Welcome and good morning, good afternoon, good evening to everyone who is joining us virtually for this year's 2021 Nabatec Capital Markets Day. I am Lars Boelisson, Chairman of the Board. And on behalf of the Board, The management and the entire Navitek company, I am very excited that you are joining here today. The global pandemic has had a big impact on our lives the last year And this event is no different. Despite it's unfortunately we can meet person to person here in Oslo, It also creates opportunity to hold the event virtually.
We have impressive list of speakers from around the world And we have more global investors and more global press than we have had in the previous years. We are looking forward to sharing with you our insights around opportunities in the network and communication industry. A combination of monumental changes from cloud networking, 5 gs Mobile and the IoT have created 1 single generation opportunity for companies operating this space like Navotec. We have assembled an impressive list of speakers today to share these valuable insights, including key member of the Navitec leadership team. We also honored to have friends and key partners on the agenda today from leading global companies Intel and Omnia Research.
What you
will learn today is that the way people are building, managing and operating their networks has radically changed, pioneered the use of a technology called Field Programmable Gate Arrays as an underlying technology in their SmartNIC products and solutions. They have built a solid business based on early adopters of this technology at Tier 1 network and security OEMs. As a result of these major market trends, the use of programmable SmartNIC based on FPGAs has become pervasive and are widely available to more users and applications in many more network types and locations. Here now Navitec well positioned to size upon these new large and fast growing markets with the FPGA based SmartNIC software and hardware solutions. As Chairman, I'm very familiar with the number and the size of opportunities in front of Nabatek.
And I'm confident you
Hello. I'm Howard Bub, a member of the Board of Directors of Napatec. I've been in the networking, communications, computing, and semiconductor industries for over 40 years in various executive positions at large well known companies like Intel and United Technologies, as well as CEO of high growth companies such as Dialogic and Netronome. I've been a director at Navitec for almost 5 years, and I believe the focus of this unique tech company is more relevant than ever. Navitec was one of the earliest pioneers in the use of FPGA technology to make faster, smarter, better network interfaces.
Today, the market has evolved such that smart NICs, as they're now known, like the ones Navitec is delivering, are increasingly at the core of the largest data centers and the 5 gs network. SmartNICs perform critical functions to increase network speeds to 100 gig and beyond. They reduce latency for e commerce and financial services. They virtualize the network edge, and they do all of this while offloading the CPU, thereby reducing the cost per transaction. Napatek is a unique growing technology business within a market that includes some of the largest tech companies in Silicon Valley.
Among these are Intel and Xilinx, the 2 leaders in FPGA technology, and Napatec has a close and trusted relationship with both of these companies. It's noteworthy that our market has seen consolidation, and I believe this consolidation is a sign of the increasing value of the technology space in which Napatec operates. What impresses me about Napatec is the broad technology expertise it has on its team, Expertise developed over years of leadership. This allows Napatec to create solutions that are needed now in cloud data centers, enterprise data centers, financial services, and 5 gs. I believe this team has what it takes to continue to succeed now and into the future.
Thank you for being here today.
Hello. This is Henry Wasek, an Appetec Board Member since 2017, and I'm based in the San Francisco Bay Area. Prior to joining the Epiqic Board, my professional experience began in the semiconductor industry and shifted to large scale systems for global communications, networks, Data centers and then further on to cloud software and services and supported e commerce. I've been the CEO of 3 successful start I'm now focused on board and CEO advisory goals. Now on to Anapatek, a company that's enabling the leaders in some of the highest growth segments of the market to achieve market beating solutions.
Our primary focus is on 5 gs and related network virtualization solutions, Cybersecurity, IoT, and edge computing. Napatec has successfully navigated the accelerating rate of technological change and the move to software centric versus hardware centric solutions. Our customers' value in Apotec's market leading technology will be consistently our best in class for performance, Our dependability as a supplier and our flexibility in working closely with our technical teams to obtain the maximum overall superior solution set. Navatek continues to expand its global reach with marquee customers in Asia, Europe and North America. We thank all of you, our investors, For your support past years, I look forward to working with you on ever greater success going forward.
Thank you.
Good morning. I'm Ray Smets, CEO of Napatec, and I would like to join Lars, Howard and Henry and welcome you all to Napatec's 2021 Capital Markets Day presentation. Although we would love to be in Oslo again this year, we are 100% global and virtual. I'm located in San Francisco this morning, but we have assembled an agenda that spans across multiple continents with video commentary and presentations from our board and management, a key technology partner, multiple customers, and a lead expert industry analyst. I will kick us off with a brief overview of Napatek.
