring the quality and reliability of SK hynix's HBM products, which are at the forefront of memory technology for AI and high-performance computing applications.
Collaborative Innovation
The partnership between SK hynix and FormFactor extends beyond a simple supplier-customer relationship. They collaborate closely on the development of next-generation semiconductor devices, including the latest HBM innovations such as HBM414. This collaboration helps push the boundaries of what's possible in semiconductor testing and memory performance.
Impact on HBM Technology Enabling HBM Advancements FormFactor's testing solutions play a critical role in SK hynix's ability to develop and manufacture increasingly advanced HBM products. For instance, SK hynix recently announced the development of a 16-layer HBM3E, which promises significant improvements in AI learning and inference performance7.
FormFactor's testing capabilities are essential for validating and ensuring the quality of such cutting-edge memory solutions.Supporting High-Performance Computing The partnership between SK hynix and FormFactor is particularly important in the context of high-performance computing and AI applications, where HBM is a key technology. By providing advanced testing solutions, FormFactor enables SK hynix to maintain its leadership position in the HBM market and meet the growing demands of AI and data center customers. Driving Technological Progress Through their collaboration, SK hynix and FormFactor are contributing to the rapid advancement of HBM technology. This partnership helps ensure that new generations of HBM, such as HBM4, can be developed, tested, and brought to market efficiently, meeting the ever-increasing performance demands of modern computing applications.
In summation
FormFactor stands to benefit tremendously from this thesis for three key reasons:
Strategic Partnership with SK Hynix: FormFactor is SK Hynix's critical testing partner for HBM development and manufacturing. As SK Hynix's HBM business grows with increasing AI demand, FormFactor's testing solutions become more essential.
Technical Leadership Position: FormFactor provides the advanced wafer probe cards that are crucial for testing next-generation HBM products, including the new 16-layer HBM3E. Their testing capabilities are fundamental to ensuring quality and reliability as memory solutions become more complex.
Growth Multiplier Effect: If Wolfe's thesis plays out and on-device AI adoption accelerates, both HBM demand (for AI training) and NAND demand (for on-device model storage) will increase significantly. FormFactor is uniquely positioned to benefit from both trends through their testing solutions and deep integration with SK Hynix's development process.
The company's positioning as a critical enabler of both HBM and NAND advancement puts them at the intersection of both the cloud AI and on-device AI growth trends, potentially creating multiple vectors for expansion as the thesis unfolds.