Sequans Communications S.A. (SQNS) Earnings Call Transcript & Summary

Hello, everyone, and Happy New Year. I'm Claudia Gatlin, Head of Investor Relations. It's my pleasure to welcome you to our event today. Let's spend a moment talking about the process. We've tried to make this as flexible as we possibly can and as interactive, given the limitations of the virtual environment. You will be able to submit questions in writing at any time during the entire presentation using the question box function on the conference platform. Take a moment to locate that. I believe it's right below the slide portion of your screen. Keep in mind that this method lends itself to short questions, and know that we will pause midway through the formal presentation to answer a few of these questions we've received up to that point. Also, if you prefer, we will have an interactive Q&A session at the conclusion of the formal presentation, which will lend itself to longer or multipart questions. In order to participate in the interactive Q&A, you will need to dial in to the phone bridge in a similar fashion to the way we conduct our quarterly earnings call Q&A. Please take a moment to jot down either the toll-free number or the second number that you see on the slide. I'll pause for a moment while you have a chance to do that. You may dial into the phone bridge at any time during the presentation. In fact, that's probably a good idea to dial in early to avoid a crowd all at once just before the interactive Q&A. Once you're connected to the bridge, you will have a better overall experience, if you turn down the volume on the phone and listen to the balance of the presentation on your computer. Then when it's time for the interactive Q&A, you'll want to make sure your computer microphone is muted and the volume turned down and listen to the Q&A via your phone, if you're about to ask a question. In the interest of time, the interactive Q&A, we ask that everyone restrict themselves to one question and one follow-up until everyone has had a chance to participate. If you prefer using the online question function, there's no need to dial into the bridge. You will hear all the interactive questions and answers in the same manner. We will answer additional written questions at the end if time permits. Also, a replay will be available from the Investors section of our website. Before George begins the presentation, we'd like to remind you that the presentation may contain forward-looking statements. Actual results or outcomes may differ materially from those that may be expressed or implied. Some factors that could cause results or outcomes to differ are noted on this slide. More information or factors that could affect our business and financial results are included in our public filings made with the Securities and Exchange Commission. Now it's my pleasure to introduce George, George Karam, our CEO, and he will begin the presentation. George?

Thank you, Claudia. Welcome, everybody, and I'm happy to host this event, and very pleased to have you with us. Let me start by saying to all of you wish you a great new year, and hopefully, it will be a year of success and happiness for all of you and your families. I'm here, we're going to go through this presentation. And I have with me Deborah Choate, our Chief Financial Officer. And I invited as well, you don't see them on the camera, but they are next to us, 2 members of my staff, Bertrand Debray. Bertrand is running the broadband business for us. And Didier Dutronc, Didier is running the Massive IoT business for us. So both of them will be helping me in case we need to address some of the questions and I'll let them to address it directly. So the agenda, I'm going to start -- I'm using a presentation here with you, and you will see that we'll have a couple of video that we'll be sharing with you during this presentation. I'm going to start -- cover all the market and the strategy and our position, I would say, in this market. And at the end, Deborah will take you through the financial model, all financial-related topics. And obviously, we -- as Claudia has mentioned to you, we'll have clear sessions to address your questions. So Sequans, we are focusing on 2 major trends: the IoT and the cellular 5G. These 2 trends are the most important trends in the -- for the decade. And both of them, they enable, what I would call a megatrend, which is the digital transformation of the world. Together, if we look to those 2 opportunities, they represent more than $8 billion revenue opportunity for Sequans in the coming 5 years. But before moving forward to the detail of this opportunity. Let me discuss a little bit how the 2 topics connect together, the IoT and the 5G. First of all, starting with IoT, as I said before, this is really a key technology enabler, let's say, in general, to make the digital transformation megatrend. And when you think about IoT, on one side, you can think is it the technology, it's more than one technology in the IoT? Is it a market? It's not necessarily one market, there's many markets. So the best way to think about IoT is like it's an extension of the Internet, the regular Internet that we all have since years, where the purpose of this Internet was to connect the people. And here, we're moving to a world where the purpose of Internet is to extend and connect all things in the world and everything. But why we connect them? I mean the main purpose of making this connection is to be able to gather all the data from all those things. And if you can collect all this data and put them in a machine where you can make smart decision, you can act on those things, to turn the world more efficiently, I tend to say. So obviously, the goal here is really to improve productivity, to improve efficiency of your process, but also about, I would say, addressing some of the concern of the environmental and social responsibility. When you think about connecting a meter in general, you could say the first purpose of this is to avoid sending someone to the home to read the meter. But there is another purpose. If you connect the meter, you can act on it and you can make the grid much more efficient and you can reduce, I would say, the consumption of energy in general. Also, when you think about the social responsibility, the pandemic give us a real case here, where we -- it was crucial to connect everybody. So everyone can work from home, and you can operate your business from home. So the goal of IoT, as I said, is really to optimize the industry and go to industry for that 0 and optimize the energy in general, get sustained development, so all those key terms are really the main goal of IoT, which is really a key component of this digital transformation of the world. And to deliver on the purpose there and essentially to achieve the objective of IoT, you need many technology, but you can group them in 2. You need one key technology, and you can talk about it like computing. So you need to compute. And computing, obviously, you can see it in the cloud. You can see it on the edge. And it's not only a machine, it goes with algorithm and where you need AI to run on those computer to make the best decision in the computer when you gather all this data to the computer. But you need as well as the other a piece of the technology, which is the connect. How to connect those things to that computer, and this is really about the connectivity there and the best way to get this connectivity is to have wireless connectivity. Because if you're connecting things everywhere in the world, there is no other way that you can do it if you don't use wireless connectivity. And obviously, you have many technology for wireless connectivity. You can have some short range connectivity, Bluetooth, WiFi. But for all those technology, you need a gateway so you're still stuck and you cannot have a global connectivity. When you think about it, the only global connectivity that you can find in the world is really cellular. And on top of this, you can get with this a secured connectivity and a reliable communication. So this is really the link between cellular and IoT. And before moving forward, let's have a discussion about why Sequans is different there. Essentially, we are the only company able to provide a comprehensive cellular offer for all this IoT market. So our solutions are optimized specifically for IoT and not really, which was the -- the baseline of cellular is coming really from smartphone. People get to cellular because they want to connect people and they want to connect phones. And that's why the technology, I will say, originally is coming from this area. However, with this IoT, with this -- the new technology we are developing now is really all about optimizing the cellular technology to make it fit for this IoT -- for the IoT application. And this is what makes the difference in Sequans that we are really the only company able to provide a comprehensive cellular IoT offering. So on cellular, when you talk about cellular, obviously, the history of cellular is coming from the 2G world, and this evolved to 3G, then we talk about 4G and 5G. And when you think all this, I mean, you can think about, okay, this is the old world, and obviously, the new world moving to 4G and 5G, people can think about speed. So you can say, we moved from 2G to 5G because we wanted to get higher speed. 2G was really in the 100 kilobit per second, even below. Then we moved to 3G, you were able to do tens of megabits per second and when we came to 4G, we start talking about hundreds of megabits per second, maybe approaching the gigabit. And with the recent 5G technology, we are able to exceed the gigabit per second and even go beyond 5 gigabits per second. So you can say it's all about speed only. But the reality, the foundation behind the solution from 2G, 3G to the 4G, 5G world is really that 2G, 3G was a technology optimized for those and 4G, 5G is optimized -- it's beyond the speed. That's why 4G, 5G is the best technology that we need for IoT because as we said, IoT is all about data, and if you want to gather those data in the networks, you need best technology, which is optimized for data, and this is the 4G, 5G. One more word here before moving on this slide, obviously, we heard a lot for a while about 4G and recently, people are hearing about 5G. So let me stress one thing that when we are talking about the 3GPP and the standard, we talk about releases, and we evolve through those generation 3G, 4G, 5G by adding -- moving from one release to another release. So as soon as you cross release 15, with 4G, you are moving to the 5G world. So first of all, the evolution from 4G to 5G is really a continuity in the same time because the 4G technology evolving with the release 15, they become 5G ready with some advanced feature that 5G broadband. But in the same time, the 5G releases introduced a new radio, which really -- the purpose of this new radio is to address the high-speed connection of the 5G and also to address the low latency connection of the 5G. And I will come back to this. But again, you will hear me talking about 5G, but I'm grouping with the 5G, the 4G, which is behind it because all our 4G technology is 5G ready. One more slide on this topic and to illustrate the potential of the 4G, 5G, this shows -- and this is not really to talk about the opportunity. We'll talk about it later on. But this is really data you can get from Ericsson, showing the number of cellular IoT connectivity that you have. And the remark there is that, first of all, it's growing and growing fast, and we're reaching more than 6 billion connectivity in 2025. But the other element there is you see that 2G, 3G is really -- has peaked and it's declining. And all the IoT is really sit on -- sitting on the 4G, 5G technology. And you see that all the growth is coming there. And this is the focus of Sequans. All what we have done in Sequans is really developing 4G, 5G since inception. And on this slide, it shows to you the leadership position that Sequans has created in this area of 4G, 5G. So since inception, all what we have done in this company is developing 4G. Obviously, there is a first phase where maybe some of you remember, where Sequans was playing in the WiMAX space, which was like a first-generation of 4G. And we had a lot of success there where we brought a lot of technology to the market and enabled many devices. But we can -- when we look to 2011 and beyond, since this date, I mean, the company is really focusing, move to the LTE -- from WiMAX to LTE. Brought at the beginning, the first generation of 4G LTE to market in 2011. And then in 2015, we start looking to the variant of this technology to address the low speed of IoT, what we call the Massive IoT. And here, we brought the first product to the market with Category 1 technology. And this was really -- we were the first guy to push this technology to market and make it successful. When you look today on a worldwide basis, all the carrier, they have Cat 1 enabled. And in 2015, when we came with this technology, no one has this enabled on their network. And we started this work with Verizon, and we make it now available worldwide. Then after this, in 2016, we introduced the low-power technology of IoT and this is really the LTE-M and the IoT. And it was, again, a first time in the market to happen in 2015, and we turn the devices on. And since then, we continue developing our technology, and we introduced in '19 and very recently, 2 new product, 2 next-generation product, 1 on LTE-M, which is our Monarch 2 and our Calliope 2, which is the next generation Cat 1. And we'll talk about this later, we are preparing now, planning to bring to market in 2022, what we call the 5G new radio, which is the high end of 5G broadband to market, and this is really in the work today. So again, we established with all this investment, a category either for Sequans, making us really -- putting us in a great position to take the significant market share of this $8 billion opportunity. If we look to the 5G now, I would like to stress one thing that when you look to 5G, you could say, okay, then it's one technology going to the IoT. In reality, we are forced when we look to the 5G to build many flavor of those 5G technology to address different requirement of IoT. When you look to the IoT requirement, you have many requirements there. And you can group them into 3 categories. Some application, we call them under Broadband. Others, we call them Massive IoT. And the third one is Critical IoT. And when you look to those category in the Broadband IoT, reality, the requirement here, the technical priority there is really to get speed. So it's all about speed. The application you can think about mainly a router application where you need speed, 100 of megabits, gigabit and even approaching 10 gigabits per second. And obviously, at the same time, you're looking to get the technology, which is very efficient in terms of bandwidth use because you know there is big scarcity, as you know, for the radio resources, and you need to use the spectrum in the best way possible. So any technology allowing you to put more speed, more throughput on this bandwidth is really something very important. So Broadband IoT, this is really about speed. Then when you go to the Critical IoT, here, you're talking about technology where what matters is not necessarily the speed. Speed can go with it. But really, we are looking for the latency. So we're looking for applications like robotic. We're looking for AR, VR, we are really cloud gaming or whatever you want to call it. Latency matters. We need to have something in the millisecond, and you need a technology really where the optimized feature is really latency or also reliability when the application is mission-critical application. And the third segment is what we call Massive IoT. Here, it's all about power consumption in general. So we need to have solution where the power consumption is optimized because most of those devices, they run on a battery and then you need to have the 5G technology optimized for power. And at the same time, optimize in cost, the connectivity on the other side could be narrowband. We don't need really a lot of speed or a lot of latency, but we need really power and cost to be very optimized. If we look now to the use cases of this, and here on this slide, we tried, obviously, when you look to IoT, you have a lot of use cases, very large market fragmented, but we group them into 2 category, one which is category you can relate to consumer application. And the other one is really pure industrial application. So obviously, in this application, you can talk about wearable, pet trackers, you can talk about security at home. This is all related to consumer application. And on industrial, you can see about, obviously, tracking pallet, fleet management or robotic, all those kind of applications. So when you think to all this, and then you say, okay, we need 5G technology for all those applications, but in reality, you don't need the same 5G. You need special technology for each one of them. And if you look there, each one is looking for a specific flavor of 5G. And that's what makes things even more complicated when you are playing in this space because it's not about bringing one cellular connectivity and one chip, we need to come with the portfolio of many platform, Massive IoT and Broadband IoT. And even there, when you go to the Massive IoT, you need to have something addressing the narrowband IoT, very, very low speed, a little bit higher, the LTE-M, a little bit higher in speed, Category 1, where you need maybe voice, you need other features. And then when you move to the application requiring Broadband IoT or Critical -- Broadband and Critical, here, you need maybe low category, Category 4, Category 6, where you have 150 megabit, 300 megabit or even to go to higher 5G category or higher Cat 4 category like Cat 18 and 5G new radio where you're going beyond the 1 gigabit per second speed. So this is really the landscape when you look to the 5G for IoT. And the reality of what we have done in Sequans is really, we managed over this investment in the last years, developing all what's needed there, and we defined a portfolio of products covering all those applications. And maybe the best way to share with you this road map and our product portfolio is to run this video. So let's run this video. [Presentation]