Then we're Thrilled to have Jim Dworkin, Senior Director of the Cloud Business Unit at Intel's Programmable Solutions Group to discuss Intel's FPGA business and how it relates to Napatec. We will have video comments from 2 important OEM customers at Toyo Corporation and Exelio, which will then be followed by a presentation by Manoj Sukamaran, senior analyst for data center compute at Omdia, who tracks the Ethernet adapter market. Jared Siket, Napatec's CMO, will follow Omdia with a more specific perspective of Napatec's product strategy, markets and how we are building solutions for success. I'll come back to anchor this presentation with an update of how we're building momentum and our reflections on our 3 year aspirations for growth. This is a packed agenda, roughly an hour long, to get our investors and prospective investors current on Napatek.
At the end, I will be joined by Jim Dworkin of Intel and Manoj Sukumarin of Ambedia and Heine Thorisgaard, our CFO and Jared to conduct the live Q and A session. To keep things organized, we'll be holding questions until the end. As you know already, there is a box on the bottom of this webcast presentation to enter questions you might have. I will do my best to make sure we get to as many questions as possible during the Q and A session. So let's jump in.
Napatec has an 18 year history delivering high performance FPGA PGA based SmartNICs. We are one of the innovators in this domain and have maintained an unparalleled reputation leveraging our expertise, accelerating compute intensive applications on servers. We were founded and based in Denmark with about 90 employees worldwide, and our R and D is completely done stem to stern in Copenhagen. We have 22 patents and patents pending, which along with the time it takes to build a base of expertise in this domain, provides a high barrier to entry for competitors. And we have a solid financial track record and highly leverageable business model targeting rapidly expanding marketplace, a $2,700,000,000 programmable NIC market by 2024.
We'll get into that in more detail later in this event. Napatek has brought together an enviable list of customers. We have over 200 global customers, And that number is growing every year. And 70% of our revenue from customers is based in the United States. We have 2 types of customers.
On the left are examples of our OEM customers, long standing customers like IBM, PECO, Cisco and many more. And some newly announced emerging OEMs like Lenovo and Silicon. These are customers who design our product into their products, and they take us to their end user customers. We consider this to be the most highly sought after revenue given that these relationships tend to be long term with revenues lasting 3 to 5 years or even longer. On the right side of the slide are the end user customers like Facebook, Citadel Securities, Morgan Stanley, Orange, NASA, the U.
S. Army or Novo Nordisk. This type of customer typically buys our SmartNIC solutions for shorter term projects or where certain applications are being deployed on servers in data centers where we have the expertise to accelerate and increase performance. These customers might not buy every quarter, but they do buy for a period of time while their rollouts are happening. Between these two types of customers, the OEM represents 73% of our revenues in 2020, with the balance of 27% revenues represented by end user customers.
This is a good balance for a company like Napatek, and we expect to grow. As we expect to grow, We'll grow them together in the coming years. In the middle of this slide, our key technology partners. You can see that they are well known technology leaders including Intel, Xilinx and Achronix, who together represent the majority of the FPGA chipmakers globally. Napatek is unique in our competitive domain by running on top of all of these FPGA reconfigurable integrated circuit solutions.
Additionally, we have partnerships with Arrow for global fulfillment solutions and Dell and HP for bringing our solutions to customers globally. We are proud of the customers we have landed and we maintain, and we add new customers every single quarter as we expand our wins globally. Napatec builds SmartNICs, which are the devices displayed in the middle of the slide. They are made to easily plug into standard servers, which are now the fundamental building blocks for all networks, clouds and data centers globally. These smart NICs are built with a super powerful reconfigurable microprocessor called an FPGA, which when combined with our software, These application areas require more and more compute power to operate and perform faster and securely.
The demand for high performance compute for these applications creates demand for SmartNICs. But the key strategic advantage to our success is Napatec's software that runs on these SmartNICs that delivers the real value to our customers. In terms of hardware, we build these solutions in our contract manufacturer location in the United States who has expertise working with this kind of technology and helps us maintain our reputation for extremely high reliability. We bring a range of products to our market that spans from $1500 to over $11,000 per unit, which allows us to maintain our high gross margins of over 70%. We've been working hard to build a history of solid financial performance, And our full year 2020 results added to that history.
Our key financial metrics tell a story of good execution in a market that is responding well to our products and solutions. In 2020, our revenues were up 16% year over year. We delivered solid progress on gross margins of 71.5%. Our net cash position was DKK 50,200,000 at the end of 2020. And with strong free cash flow of DKK33.6 million.
