Ethernity Networks Ltd on Thursday reported good progress in a new chip development venture and fulfilment of a US aerospace contract, but warned it could face order cuts due to rising costs.

The Israeli supplier of data processing semiconductor technology for networking appliances said it was in talks with two original equipment manufacturers to evolve its circuit technology. Ethernity is interested in developing a custom-designed data chip known as an application-specific integrated circuit or ASIC.

‘The company is in meaningful discussions with several well-established tier-1 third-party ASIC vendors that have expressed their interest in development of the ASIC,’ Ethernity said. ‘Should it commence, the company plans to select one of them’.

The firm estimated the overall non-recurring cost to engineer the chip would range from $15 million to $17 million, and would be funded by prospective customers. Ethernity added that minimum purchase commitments would be required before entering the development phase.

Ethernity has not yet entered a contract to develop the ASIC.

‘We are making progress in negotiating with one of the two vendors that has indicated an interest to select Ethernity and in funding an extensive part of the NRE,’ the firm said, with the possibility of funding some of the non-recurring engineering cost through another vendor.

An existing contract with a US aerospace customer is progressing well, according to Ethernity. The company said it has passed the initial milestones of the around $1.1 million project, which was approved by the US government in September. Ethernity said there is potential for a contract extension and further opportunities with this customer, pending negotiations.

Despite its optimism, Ethernity cautioned against possible order cuts, after one of its semiconductor suppliers reported a ‘significant increase in component costs’. Ethernity has not received all anticipated orders from a US-based fixed wireless customer and warned the customer may reduce orders due to Ethernity not meeting its target price.

This follows revenue decline in Ethernity’s 2024 half-year results, which the company said was due to reduced hardware sales.

Ethernity shares were down 4.6% at 0.13 pence each on Thursday afternoon in London.

Copyright 2024 Alliance News Ltd. All Rights Reserved.