Okay. So let's now go back to the $8 billion opportunity we spoke about at the beginning and share with you more detail about our addressable market. So the source of this study is ABI Research. We went from this study, obviously, made a little bit of fine-tuning on our side based on the -- our market understanding but essentially, taking the total addressable market. And from the total addressable market of cellular technology, obviously, we focus on IoT. So we excluded smartphone and tablet. We also took out some of the 2G, 3G requirement there, some of the operator, they are looking for 4G. But at the same time, they ask for 2G, 3G fallback and Sequans is really pure-play 4G, 5G. So we took all those pieces out of the market as well. And obviously, we're focused on the market where we play. You know that we are -- Sequans focusing is outside China, in general, a big focus on the U.S. Japan and Europe. And for this reason, to go to our SAM number, we took out the China piece. And when you look to this opportunity here. This is the $8 billion for the coming 5 years. If you look to this, we reach around $1 billion in 2022 and $2.5 billion in 2025. This is more than 40% growth in average over this period of time. When you look to the detail there because we're putting there the Massive IoT and the Broadband IoT, you realize that the Massive IoT opportunity in general is around 30% of the total market and 70% in the Broadband. And more specifically, if you dig into the detail of the Broadband, realize that the 5G opportunity, the 5G new radio is really providing the growth for broadband and essentially starting in 2022 and beyond. All the growth coming in this Broadband segment is coming from the new 5G technology that we are working on. So that's why, by the way, one of the key elements why Sequans is investing in this because when you look to the total opportunity, Massive IoT is really huge for us, and we did a lot of investment there to capture this piece of the market. We have existing 4G to capture some of the piece of the market in broadband. But we need this new 5G technology to capture a significant piece of the market in -- beyond 2022. Also, the other element here, when you look to it, all those numbers, they show in dollar amount. We put on the slide as well, the growth in terms of number of units. And obviously, no surprise, in number of units, if we have to present this slide a number of units, the Massive IoT will be much bigger than number of unit versus Broadband. And this reverse, when you talk about dollar amount because, obviously, the ASP of the Broadband technology is much higher than the ASP of the Massive IoT. Specifically with the arrival of the 5G because here, we're talking about very high ASP, talking about ASP exceeding $30 or $40 per chips. So this is why we have, I would say, in terms of dollar amount, the Broadband is bigger than the Massive IoT in total. So again, very exciting opportunity for Sequans. And as I mentioned before, we have done all the investment there to address this opportunity with the Massive IoT ready with the second-generation with a leadership position. And in the Broadband, we have some of it already in hand, and we are working on the new technology to bring to market. But before turning this page, maybe the best way to give you more color on this market, I'm happy here to invite Dan Shey from ABI Research. He is Vice President, enabling platform. So Dan has 25 years’ experience in this industry, with more than half of this experience spend in IoT market. And maybe I felt like the best way to comment on this market opportunity and it's timing and the challenges that we went through is to run this video where Dan is presenting. So let's run the video. [Presentation]

So with this, let me -- before concluding this section about the market opportunity and our position there, I felt like I need to share with you as well the competitive landscape. And I have a few remarks on this chart. The first one is that the number of the competitors has reduced over time, which is interesting enough. As you know, the reason is really coming from the fact that the genesis of cellular is really in the smartphone. And all the players that they were addressing and working on this technology, they were addressing this market. And with the consolidation of the smartphone market and the dynamic that's happening there, we've seen many guys exiting this market because of the challenge there. And obviously, it's hard for them to come back and to play in the IoT space. Because they lost all this technology. And obviously, the recent one that we all heard about. It was Intel exiting this market. Now obviously, the other mark we have is that we have Chinese competitor, and I don't want to neglect them and I'm not diminishing them at all. They are very serious. But those guys, obviously, they are focusing on China market, which has some special priority in terms of technology, I tend to say. So -- and on top of this, taking into account the dynamic of what's happening in the world, those guys, they are not visible or competing less with us in our addressable market outside of China. So now if you exclude all this out and you look to the remaining picture, so you see that the number of competition there or the -- in front of the opportunity is not really very, very large, and it's quite interesting. So we have competition, but the competition is really what I will say, the number is acceptable to give us all the chances with a good position, with good product to capture a nice market share. And when you look to the competitive landscape, you can compare them like 2 categories. The 2 big players, and obviously, those guys coming from the smartphone, they focus on smartphone. And by definition, they have large portfolio to address this market. So the way we compete with them is that they don't come with the best solution to compete in the IT space because all their technology has been developed for the smartphone, where they have a huge market. And when they come to the IoT, they serve it with the best way possible without really building things from scratch. And then you have another category of 3 other smaller players that we compete with. And here, what's interesting to look is that they are not present in the whole space where Sequans is playing. And we look to this picture we come like really the unique company focusing on IoT and able to cover all this space. And this is really what I wanted to share with you before. So going forward and before concluding -- to conclude this section, I mean, it's -- after talking about the market and our position, I believe it's important now maybe to pause and take a few questions here. But while we gather them, take a look to this video, showing a few cases where our product is used, and we selected here some use cases playing in the application of smart home and consumers. So let's run this video while we are looking for the questions to address. [Presentation]

Okay. Sorry for -- I don't know how this looks for you, but we're struggling a little bit to read those questions on the platform. But thank you. So I see here one first question, which is any sense of what your piece of this multiyear $8 billion market will be? Obviously, we'll talk about this in the second piece of the presentation, what we'll be doing there. But the goal for us, obviously, when you look to competitive landscape and so on, if you ask me, my internal goal is really to exceed the 20% market share as a company. And there is no reason why we'll not go there. But you will see later on when Deborah will talk about the model. We don't need that level really to achieve our target financial model at scale. So this is what I could say there. The second question we have, clarification on the Critical IoT TAM, while it includes 5G, it includes 5G, fixed wireless access. In fact, indeed, this is good question. When we talk about 5G broadband, which is where we have the 5G, let's say, the new radio, the latest of the 5G modem technology. There, you can -- as we said, there are 2 targets there. There is a speed and for speed, you don't care about the latency. And this is -- when you go to fixed wireless access, that's all what you need. You need speed and you need bandwidth efficiency. But obviously, the purpose there as well to improve on the latency and the latency is really to go for the Critical IoT market. And the Critical IoT market, is really a part of it could look like -- for consumer like AR, VR, as I mentioned, but also part of it is really for robotics and industrial. And in our business and our number there, obviously, we combined. I mean, this includes the fixed wireless. And when you look to the SAM, it has the fixed wireless access. They are included. To be honest, the Critical, which is coming really, Critical IoT in the industrial space, this will take time to develop. So we're not assuming that this really will come very fast. When you look to the data, this is coming really after 2023, while the fixed wireless access, it's available or people are pushing this even now. As soon as the network is there, you will start seeing application. But obviously, the number, just wanted to -- include this. But if we have to project those numbers beyond 2025, I suspect that we'll have more and more Critical IoT behind the growth generated into 2025. Then maybe -- maybe we can take a question here, which is regarding what do you see as the killer app for Massive IoT? And if you allow me, I'm going to ask Didier to address this. Didier?

