Deal focus: Morse Micro takes Wi-Fi to the next level

There are currently 7.7bn internet-of-things (IoT) devices in circulation globally, and that number will grow to 25.4bn in the next seven years, according to UK-based IT research firm Transforma Insights. Meanwhile, the number of non-IoT devices will remain steady at about 10bn.

“Don’t underestimate this market,” said Mike Nicholls, a partner at Australia’s Main Sequence Ventures. “People say IoT didn’t really have the impact we thought it would, but they’re not thinking about it the right way. All these sensors out there in the world – we’re not thinking of them like IoT devices, but they are. There are literally hundreds of millions of products shipping a year.”

Having been hatched from Australian science agency CSIRO, the inventor of Wi-Fi, Main Sequence has been conscious of this perspective from its inception in 2017. That’s when it made its first investment in Wi-Fi chipmaker Morse Micro alongside PAN Group, a local private equity firm.

Main Sequence led a USD 24m (USD 16m) Series A round two years later, channelling CSIRO’s Wi-Fi royalties back into the industry’s next generation. CSIRO was a key strategic partner during this period, supporting prototyping and test work and helping bridge the chasm between research and production.

Main Sequence closed its second fund on AUD 250m, sourcing the entire corpus from third-party investors to cement its independence, yet a strategic connection to CSIRO remains. The firm re-upped in Morse this month as part of a AUD 140m Series B led by Japan-listed semiconductor company MegaChips Corporation.

The deal featured a mix of financial, academic, government-affiliated, and industry-related investors. They include Blackbird Ventures, Skip Capital, Uniseed, Clean Energy Finance Corporation, and Malcolm Turnbull, the former Australian prime minister.

“There aren’t that many semiconductor investors globally,” Nicholls observed. “It’s an acquired taste, and few people understand the process of bringing a chip to market.”

The thinking is that while it’s a long road to commercialisation, those that make it to the finish line will become huge – and Morse’s core offering appears to position it well for this narrative. The company has produced a Wi-Fi chip that uses HaLow technology, which effectively gives devices more than 10x the range of standard wireless networks and enhanced ability to radio through walls.

“It’s probably the first real chip of any significance that’s been built for 20 years in Australia,” Nicholls said. “There have been a lot of little design companies and foreign R&D companies with a lab in Australia, but nobody has actually designed and built a whole chip.”

HaLow’s advantages have made it industry standard only in the past year, so production knowhow remains relatively scarce. Morse retains some intellectual property rights around various components, but it’s main barrier to entry is the sheer complexity of prototyping, convincing device makers on specific designs, and industrialising production.

It is hoped MegaChips delivers on this front, especially in terms of accessing Japanese knowhow and industrial connections. This will also include support in quality assurance, sales, and new distribution channels. The two companies will engage in joint sales and promotion activities.

Nicholls estimates offhandedly there are 5,000 different types of Wi-Fi-dependent IoT devices in the market, and use-cases could multiply rapidly if adoption trajectories play out as forecast.

Logistics is a likely hotspot for upcoming demand, given the ability for HaLow to cover an entire warehouse with a single device, penetrating crates or any obstructions in the area. Surveillance is another prospective growth area, with the proliferation in camera systems requiring cheaper connectivity options than ground-based fibre.

“The other one that could be interesting – because you have a range of more than 1km – is person-to-person calls that bypass the telco. It’s basically a walky-talky, but with the security kernel on these, you only broadcast to one person, not everyone,” Nicholls said.

“There’s a whole range of possibilities around that. Maybe not everyone believes that that’s the case, but I think there’s actually a play there.”

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• Topics
• Australasia
• Technology
• Early-stage
• Australia
• Main Sequence Ventures
• Blackbird Ventures
• Skip Capital
• semiconductor