Yes. In the Massive IoT, in fact, we don't have really a killer apps as we have with -- we may have seen on the consumer side. That's what we try to identify is really the segment, which are, let's say, the key -- will have a key traction for the next couple of years. And 2 are to be highlighted today. One is more the all what we call the Smart City, which includes smart meter, street light, all the management of a city and their interconnection inside the city. And this one is mostly something can represent roughly 30% of our share. And the second one, which is also quite important. And it has been already highlighted with the -- I mean the video, et cetera, is all what we call the smartphone, which includes security, cameras, connected cameras, all this kind of stuff, which are really growing fast. And we see that LTE replacing all kind of technologies. On top of that, there is a recurring business, which is the segment, which is asset trackers, which is going also quite steadily. But we see also some emerging application, maybe boosted by the environment today like the ELs, and we see -- and you have seen some announcement around this kind of application recently with the Sequans, which is really also be a trend for the next 3 or 4 years when I believe this will be really amassed and touching also a bit some consumer application like hearable when we see the trend of using the voice to comment or to have some voice basic streaming. We also believe that this will be also a good traction for the next couple of years.

Thank you, Didier. I believe we have still -- maybe we can take some time. One more question. This is for Broadband IoT, how much of the Broadband IoT portion of your market is related to 5G? Bertrand, you'll take this.

So maybe, George -- sorry. Yes. So George already covered this topic a little bit during the presentation and already explained that our broadband growth for the 20, 25 years is going to come mainly from 5G. The most important reason is the fact that the 4G Cat 4, Cat 6 market that we are addressing is more or less flattening over those years. Still interesting, of course, to play there but it's flattening. And therefore, all the growth that was presenting in the previous presentation is coming from 5G. And the growth is even amplified in dollar because of the ASP shifting from a low ASP on 4G Cat 4, Cat 6 to a much higher ASP on 5G and this is, of course, amplifying the growth in dollar amount.

Thanks, Bertrand. So I don't know. We have -- still have -- okay. So I believe but we are standing here, maybe we can keep going with the presentation. And obviously, if some of the questions we didn't address them. Now very likely some of them could be addressed in the second piece of our presentation. And obviously, we'll have time for the end of the session for more Q&A. Okay. So I'm assuming I can continue, operator of the presentation just only by clicking you. So let's go to this section now where we are going to address the recent developments. And obviously, we would like really to stress some of those developments. That we did in 2020, but all what happened since maybe our last earning call, some very recent news that all are very important in our opinion for the next few year growth of the company. So let's start with the first topic, which is really related to the private networks. As you know, so far, most of our business was really related to I mean really to the carrier business. And obviously, that's why we developed a very strong relationship and which is very important for us. With all the carrier on a worldwide basis in the U.S., in Europe, in Japan and so on, because most of our businesses are -- rely on networks provided by the carriers. However, in the recent period of time, and specifically, I will say, in 2020, a lot of traction came around private networks. And private networks, when you think about it is like me and you, building our own networks to run an application without going to pay a carrier who has an network there. This kind of application, by the way, when you think about it, it's really a trend where I could build my own networks to do it, to be independent, to get the security and so on. I could mix the 2, my own network and have as well the carrier networks as they fall back or they reverse if the -- if I'm on the main network, my -- the carrier, I can fall back to my own. And also, with the 5G, by the way, technology, which is providing what we call technology, we call it slicing, there is an offer from the operator that could come in the future to give you your own network which is for you, reserved for you, you can run your private network. And at the same time, stay independent of the rest of the bandwidths that the operator is using to provide other services. So it's really a major trend in the industry. And when you think about it, it's really about providing solution for many, many applications. For utilities. You can imagine in a stadium. Currently, for example, we have one customer for the National League, they have application using our technology for this. You could imagine as well for the student, for campus, for school district, for obviously, factory, we can -- I saw one customer playing really a network for jail for the prisoner to give them their secured network and so on. So the team is really very important. And obviously, the people they want -- why they use cellular technology because you can think, why they don't use WiFi at the end of the day, it's simply because if you use cellular technology for this, you can guarantee the quality of service. You can guarantee the security. You can avoid the overlap between users and -- which degrade the quality of service. For all those reasons, people that would like to run on cellular technology instead of using regular WiFi for those private networks. And what happened essentially in the U.S. market, we -- the private networks get boosted in the last year, really by the availability of the CBRS frequency band in the U.S. because obviously, to run private networks, you need to have your own frequency band. So then the regulator there needs to reserve some block of frequency to give it to the people to run their private networks. In the U.S., we had really a very interesting opportunity, which is the CBRS band, which is essentially a frequency band around 3.5 gigahertz, used mainly by some incumbent, specifically the military but this frequency was not used efficiently because it's used only where the military are present around the coast of the United States. In the mainland, the frequency is free, and no one is using. And obviously, the FCC there they came in and they said, why not picking this piece of frequency when the military are not using it and give it to other people to make private network with this. And the way they did it, they cut it into 2 block. One block, they said we are going to run auction on it. In other words, they give you a top priority after the incumbent, and they leave another block for any guy like you and me, we're not paying anything for the frequency if we need -- that the frequency is available where we are, we can run our network only. And that's why you see the 2 differences between what we call the PAL and the GAL block, GAA block. And essentially, for this auction, the auction went in the U.S. last year, I believe it concluded around July, more than $4 billion got paid for those auctions. And it ended by having Verizon, by the way, who got almost a big chunk of this. They paid almost half of this money in the auction. Then another big players were the cable operator, then you have a lot of smaller guys that they are like utilities using those frequency bands. And for us, this really was a very interesting market because we are, since even more -- before 2020, we start feeling the CBRS opportunity happening in the U.S. on the private networks. You need the 3.5 gigahertz, and this is where Sequans has all the technology because we have the Cassiopeia platform and our 4G supports 3.5. We are very strong in the 3.5 frequency band because we use it in the emerging market. And definitely, we -- what we did last year, we facilitated the go to market by creating 2 module, one Cat 4 and one Cat 6 that are very efficient in terms of cost structure. Because when you use any CBRS frequency band from the -- what's existing from the competition, you need to go to high-end chip, and it ends with module very, very expensive module price, while ours really are very competitive. So this attracted a lot of customer for us and put us -- and we had a lot of design win. And this start generating revenue for us already since the fourth quarter. And to talk about this, maybe I felt like it will be good to share with you this video of my Vice President of Sales, Nick Taluja, when he was giving this presentation to the CBRS Alliance meeting end of the last year. Let's run this video, I will say a few comments at the end. [Presentation]

So the -- as you've seen, again, great momentum with this market and the product we have it for this market. Many customers like IRIS, like MultiTech, already shipping product and to whom we ship already even end of 2020. We signed as well the partnership with Telit with the aggressive go to market, giving us access to more customers. So again, we have more than a dozen of customers there already in a product phase. On top of this, we have a lot of opportunities that we are working on. We are very bullish about new design win there. We have a couple of them even -- some of them working on solution for portable router. To use it for -- really to provide -- to connect the kids for the schools, so for the education systems. So instead of having -- when you put in the school a CBRS base station, and then you provide connectivity around the school for the whole district. Then the student, they don't have only their WiFi inside the school. When they go home, they have their CBRS connection maintained, and this is for free because it's provided by the school. They don't have to pay any carriers for the connectivity. So this is really quite interesting, and this could be -- could have a very nice potential. So we're seeing very nice momentum there. We remain cautious about predicting our number but definitely, it's going to be a major growth for us this year. A big piece of the growth coming from the CBRS business and that we will lost. Now if we go to the other thing I want to talk about, it is really the go to market. Maybe one of the most important accomplishment, I believe my team did this year other than bringing technology and the product to market is really to work on the go-to-market initiatives. And essentially, this is very important for the Massive IoT play. In a Massive IoT play with those application, the variety of application, the fragmentation of the market, the sales structure matters, how to access those customers as fast as possible and how we are able to scale to support the big number of customers because the customer are going to -- we're not talking about dozens or even 100, maybe thousands of customers to support them. That's why the -- we started this like beginning of 2020, and even in late '19, and we accelerated this in 2020, and I'm very proud about what we have done. And essentially, we work on 2 fronts. The first front is really about scaling our sales capability. In addition to our direct sales forces, we added reps, many, many reps, by the way, in many region, not only in the U.S., in Israel and many places. But also, we work on the distributors, and we added global distributors, and we signed 4 today. We have obviously Avnet, we have Richardson, which is the company of Arrow, but also we signed Mouser and DigiKey. And those last 2 are very important in the IoT space, because many developers, when they want to get access to a tool kit, they go to those guys first to get access to this. So the 4, they have our product to them, and they help us selling to many customers. And I can say we are making already revenue definitely with Richardson, RFPD and Avnet because we signed them like mid-last year. Mouser and DigiKey is new, but we're seeing some orders already going to those guys. And we bet that our business in the future is going to have a nice portion of it going to distributor. And when I compare to other business playing in this space of IoT, in the IoT space, not in cellular, you realize that many of them, they have more than 50% going to distributors, sometimes even 70% of distributor. So it's really a key channel for us, and we built all the foundation to take it forward. But there is another important work that we have done, which is really the channel partner. And the channel partner in the past, we worked some. We have, for example, channel partner with Skyworks, with whom we brought joint chip together to market is doing very well. But here, it was another color of the channel partner. We thought about the MCU vendor and why the MCU vendor. The reality, when you think about an IoT device, and almost all the IoT device, I don't want to say 100%, but a big chunk of the IoT device, they have a microcontroller inside. They have this smart computer to do something inside the IoT device there. And when you look to the MCU market, you have there like 6, 7 players. And they sell like 20 billion microcontroller per year, 20 billion microcontroller per year. So obviously, those microcontroller all of them, they don't need connectivity. Many of them, they go to some electronics, where there is no -- it's not really -- you cannot qualify, it's really IoT device because there is no connectivity required. However, a big chunk of this, and we start talking about big percentage, 30%, 40%, looking for connectivity, wireless connectivity. Some of this wireless connectivity can stay at Bluetooth or WiFi. But we believe a big chunk of this, and everybody realizes this, that they need really the cellular connectivity for all the good reason I explained previously about the link between IoT and Cellular. So if you take this as a fact, the best way to address this market for us, we could have one way by doing ourselves, the MCU and go to the market. And believe me, from a technology point of view, this is not the challenge. It's not really a technology to build the MCU. The challenge is really in terms of go to market, the challenge is really the environment that the MCU partner have developed to create the development tools and software environment where the developers, they are familiar with, and they want to stay with, and they don't want to switch from one microcontroller to another microcontroller. So that's why we realized that the best way to align with those MCU partners, go with them to the market and make it a win-win relationship, knowing that all of them, they don't have cellular technology. So there is no competition with them. And we are the best partner for them. To be like Sequans becoming the ARM of those guys on the cellular instead where ARM was really the guy providing to them the core technology. And we engaged with many of them. Here, the public -- the names of the public one, well-known. We started with ST. Today with ST, if you go to Orange and you look to the life booster, you will find the platform between ST and Sequans. We have a couple of customers that they selected. They are working with us to build the product. And you can get the development kit what you have in the ST platform and you have from Sequans, the modem connectivity to build your environment quickly. And then we get as well NXP and Microchip in the second step, where both of them, they have dev kit with us. NXP, they recently -- they launched a platform that we did there. We took it with Microsoft and Verizon with the connectivity included. And this is really -- is sold by Avnet to the market. And it has an edge CPU inside the platform for all the people that they want to do edge computing. This is the best platform, you can find it in the market ready to go completely. We as well engage with the NXP, many customers. Some of them are design win already with Sequans. With Microchip, very good relationship as well. We have an EVK. We have more to come with them. I don't want to be public on it, keeping this as under NDA, but you will see in the future more things coming from Microchip with Sequans. And last was really at the end of 2020, we align with Renesas. And here, the relationship took another form beyond really the development kit, beyond the go to market and the marketing. They wanted to go another step further. This step is really about reselling Sequans technology to the market in the form of module. So Renesas is building module, integrating the Monarch, the solution of Sequans, the LTE-M and the IoT. Those solutions could be -- they could add to this solution, their own MCU technology or their own Bluetooth technology and taking this to market. And again, this is moving very, very well. They have already product certified in the market on Verizon. We have engagement with the customer with them. So it's doing extremely well. And as you've seen, recently, we announced yesterday, the partnership with them on the 5G. But if you read well, the press release, we have -- we went from LTE-M to Cat 1. So now with Renesas, we have, not only the LTE-M, we have as well the Cat 1, Calliope 2 in the work, and we will have in the future of the 5G when our 5G chip will start sampling. So great relationship, and we are working on few others that hopefully will hear about them in 2021. And again, in terms of relationship, I give you a little bit what you can do with those guys, but obviously, this can develop further. We can imagine even an IP model if the business justify further integration and the volume of the integration and the attach rate of the MCU with the cellular technology is big enough to go to a single die. This could be another business model where Sequans can bring to those partners. Now to another -- to go another shutter now in terms of development is really was the product development. And 2020 was a rich year for us, mainly sustaining our leadership in the Massive IoT space and bring second-generation platform to market. So the second-generation of Monarch 2, this have been sampled beginning of the year. And we developed recently the module of -- based on Monarch 2, and we have very -- we received very strong reception from our customer. So the best way to talk about this, and I will post later on to give you some customers, I would say, feedback on this. Let me first present to you, Monarch 2 and I'm going -- we're going to run the video that we are preparing for CES. So it's really a new video on Monarch 2. Let's run this video. [Presentation]

So I'm assuming we go back. Video is done you. so just to on this video, I'm really proud about the second generation of Monarch 2. We leverage all the maturity of Monarch 1. Monarch 1, we came first to the market. We wanted to be first. We want to move fast, and we did a great job with this. But on Monarch 2, obviously, we milk all this to do a much better job, which is obvious. And this product, we improved the cost, we improved the advanced -- added advanced feature. We also -- more important, really the power. We cut the power by a factor of depending on the mode, 50% or 60% better in terms of power consumption. And we added some unique capability that no one in the market has today. For example, our chips running at 2.2 volt. You could say, why, the 2.2 volts, then you need -- you can connect the battery directly. You don't need any more DC/DC, you save costs. You save power, you save space on this. The only chip in the market running at 2.2 volt in LTE-M. We added as well the iSIM, integrated SIM. Integrated SIM, you can do, you can try to make some secure element to emulate some SIM. But if you want to reach the level 5 security that we have we have done it in this chip, this is really unique, and we use the special IP there to differentiate this product. All this to say, this created a lot of traction. And when you look today to the first results, the first outcome, since we sample this in Q3, we have more than a dozen of projects with this chip already. A big chunk of them are design win. The remaining one are very, very advanced. When I say very, very advanced is really imminent, some of them maybe this month will be concluded. And I can -- when I think about major achievement there was in the metering space. You heard Didier talking about a big chunk of the market. Massive IoT is really related to Smart City and metering. So it's really an important market for us, and we are focusing a lot on it. And here, we won Itron, one project to the Itron. And for those of you who are not familiar with Itron, they are the biggest company in the metering space in the world, number one. We engaged with many other guys. I mean, you can name them, the Honeywell of the world, the Linsinger and so on. I could say recently, beginning of this year, I have really fresh news that we closed one new deal in metering, and we start the design. And we have another one very imminent. So very, very excited about this space. The other space where we are quite happy about is really the e-health application. In the e-health application, we have many projects there, again, well-being and e-health is really very important and taking off these days. And we announced this week, a design win with, Withings. Withings is a spin-off of Nokia. It's a very well-known company. You can see their brand everywhere. They have some wearable device. They have body balance, they have blood pressure, lot of medical devices. And essentially, they provide smart health devices. So far, those devices were connected with WiFi and Bluetooth. And now they are moving to full generation of product connected with cellular using LTE-M, and they selected Sequans, and you saw the press release with them. And we believe some of those products will be shipping this year to the market, so it's moving very fast. We also obviously have Renesas adopting our technology to market and where we have new projects. We have even our solid partner, Gemalto in the module space, moving to this second-generation as well. And we have other module vendor interested in this. So it's really large scale, very exciting momentum with this chip, and this is really going to ensure to us that in this year, we'll continue to scale our LTE-M business, thanks to this generation of product. At the same time, not to forget, keep shipping our Monarch 1. And then if we go to the second thing we did this year is obviously was Calliope 2. A big chunk of our R&D was this year, finishing the second-generation of Category 1 product. This is really a unique offering, and it has a huge potential. When you look to the market at the beginning, we were the guys who rolled Cat 1 to market, and we made it happen. This market that sometimes get cannibalized by the arrival of LTE-M or the attention went on LTE-M. And as things matured over time, people realize that LTE-M is a great technology and NB-IoT, and you need it for many, many applications. However, you still need higher throughput than LTE-M, you need still need more feature than what LTE-M provide, specifically voice, higher throughput for streaming or for camera and you don't want to go to the broadband product, expensive and hungry and power. So you want to have something cheap and optimized in power. And here, for regular IoT, what I would call it, Industrial IoT, like security application, but also for applications like wearable, hearable, connected speaker, where we have a lot of traction. So let me -- we announced this product recently. And let me share with you again the video prepared for CES about this product. Operator, please, let's run this video.

[Operator Instructions] [Presentation]

Okay. So again, with this video, what I want to say on Calliope 2 that this product will sample soon to market in the first half of this year. And what's exciting there is that we have customer waiting for it. So we have customer already in POC using Calliope 1 first generation, waiting for the Calliope 2. We have customers in all spaces, whether wearable, hearable as well security system and module maker -- all the module makers are very excited about because, again, what we are providing there is a Cat 1 solution, very close in cost to the LTE-M. And very close to the -- and power to the LTE-M. So then we are doing -- we're covering the speed above LTE-M. We're getting the voice capability that LTE-M is not able to cover on a worldwide basis at least with Calliope 2. So -- and to conclude on -- a second point I want to mention here on the -- is on the product. It's really Taurus. So obviously, a big chunk of our R&D was on the 5G Taurus platform. As you know, Taurus is a product that we didn't announce yet to market so typically, we talk about it under NDA. So I limit what I can say about it in terms of technology here. But what I could say, which is the obvious one, Taurus 5G supports the 5G. Advanced releases can go up to release 17, and it will fall back to high-end 4G as well. So it's really a 5G, 4G chip, high end. And what's interesting there is that it can -- it's addressing what we mentioned before, the broadband and critical IoT of the market, where all application in the early days is going to be a lot about fixed wireless application, whether home or enterprise. But obviously, this will evolve to some computing with mobile router application. And private network what we spoke about it. And last but not least, the industrial and all the Critical IoT application. So again, the coming year this year, our R&D will be mainly moving to continue the work on this 5G and to take it to market in 2022. So let me pause here a little bit on this slide. And essentially, sharing with you here on this slide, the headcounts of R&D in the front of the addressable market, we spoke about it before in terms of opportunity. And I can make a few remarks on this chart to share it with you. First of all, the -- you saw that we maintain our R&D flat and to some extent, almost increasing from time to time in the recent period of time a little bit, simply because we have very strong confidence in the opportunity of the market. Despite the fact that we faced a couple of years where we were expecting Massive IT to ramp quickly, and it didn't ramp quickly, and it was a disappointment for all of us. We could have the choice by dropping our R&D and improve our P&L, but be in a position where today, I cannot tell you that we are there and ready to take this market opportunity, which is still ahead of us. The opportunity is solid. We believe it a lot. You heard Dan talking about it as well. So that's why we maintained our R&D investment in full confidence to bring this. We have, obviously, in the future, we don't expect to increase R&D a lot, but we'll have the intention to keep growing this as the opportunity will become more and more real. But more specifically, to mention that our R&D investment will shift from Massive IoT technology to the Broadband IoT technology and specifically to work on the Taurus platform. And this is always for you. And again, you could say, why you're putting your R&D on Taurus platform. It's a good time maybe to start milking the model and make the company breakeven as soon as possible, which is obviously, a target for me. Believe me, I'm not giving up on this. But on the other side, you saw in the market opportunity, the piece of the 5G there, broadband, that if you give up on this it will be shame for us, and it will be waste of all the expertise and leadership that we built over the last 10 years because in the 5G market, few players can bring this technology to market. And Sequans is really well positioned to capture a big chunk of this market with a little bit of incremental investment of our R&D, and you will see later supported by many partners. And the last remark I want to say there, you see the level of R&D. We're not talking about a huge number of R&D people. And it was always a mystery for many of my friends, I will say, working with big companies when I was meeting with them in conference and so on around the drink, one of their big surprise, how the hell, Sequans is able to bring all those products with the couple of hundred people of R&D, to bring all this to market. And this is the mystery or, let's say, the chemistry that our team has done, and I'm proud about it. Other people, they aligned thousands of engineers, and they didn't manage to bring product to market in the cellular space. And this is really a big asset for us and give us confidence in our future. If I go to this now back to the business a little bit, and talk to you about the pipeline that we have and the pipeline business opportunity. In the past, we were -- we talked at some time about LTE-M opportunity because people were excited about this only, and we were focusing giving you some numbers about LTE-M. And I felt this time that maybe as we have new market growing. We have the Cat 1 growing. We have the CBRS growing, we have the 5G growing. So we have more than the LTE-M growing, and it's not to diminish the LTE-M because the LTE-M remains the biggest piece of this opportunity that I'm showing here. So we said, let's group all this and share with you the opportunity, which today, we have it in hand, whether in design win or advanced into design. So we're talking about an opportunity today that we are addressing around $500 million. How we come to this number, we count only 3 years of revenue. And this is very important. We count 3 years of revenue from the year of the launch of the product. So the product is launching in 2020, we start 2020, if '21, '22 or '23, we count this, and we count only 3 years. And 3 years, very honestly, it's pessimistic because those number can be easily be bigger, this number, the $500 million, if we count 5 years or 6 years. And you know, for example, metering application or all those projects, they tend to be 7 years deployment. So it's not really 3 years. But to be cautious, and we don't want to -- we prefer, like, say, to stay humble with the number we are announcing, we are limiting our count to 3 years revenue. And the other element here is that we're not counting services in those numbers. So all what we are counting in this pipeline is really product. Only product. As you know, we have services revenue coming from NRE, from licensing, from strategic, from vertical that I will talk about it later on. But this is really product front. And again, when you look to this, we are talking about $0.5 billion in market opportunity in hand, and we can claim that 40% of it is really design win, what our product in mass production shipping or to ship soon indeed. So this is really what I can give you an update as we are speaking in terms of pipeline. And obviously, this pipeline is growing. I can say a few words as well, like we have a lot of opportunity becoming like Tier 1 customers, more and more, the company changed color by getting Tier 1 player dropping on the IoT space and engaging with us, and this is really very important. Also the design cycle for those deals. They could be -- keep in mind the design cycles, you could have something very short, like 6 months, where the guys they can use almost a product ready. They have existing product, they move to a new module. This you can take it even to 6 months, 9 months, but you typically, design cycles, they tend to be like more than 1 year, 1.5 years and sometimes it could be even longer, depending on the qualification process, and the category of products we are launching. So all this is factored in to come to you with those numbers. And as I said, this is only product. So now if we look to the services, that comes on top of this. We can claim that we have another $100 million on top. So technically, if you look to what the company has in hand today engages around $600 million more than $600 million were $0.5 million of this is product and $100 million is in services. And when you talk about the services revenue, software services revenue, you know that we have 2 categories of engagement, generating those revenue. One, which is we call it like business, and we talk about vertical market business. And I don't want you to be confused with the strategic. I'll talk about it later on. But the vertical market is really a market where the end customer is not -- the end network is not cellular I will say. And those guys, they come to cellular technology but for a different network, satellite network, avionic network, public safety network. So those networks are really, in principle, we can develop proprietary technology to them. But the guys instead of using proprietary, they prefer to use cellular technology. And in other words, they prefer to use the broadband platform that we have developed or the Massive IoT platform that we have developed. But definitely, if you want to make them work on a satellite, on a plane, on a public safety environment, you need to do some software work, some software services to change the software, to adjust sometimes the PHY, sometimes the protocol stack and sometimes really other layers like the security and so on in the system. And sometimes even a piece of the radio, which is harder because you change the radio signal the radio is not the regular radio front end that you use in cellular. For all those deals, they come like projects to company, they will generate product revenue later all, but the product revenue will be not major because the number of units is not big. Still can generate like a deal could generate $0.5 million a year or $1 million a year. So it's not negligible. But the major engagement we have with them is really to commit on some services revenue with revenue guaranteed for the execution of the project. And when we sign a deal, we take revenue, sometimes it could be for a small, short execution, less than 1 year -- 6 months, 1 year and sometimes can go to 2 years’ time frame. And obviously, this deal will be revenue recognized as we deliver, execute on the project. So this is the vertical project. We have a lot of traction. I spoke about it on my earnings call in the satellite space. It's really booming. We have really dozens of opportunity there that we are engaged with. They tend to be lumpy to predict because they take a long time to mature, to conclude. Sometimes, they are very big projects with many players there in the game, and we need to be patient before closing them. But all of it I could say, we have successful projects so far with locking margin shipping. We start moving to product revenue this year. This project, this was close to $10 million, as an example. With TELUS, we did the project on avionic, and we have others with Motorola, with Insight on public safety and military application. And the new projects we are also on, as I said, we have a lot on the satellite. One of them, as you know, is a big one. I talked about 2 digit number. And this one continued to be moving a lot. We were working a lot around the Christmas with back and forth with the end customer, not our customer to secure this deal. So I'm optimistic, crossing my fingers, it's not done, but we should hear about it hopefully soon and close it this quarter. So -- and we feel in a very good position with our partner in a good position to win it. Obviously, it's not done until it's done. The other angle obviously is to talk about the 5G partnership. But let's talk about strategic partnership in general. Strategic partnership depends on the technology, it depends on the momentum, they turn to take a color of technology. Now when I say strategic partnership, in reality, 99% of the partnership, they tend to engage around the 5G. And what's different than 5G? I mean why we have distraction around 5G for partnership. Yes, the technology is very complicated. And the landscape, you saw the competitive landscape, I showed to you. Few players are playing in the 5G broadband space, high end. And if you put the dynamic of what's happening geopolitically between China, Europe, U.S. and all this, the 5G is considered like very important for the sovereignty of all the nations. So everyone would like to control it, to be sure that there is more than one source and to be sure that they have some local access to this technology. So this is really very important. We have as well as many customers. They come to this 5G, and it's expensive technology. Only one guy able to give it to you today, maybe in the future, 2 guys and on top of this, those guys, they focus on a smartphone. So they need someone taking into account the requirement they are looking for IoT space. So they need someone optimizing the chip for the IoT. And again, the Sequans is able to do this. Put those 3 things with the other angle of, obviously, missing expertise, some people, they could say, why not developing themselves, but obviously, it's very complicated to develop. So all this created a good momentum around Sequans to attract a lot of partner for us in the early phase of the development, which is quite surprising. Even for me, it was surprised to be able really to engage that much partner before really sampling the chip. And this is what happened. And as you know, that in 2019, we -- and we signed a big strategic deal with a Fortune Global 500 company. The deal is more than $35 million NRE brought to the company with some cash upfront at the beginning. And this year, by the way, we'll start getting the other piece of the cash start moving. And this project is moving very, very well. Our partner is very pleased. We delivered on all the milestones during 2020. And on top of this, what I could say, this project is not going to stop there with those $35 million. There is another section of product because you could imagine that our partner will take this product later on, and we can generate revenue with them from product front. So it's like we have almost secured customer in this space, and we are very, very happy about this engagement. Very recently, and essentially, we announced it very recently, but it was end of 2020. We closed a similar -- a 5G partnership as well with Renesas. Here, it's a little bit different because Renesas is a technology partner. And obviously, their partnership with us is about getting access to the technology to take it to market with us. So we are teaming together to reinforce our position from a channel point of view, positioning point of view. But also Renesas has some key technology that can be complementary to what Sequans is doing, mainly in the RF front-end space and the millimeter frequency band and so on. That could create a great win-win for the 2 company. And this partnership has been announced recently. And it has an element of financing of -- related to the licensing of this technology with some upfront payment of this. And this is really, again, a great development with Renesas because now we have them as a partner, on almost all the portfolio, LTE-M, Cat 1 and now 5G. So I believe it's going to be an important partner for the future of Sequans. Last one, as you know, related to the sovereignty angle, the French government was very motivated to be sure that Sequans will succeed with this technology and obviously, support the investment that Sequans is doing. And I spoke about engagement in any project with the French government. Essentially, we have the consortium. This consortium, Sequans is leading this consortium, and we have 7 other partners. One of them is the SNCF, what we call in France, which is really the train company in France. And this project was in the process to be approved. And I'm pleased to tell you that it get approved. I had the letter -- when I came back from Christmas, I had the letter in my office. And we got an approval, awarded this project. We now need just only to finalize, to sign the agreement because it comes like notification with the letter and then you will have the agreement to sign it. But this is really a project that we are going to get full grant of -- close to $7 million grant of this project. So this is really the great things happening around this 5G. And obviously, those money coming in, obviously, not the grant from the government. But when I talk about the first 2, they generate revenue for us because the $35 million or the money coming with the partnership with Renesas, they will be recognized as revenue during 2020 and '21 and beyond, depending on the execution of those projects. So all this add up to -- in the bucket of the $100 million, I talked about it to you before. On top, this is not stopping. Interesting enough, we could talk about other, almost half a dozen discussion on the 5G space. There is almost no 1 week that can go where I don't have an interesting call interested in our Taurus platform. Obviously, all the partner, they have different demand requirement, timing and all this factored in, not all of them maybe will conclude in the coming quarter or so. But we believe we'll conclude some more in 2021 and will help us again funding this 5G investment, where we're putting a lot of money. And beyond this, obviously, we'll continue for '22. And then 1 day, this all will turn to product revenue to fuel the second phase of the growth of the company beyond 2022. With this, I'm going now to turn the presentation over to Deborah to take you on a couple of other -- on the second piece of the presentation, which is on the financial discussion. So Deborah, leave it to you.

Yes. Thank you, George. Hello, everyone. Sure. Nice to have a different voice, and George can rest his vocal cords a little bit. So I'll be going over some of the current trends and the business model for the company and covering some items of -- I'm assuming there are some new people on the line as well that aren't necessarily familiar with the company. So after years of investing in these new markets, developing leading-edge technology and building the partnerships, this is now beginning to pay off. We had very nice growth over the course of 2020, was good quarter-on-quarter growth in the first 3 quarters. And I take this opportunity to reaffirm the guidance we talked about on our Q3 earnings call. We're expecting at least 10% growth in the fourth quarter, quarter-on-quarter, and this will represent over 60% growth for 2020 as a whole. We will have our normal earnings call, which is scheduled for Tuesday, February 9. At that time, we'll cover full coverage of the Q4 and 2020 annual performance as well as providing outlook on Q1. While we're talking about revenues, just for people who are less familiar with the company, obviously, our main source of revenues is coming from product sales. But as George has just touched upon in the last few slides, we do have a significant amount of other revenue. In other revenue, we grouped together service revenue from the various vertical and strategic projects and also license fees. The other revenue can be a bit lumpy from quarter-to-quarter. We don't necessarily sign big license deals every quarter. And because the service revenues are typically on a percentage of completion basis over -- maybe from 6 to 36 months, the recognition is not necessarily on a straight-line or a linear basis. So just to be aware of when you see other revenue in our quarterly reports, what's in there and why you can see some movement on that from 1 quarter to next. When we think about the key metrics for the company, obviously, top line growth is very important. But we also look at 3 other items that are very critical in the company, gross margin percentage, operating results and the strength of the balance sheet. We are on target to achieve the 50% gross margin target at scale. Over the first 9 months of 2020, we achieved a 46% gross margin, which is a significant improvement already over 2019, and we are expecting to see that improve in 2021. Our target at scale for operating margin is in excess of 20% on a non-IFRS basis. In our non-IFRS, we take out the noncash stock-based compensation expense, just to keep that out of the measurement. Looking at the balance sheet, we're very pleased in 2020 that we were able to strengthen the balance sheet through a combination of debt and equity financing. And in December, a conversion of 2 tranches of our convertible debt. At September 30, we had convertible debt and accrued PIK interest totaling $35 million. On the slide, you see the presentation on a pro forma basis after the conversion in December, bringing down the convertible debt number to $24.6 million. The remaining debt, the largest portion of that is at an effective conversion price of just over $6.30 due in April of this year. We are expecting that, that will be able to convert. In the event it doesn't convert, we do have the option already negotiated and in hand to be able to extend the term for at least 1 year and up to 3 years. You can also see here that we have some short-term financing. This is primarily factoring of the receivables. This is very useful for working capital management. This number can move around quite a bit from quarter-to-quarter. It really depends on the timing of invoicing, the timing of when the customers then pay and the customer credit limits. But as a general rule, as our revenues go up, this line could be expected to go up as we're able to finance more receivables. And we see that as a positive point. In our IFRS financial reporting, we revalue at each quarter end the conversion option of our convertible debt. This is called the embedded derivative. This noncash and truly theoretical exercise at the end of each quarter can result in some major swings in our financial results, whether positive or negative, and we do strip this out when we present our non-IFRS results. Most of our interest is PIK interest. And so I think it's important to note that the actual cash payments and interest are significantly lower than the interest expense that we report on our P&L. For example, for the third quarter, cash interest payments totaled about $600,000 versus IFRS reported interest expense of $3.6 million. So I think it's important to keep that in mind as well. We report our financial statements in U.S. dollars, but we do have a lot of our operating expenses that are denominated in euros and other currencies. So changes in foreign exchange rates can have an impact on our operating expenses. And you'll see here government debt of $23.4 million at the end of September. That's all denominated in euros. And so we have to remeasure that into dollars at the end of each quarter, resulting in a noncash unrealized gain or loss. Because neither we nor the analysts who follow us can really predict where the exchange rate might be at the end of the next quarter. This -- purely this noncash and measurement can result in a difference between our result -- quarter results and the analyst estimates just due to this one issue. And lastly, coming to cash, which obviously a major focus of the management team as we make sure we can continue to fund operations. We ended September with over $25 million in cash on the balance sheet. And we have many sources of cash coming in to offset the remaining operational burn that we're expecting in 2021. George just talked about a couple of these items. We just finalized a strategic deal with Renesas. This has a value in excess of $5 million, and a substantial portion of this will be paid upfront. And we're really pleased with this partnership and everything that it represents for the company. The French government grant for the -- to fund our 5G program, which we just talked about as well. As George mentioned, this is close to $7 million. It's in pure grant form. There's no -- 0 interest debt as we sometimes have in these kind of programs. We don't yet have the final documents, but we do expect that the bulk of this cash flow come in during 2021. And lastly, the large satellite deal that we're hoping to finalize soon would also have a significant upfront payment. So with all of this, we're -- we're feeling good about our position. And in addition, we have other strategic partners and vertical customers that we're continuing to negotiate with that are in the pipeline. We would expect that those deals, we have similar structures and yet similar size. And each would represent additional cushion comforting our financial position before we get to the point where we're generating cash from operations. We have a really unique position in the 5G space, and we fully expect to be able to continue to monetize this position with new licenses and service contracts. Moving to the business model. First of all, in terms of the breakeven point, which is obviously a key criteria for us. As we've said in the past, to break even on a quarterly basis for operating results, we need to generate revenues of $22 million to $23 million. This represents about $90 million on an annual basis of operating breakeven on a P&L basis at the 50% gross margin. Our target at scale is, as I mentioned, a non-IFRS operating margin in excess of 20%. And the beauty of the fabless semiconductor model is that it's very scalable. So we can grow our operating expenses at a much lower rate than the top line growth. And based on the projected growth, growth in our served market, and we talked about some of the projections earlier in this presentation, we would expect to get to this scale at a rate of somewhat below $200 million a year in revenues. And we believe we could reach this level during 2023. Just coming back to the operating costs, and George touched on this earlier. The incremental costs that we need to add in operating expenses to really serve this, a substantial market and the significant top line growth that we're expecting is really quite small, and this is thanks to the sustained development and R&D we've done over the years. And not only in R&D, but also all the work that's been done to put in place the go-to-market channel with the specialized distributors, vendor partners and technology partners, including, in particular, all of the MCU vendors that we've done over the past few years really adds to the scalability of the model. We don't think we need to add that much in SG&A in order to sustain a strong double-digit top line growth. So in conclusion, we're very excited about the unique position of the company today. There are really few companies who can offer the full 4G, 5G IoT technology solutions that Sequans has and the barrier to entry in terms of investment and know-how are significant, and we think we'll continue to be one of just a handful of companies ready to address this very exciting and fast-growing market. I'll turn it back to you, George.

Thank you, Deborah. So again, I want to conclude this presentation and move it to -- so for the interest of time, I'll be short on this last slide. As we said, we tried really to communicate to you the excitement that we have as a team here with the opportunity, which is still valid and solid and big. The number that Deborah was -- were talking about, we can achieve the scale and go beyond the scale very easily with market share, not necessarily huge market share to be there, knowing that we have the potential to be dominant in this market and exceed our target, by large, if things will go fine. And what's very, very important, again, that the opportunity is there, and it's solid. And even if we get disappointed with the timing of those opportunities a little bit, we are not -- the market is not -- the opportunity is not going away. It's still there. And the proof of it is that in 2019, I didn't see those Tier 1 customers coming to us and talking to us. For whatever reason, they were supposed to engage in 2019, but they came in 2020. And in 2020, we start securing those Tier 1 guys. And we end the year with a bunch of guys very, very advanced to add them on our list of design win. So we're very excited. And again, great opportunity, great position and the model that has been explained by Deborah really -- you can -- it has a lot of leverage from a financial point of view. So thank you for listening. Maybe now we'll begin the interactive Q&A and -- very soon. If you wish to ask a question, let me stress this via the phone and have not already dialed into the bridge, please note the number, and -- that we are showing now. As a reminder, you will need to mute your computer's microphone before asking a question on the phone. Time permitting, we'll also continue to answer questions submitted online via text. I see some of them in front of me. If we run out of time before getting to your questions, please let Claudia know and we'll follow-up. While the moderator is connecting people to the phone bridge. We'd like to share with you the last video clip. You will see here some industrial applications where Sequans technology is also used. Let's run this video while the operator is working on the connection.

[Operator Instructions] [Presentation]

Okay. So operator, we are ready for the interactive questions-and-answer session. Do we have a first question ready to go live?

We can take our first question now from Craig Ellis of B. Riley Securities.

And George and Deborah, thanks for the comprehensive presentation and happy new year. So I just wanted to start by following up on the design win commentary. So as we look at the $500 million product and $100 million services design win funnel, can you help us understand some of the further dynamics with that funnel, whether it be characterizing it by industrial or consumer dynamics or perhaps the linearity with which we might kind of scale up to capture what could be revenue conversion of around $200 million a year, if it's a 3-year funnel?

Craig, and happy new year. In fact, the first -- on the first question, which is how to qualify it, the majority of this pipe is really Massive IoT. To be clear, obviously, the broadband, we have -- we have the CBRS coming. We have some -- our existing Category 4, Category 6 product in those pipes. But as you know, it's not major. And the Broadband 5G didn't yet come, right, I mean, in the pack. So it's not counting yet product revenue from the 5G. We have a lot of services and factoring product is a little bit early there. So the majority of this, I mean, a big chunk of this is really coming from the Massive IoT. And obviously, in the Massive IoT, the biggest majority is LTE-M. To be clear, Cat 1, we have decent business today. We are going to have more, and I believe this pipe is going to fill more with Cat 1 during 2021. Because we'll have this Calliope 2. And I believe later on, we'll have the 5G when we start approaching the sampling of Taurus. Now for -- by application, it's a little bit complicated. But as we mentioned, big presence of Sequans in the metering, big presence in the smart -- sorry, in the security system, where we have a design win, as you know, we have Comcast. We have other projects running like this. Just to name a few, and obviously, we spoke about the e-health and the tracking application. And in terms of linearity, this is where it's a little bit more complex because we're counting, again, the ramp of a project. So in other words, when I have a design win, you could have a design win starting to launch in 2022. And doesn't materialize in 2021. So in other words, contributing only 0 in 2021 and contributing in '22 and '23 and '24, if you look to the graph. So it's a little bit complicated to go on this and say it's linear, it's not linear at all. And it takes the form -- obviously has exponential form to grow there. But what I want as well to stress that this is not all what we will get. So this is what we have today. And to reach the scalable model, if we assume the scalability we reach it end of '22, beginning of '23, Deborah talk about '23. If we reach level in 2023. So between now and 2023 obviously, despite continued building up and growing to allow us to be in 2023 at the $200 million, Deborah, was talking about in the month.

Got it. That's helpful, George. And then, Deborah, if I could just follow-up with you on some of the comments you made around cash. So congratulations to the team on the French government partnership news, and it sounds like that $7 million could come in, in the first quarter. And then great news on Renesas, and it seems like we could get a bulk of the $5 million early this year. If we have those and then a potential new partnership, is it possible that we're seeing an incremental $15 million come onto the balance sheet in calendar -- in the first half of calendar '21? And would we even see it all potentially hitting in the first quarter of calendar '21?

Craig, we don't yet have the timing of the French government funding. I think we think the bulk of it will come in 2021, but typically, they've come in -- it's like with the promise, this isn't a typical sort of a special project, so it may be more upfronted. But typically, it's done in 2 or 3 payments. So I'm not -- I don't think all of it will come in, in the first quarter, but we feel comfortable that most of it coming in during the year.

Like -- and typically, we may expect in the first quarter, like 40% of this but very honestly, there is a push by the government to make it like -- because it's not typical to have it full -- in full grant. Typically, they split it. We get it full grant. We are waiting for the people. The -- follow-up people with those guys, may be hoping to get it all upfront. I tell you, I have something in mind telling me this is what's going to happen. But obviously, this will happen in 2021 and a big chunk in Q1 at least.

And we can now take our next question from Scott Searle of ROTH Capital.

Happy new year, guys. Thanks so much for having this call, a lot of detail in it today. Glad to see that everyone is healthy and safe in the new year. Just first quickly, a clarification on Craig's question for Deborah. Given the exercise of issue, given the French grant, given the money from Renesas, and it sounds like there'll be some vertical market money coming in as well and potentially some other deals, do you feel comfortable with where the balance sheet is to get to a point where you are now fully funded, get cash flow breakeven? Then I had a couple of product follow-ups.

Yes. That's definitely where we're feeling today, and that was what I was trying to convey in my remarks.

Very good. Just wanted to clarify. On the CBRS front, George, tremendous amount of activity that's going on in the world today, a relatively limited competitive landscape out there. So you guys are very well positioned. So it seems like that market is taking place quicker than expected. And also given the fact that you guys are largely selling modules as well as having some partnership with some other module vendors. You guys have some higher ASPs there. How are you feeling about the ramp up in contribution this year? I know, in the past, you talked about it being maybe $1 million a quarter or so. But it sounds like it's certainly building up to something much larger than that. And then second, on the Cat 1 front, this is a product that, I think, has really been undervalued both by the Street and the market in general, had been kind of niche with you and Intel there for a number of years where I think the market TAM was anywhere from $40 million to $50 million, maybe in a bigger year, a little bit more than that. But now with Intel's exit, as they've sold the business to Apple and there's no longer a product road map there, the performance now for the second-generation product now, the cost that second-generation product, it sounds like this market is really going to start to take off in the second half. I was wondering if you could put some color on what do you think that TAM is going to look like in the second half of this year for Cat 1. And also what's your sheer expectations are given that you are the lone guy with a real product road map on that front? And then I'll get back in the queue.

Thanks, Scott, for the questions. And again, happy to see you on our call. For the question on the modules on the CBRS, you're absolutely right, or what you said that we're in a great position there. But honestly, that the market is happening now, I don't qualify it like a big surprise because we were waiting for it last year. And when it started happening, we are comfortable on this. So we didn't have doubt about the timing, at least for this year, if you want, in Q4. So since Q3, I'm very confident on this. My big question was, how big is this market? And we saw study talking about, could be couple of million units over a period of time of 3 years. So it was a little bit confusing. And then we start seeing more and more application. The more we start engaging, the more we're seeing application. For example, when I was talking with you about like $1 million per quarter, what I said before, I was not thinking that we will have portable router in this space. Now I'm seeing portable router in this space. We used to have -- even I'm seeing opportunity where people talk about few hundred thousands unit. So all this to say, I'm not yet in a position to tell you, yes, definitely, this is going to be $2 million, $3 million a quarter, but I don't see why this will not go to this level. Maybe it's going to be this year or next year. However, I'm really confident about the -- my previous numbers, and I'm sure that we should have about -- we should go above this with all those new applications. And then regarding the Cat 1, indeed, I mean, what happened in this market is more than Intel. You had Intel and Qualcomm, while they didn't do anything. When we brought this Cat 1, they'd tell to the people, use my Cat 4 and hear he goes cheaper. And they rebranded. By the way, they put best one on the chip. And obviously, they sell cheaper. And then they said to the guys, why you need to put R&D with Sequans. You don't have to spend R&D. You can just only use this product and go ahead and keep selling and go ahead and compete with Sequans. This has really hurt our market share penetration in this space, but still we managed to get 15% market share. I mean, I believe we are around kind of 15% market share in the Cat 1 space today. On the other side, you have obviously the cannibalization of Cat M, at least by many, many applications they moved. And we have some customer of us. They were with us in Cat 1, they moved to Cat M. So we know many people moved to Cat M because they can afford it. So why you stay on Cat 1. So this also hurt the market. But the more these things get mature, the people get the understanding that it has value in a throughput. It has value on voice and many applications, they need this. And on top of this, which is I didn't mention before, Cat 1 today is perceived like the only massive IoT technology that you can find it in every place of the world with all the carrier. Now ours is a global. You go to China, you have Cat 1. You don't have Cat M, you have only NB. You come to Europe, some places, you have Cat Ms and some places you have NB. But all of them, they have Cat 1. You go to the U.S., obviously, you have Cat M, but you have Cat 1. So the Cat 1 make it like an easy platform because you don't question -- take the question which operator is able to cover this? Is it ready? Is it mature? So we saw this. The barrier of the Cat 1 was really price and you mentioned this, and power consumption for the application of consumer. So -- and that's why we took this product. And we believe with this, we should go beyond the 15% market share, for sure. I'm confident that this will be -- it will be ridiculous if we'll not take a big chunk of this, even half of the market share. But obviously, it takes time because when you look to the TAM, Scott, you need to consider that in the time, you have a new product shipping, but this is an older platform. In other words, they still use the Intel product. Even if Intel exited, they keep selling their chip. They didn't terminate it. Someone who has Qualcomm chip is -- on product shipping is not going to stop. He needs to build a new product. So we are going to win more than 50% in every new project. But globally, on the time, it takes us a couple of years, 3 years to increase the TAM because we need to have all the product disappearing and ending of life to get the new product fully supported. Okay? Another question on the call?

We can now take our next question from Mike Walkley of Canaccord Genuity.

Don't hear you, Mike.

Sorry about that there. Can you hear me now?

Yes.

Yes.

Great. Yes, best wishes everybody for healthy '21, and thanks for all the details today, and great to see you virtually. Just helping us think about you have a longer-term step-up in the model and thanks for sharing all these growth drivers. And kind of a longer in question, maybe summarizing what you covered today. But as we look at your business model and maybe how the mix might change from '21 to 2023, how should we think about timing and contribution of different things you've shared today? You talked about, and I agree this Cat 1 product certainly looks interesting with the second-generation product. We have CBRS coming into the model and then you have 5G. So as we're -- and you have more services contracts. So as you scale the business to 2023, how should we think about all these different products kind of when they enter the model and how the business model might step up between '21 to '22 to '23 to hit those metrics? And then any thoughts on new products and what they might mean for margins?

Hi, Mike. The -- in terms of -- obviously, the way to look to it, first of all, and we should not forget, I don't want to excite the people only on new products we are building. What I'm pushing my team is to sell what we have in hand. And you know why? You talk about Monarch, Monarch 2. We have a great product, fully matured, leading and we're going to get a lot of excitement and a lot of deals around LTM. So the first engine of growth. If I talk about engine of growth, not talking about what we have in hand because, obviously, we have Cat 1 in hand and we have 4G Cat 4 in hand. But the first engine of growth for the first period of our life, 2021 and 2022 is going to be LTM, no doubt about it. On top of this, obviously, we have the CBRS, which is coming from 0. So obviously, this is an engine of growth starting in 2021. And then when we start penetrating in 2022 and '23, the Cat 1 will play, mainly because we're going to have an acceleration of our market share in the regular M2M market because we're talking about price reaching 2 digits of the module. While today, Cat 1 module is really in the $16, $17. So I'm a big believer that a lot of people will switch between all the platform Cat 1 to new platform Cat 1 based on Sequans. And this will give us better market share. But also, the deals we are seeing in the consumer space with connected wearable, where we have a design win already and we have another proof of concept, so those can bring completely new business to Sequans that's not yet there. So definitely, Cat 1 will come in the second phase. And last but not least is really the 5G that will for us to start generating revenue in 2023, seriously, and beyond. And obviously, none of them is stopping in growth because if you look to the trajectory of the massive IoT, it will continue, Cat 1 and Cat M, because it's an exponential curve. And this is where the people -- they get a little bit disappointed when they look to the massive IoT because it takes time, but it's very sticky business. Once you are in, the project is there for 7 years and the number of unit keeps adding up without really major problems. So this is how we see this one. And last bullet is really about services. Services, very honestly, it's lumpy to predict growth. We see it's flat, at least for the coming 2, 3 years, maybe growing a couple of years, if you want. This year is going to be a nice growth in services versus previous year because we have the strategic adding up. I don't know if we'll continue to have NRE strategic in 2023, maybe because we'll have other products coming to market. But at least if I look between now and 2023, I see it growing maybe obviously to the nice growth in 2 digit or whatever, but it's very hard to predict it. It's not going to be the major factor beyond 2021.

We can now take our next question from Tristan Gerra of Baird.

You've talked about, obviously, a lot of opportunities. And in terms of geographies, you've expanded notably in terms of opportunities and traction you have in the U.S. and Japan. Could you talk a little bit about the opportunity potential in China, given it's one of the large geographies that seems to be embracing NB-IoT over time versus Cat M? So do you see a change in competitive landscape there that could help you? Or is that pretty much out of your longer-term revenue projection by '23?

Hi, Tristan. Indeed, you're -- it will be shortcut to say, let's forget China. And just to make things simple, in our study and so on, we focus on the SAM where we don't have the China inside. But when you -- the challenge for China, first of all, from a technology point of view, it's a big market. And when you look to the numbers, they can double the numbers of the SAM. If you add in China, also it's not negligible. They are aggressive. They don't have LTM, they are NB-IoT. They have Cat 1, however. Very aggressive on Cat 1 next-generation because they don't have LTM. They took their decision, "Oh, we have our poor IoT, which is NB-IoT." But as soon as it's serious IoT instead because we don't want to use LTM, we go to Cat 1. And then, obviously, they have the 5G high end, which is they are leading with this in the world as well. So definitely, it's important for them. So we could not ignore them and say this doesn't matter for me. Obviously, I have a lot on my table to work on outside of China. But my challenge in China is not the technology and not really the competitive landscape because even if we have local competition, we can still go there and take 10% of China, which will be huge for us. So the point for me in China is how to go there, what kind of partnership. And I'm not taking this off the table. And I tend to say the MCU partner, as an example, where we have. Today, they are big players, as you know, globally, and they play in China. They play worldwide. They could be a nice partner to attack this market in different way. What we did so far, we said, let's focus on how to go there and start going there and burning energy and maybe collect very little money, but we are not taking this off the table completely. And definitely, the MCU partner could be a great help for us to address this market.

Great. That's useful. And then just a quick follow-up is your 2023 revenue target, obviously, implies very good top line momentum and reacceleration. How would you characterize the whole ecosystem, so you have a very nice pipeline of new products starting to ramp this year? Do you think that the market is now going to embrace IoT at an accelerated rate? Or is there things that need to fall in place for that ecosystem to mature further and really help adoption? And I think as a follow-up, we've seen projections for IoT that shows that there is kind of this inflection point in terms of adoption rates over the next couple of years. And do you see that ramp fairly linear? Or do you see really a big inflection point? And what will be driving that?

Well, Tristan, in fact, you're absolutely right. I mean the traction, or what I was saying for a while, we didn't see -- take metering projects, big metering projects. We have told people who were evaluating, they take time. And I don't know why, but maybe for many reasons because industrial project, they don't change over time. It's not about launching a phone or a tablet and you will see, you sell it for 6 months. If it doesn't work, you will drop it and you move to another product. Industrial is all about end-to-end system that you are building and you put a lot of energy in and you don't want to -- you don't play this easily. So for those reasons, really, we have many, many, many points that were behind the delay of the massive IoT market, many, including the technology readiness, the maturity, the data plan and so on. Dennis spoke about some in his video. But for me, there is -- the important point is that this is a market that takes longer than what we -- everybody thinks because it's a complicated product and system. But what we saw, indeed, that we are in an inflection point because we're talking about Tier 1 seriously considering project. I mentioned a meter, but the meter is not an accident. It's not like we have 1 guy. We have 6 guys talking with us with metering with the project to launch now. So yes, it's happening. Now the ramp of this curve, definitely, it's exponential because no one will go and start launching a new technology on a meter, for example, by going a 3 million unit a year. They are going to start with the project. Maybe the first year, they'll do less than 1 million or 700,000 or 500,000. The second year is 1.5 million or 2 million, and then you will go to 3 million units per year. So there is -- for each project, we are seeing with the customer. There is a curve which is exponential. So if you add them all up, you go to an exponential curve, which is uncontrolled.

[Operator Instructions]

So in the meantime, if we have next question on the phone, we take it. If we don't, I will address maybe something online.

We can take our next question from Steven Gart from John Locke Capital.

It was a great detail call. I just wanted to get a clarification on 2 quick points. You've mentioned in the financial portion, $22 million to $23 million revs per quarter needed, assuming a 50% gross margin, $92 million like to breakeven. Would that be -- are you referring to breakeven from an earnings standpoint? And would that be, I guess, based on my rough math, looking like mid-to-late 2022, depending upon what the timing of the revenue of the $500 million hits in '22? Is that roughly correct?

This is referring to operating results on a P&L basis. So I think we're targeting to reach it earlier than that.

Okay. So that would be sometime in 2022?

Potentially could be towards the end of this year or early 2022.

Great. And then a question on the reference to the $500 million -- the $600 million in the next 3 years. Will that revenue be recognized over those 3 years? Or is that spread out a little more?

Yes. I mean let me correct one thing. This is not over the 3 years. This is revenue in hand, if you want, because you see more or less secured because not all of it secured. We said 40% of the secured for 3 years of revenue. But the starting point is not necessarily 2021 for all of them. In other words, you cannot say $500 million divided by 3, that's what because the project -- we have project launching, for example, end of this year. Then they will generate 0 in 2021, and they will generate in 2024, not only 2023. So you need to stagger it like this.

All right. Is it fair to look is if you say -- I understand that it was to take the $500 million that it's not $500 million divided by 3 and apply 1/3 in '21, 1/3 in '22 and 1/3 in '23, it's going to be lumpier.

Yes. It's like if you want to divide it -- you need to split it over, assuming, let's say, the last deal in 2022 or beginning of '23, you need to go to 2025. So this is independent of its linear or not, you need to take this and divide it by 5 years or -- and then put the exponential ramp through this.

We have no further questions over the phone. If you'd now like to take any further written online questions.

Yes. I see a question here, which is talking about how many engineers do we have working on the Taurus 5G modem? And is the ramp still scheduled early 2022? Roughly speaking, today, maybe we're ending -- we ended 2020 with like close to half-half. But this year, we'll be going towards 60-40, 5G, more 60%, maybe we will finish at 70%. In average, maybe 60%. So towards the end of the year because we are finishing Calliope, and the more we finish, the more the 5G is loading up. And obviously, beyond 2021, with 5G, I mean, we will reach a peak -- the peak of 5G resources that we'll reach at the end of this year, beginning of 2022. So we don't expect to keep adding 5G resources in 2022. Now the curve I shared with you about the growth there is, obviously, in general, R&D. We didn't put it flat beyond this 2022 because you could imagine that if the opportunity, if the company is doing $200 million and more, you will need more people even for maintenance and support of your project and customer and even maybe to develop a new technology combined with our seller and so on. We didn't want to make an assumption, which is very, very conservative, I'll say. I have another question, which is who are the consumer an industrial IoT update -- uptake leaders? How does Sequans engage? Obviously, when you talk about industrial IoT players, here beyond -- behind industrial, you have so many, many applications. So you have a lot of players. We're talking -- when you go to the metering players, you talk about Itron, Linsinger, Honeywell, name them like this. If you go to the -- some security play, if you go to fleet management, you'll have other players. So each guy, you have many there. And this is, by the way, one of the complexity of this market. So it's not like about gathering 10 customers or 20 customers and try to win them. You're talking about really big number of customer and leader you need to engage. Even if you select the top 2 or top 3 to engage with, even if you don't go to the full list of customers, still sizable. And that's why the engagement there is a combination of direct when we feel about good position. And in general, we are always engaged. We were never -- because, let's say, complex technology, customer would like to see Sequans and so on. But we combine it with the distributor and the partner. And in some situation, even could be some Tier 1 customer. The value of the partner like someone from the MCU partner could be their brand and their name because the customer in front of us is so big, and he prefer to deal with Renesas than dealing only with Sequans. So then we bring this partner to the loop. And that's why we feel very good about our engagement since we developed all this go to market. What do you expect in average selling price of 5G compared to 4G? Again, 4G broadband because when you talk about 4G massive IoT, you're talking about Cat M close to $3 and Cat 1 in the $5, $6. But when you go to the high-end to the low-end 4G, like Cat 4, Cat 6, here, you are talking about high single digits. And then when you go to the 5G high-end, you are going above $30. Today, the discussion people -- no one is defining the price because the big player started with $100 ASP. Now there are people talking about $50. This is the trend. We believe we'll be below $50. But obviously, over time, this can go down maybe to $30 or so. But it remains very big in multiple versus the regular massive IoT product. Can you clarify on the SAM? Is that dollar value, the chip market module or end device? Very good question. It's a chip market. Indeed, when we are making the SAM is complicated, if you start mixing module and chip and -- because you don't know what's -- it's not device because we never sell device. Obviously, Sequans, sometimes, we sell module and sometimes we sell chips. The trend, as Deborah explained many times, is really to push everything to chip. And our module -- even if we develop all our modules, we develop it in the purpose of go-to-market strategy to help our partner to accelerate the business. But obviously, at the same time, we are willing to sell modules. Sometimes, some customers would like to buy from us. So that's how we do. How many customers are looking for the full suite of Sequans solution, Cat 1, Cat M and broadband 5G? Very honestly, it's a very interesting question. But we have customers that they look for all. We have -- but at least, you have customers when they are playing in a massive IoT, they do not -- they want to go Cat 1 or Cat M. And they like the idea about having a solution delivering to them, either one from Sequans with the same interfaces, the same software, the same thing. So it's really -- it does exist. Now the customer that they need the high-end and the low-end, in other words, the broadband and the massive IoT, they exist, but maybe not the all of them. I see here, Deborah, kicking me to call...

And we're coming to the end of our scheduled time.

Because I still see question, and I would love to continue with you guys. But I believe we don't do -- we value your time, and we appreciate all the time you spent with us. So just to wrap it up. Again, many thanks for all your time with us. I hope that we let you learn something more about Sequans and excite you about Sequans. Again, it's a great opportunity. We are here very excited about 2021. We wish it a happy new year for all of you and great business for Sequans. We are very comfortable about this year and excited about it. Thank you.

And next earnings call, Tuesday, February 9. The information is out on press release and on our website.

Okay. Thank you very much. Thanks, operator, Claudia, everybody.