With these kinds of results, we can deliver solid earnings growth. In 2020, our EBIT was DKK10.1 million, up from negative DKK10.1 million from the year before. 2020 represents the best results for Napatec as a public company ever. So now you know about NAPTECH at a high level. We can now move along to enrich the story.
In the next section of our Capital Markets Day, we will have presentations from our top technology partner, Intel, key OEM customers like Exelio and Toyo Corporation, one of the most respected industry analysts for our marketplace, Omdia. We are very fortunate and we're super thankful to offer them to you for your interest and education about Napatek.
Hello, team Napatek. Thank you so much for inviting us here at Intel to be a part of your Capital Markets Day 2021. I'm happy to I'm Jim Dworkin, First of all, I would really like to send a heartfelt thank you to Napatec. I've known many of you for a number of years and have always been impressed not only by your extremely high technical acumen and business acumen, But also just the high quality of all of you as people there. It's really been a pleasure to be your partner over the years.
So I want to talk about 3 specific areas of partnership. 2, the first 2 of which are in flight, and the third one we look forward to for the future. So the first one is the Running of the NapaTec software solution on the Intel FPGA Programmable Acceleration Card, Intel PAC. The second one is a really exciting new platform that we launched last quarter called the Intel FPGA SmartNIC Platform for Cloud. And the third one is the Intel Open FPGA Stack, also known as Intel OFS.
We think it's important to capture the trends in the data center. And the data center is evolving. And the role of the FPGAs in the future data centers also evolving. We're going from what is today, what tends to be a node homogeneous environment, where a typical server will have the CPUs, tightly coupled memory, local storage, Add in cards for acceleration with GPUs, FPGAs or other components and then the network interface. What that's evolving to is a data center which is heterogeneous disaggregated.
You see that in the picture here where we have Separate general purpose compute nodes, accelerated compute nodes, storage nodes, memory nodes, And those can be bifurcated into 2 basic types. 1 is infrastructure support. The other one is application support. So, the FPGA enjoys a role in each of these disaggregated components, where it could be part of the SmartNIC or IPU as the interface, Or it could be embedded in any of those technologies within those nodes. For example, in a flash drive, an SSD for computational storage, or embedded with a memory, card as a computational memory device.
Also, the FPGA could be used as an XPU all on its own to do acceleration. And here at Intel, We invest within our division in both infrastructure and application acceleration technologies and solutions. And you see that in the pyramid on the left, that in order to make that accessible to our customers, at the end of the day, We need to build that into platforms. And that's the key to the strategy to try to make these solutions scale to a higher degree then would be capable by asking the end customers to program the FPGAs at the component level each time. So we come out with platforms and we enable those platforms through Intel and with our partnerships like the one we have with Napatek in order to deliver the applications and services accelerated to the end customers in the cloud.
So speaking of platforms, we have what are called PAC. These are the Intel branded cards for programmable acceleration platforms, and they accelerate many workloads from the edge with smart devices through the access and edge networks, through the core network and then into the cloud. So we have packs for different types of workloads. And the goal of the pack is to provide application performance acceleration at a TCO that's attractive to the end customer. It also delivers versatility.
So deploy once and then you can do your, customizations in your data center at the speed of software in a DevOps kind of methodology. So you see at the bottom how we take In either Intel branded platforms like Intel FPGA Pack or 3rd party cards like those that Napa Tech provides, We have then the STACK software layer. And the goal of the STACK is to abstract the Complexities of the underlying hardware, especially in the FPGA and bring that up to an API level that is standard, easy to use, customizable and delivers on that promise of application acceleration. So that as much as possible, we want to offer turnkey acceleration solutions through our partner ecosystem, again, including the strong one we have with Napatec. We also have a platform strategy for infrastructure processing, also known as SmartNICs.
Here you have a picture on the top left of a host CPU with a foundational NIC. And the host CPU is running functions like security, storage, networking, management and others that consume valuable host CPU cores. And as link speeds increase, the tax of running those applications for the infrastructure on those CPUs increases. To the point where offloading those and accelerating them on the SmartNIC gives an opportunity for the cloud service provider to monetize those cores or run the given application faster and more efficiently. So we have taken a platform approach.
Based on our component wins with the hyperscale cloud service providers, we've created this architecture which pairs a Stratix 10 FPGA along with the Xeon D SoC. Those 2 combine powerfully on a single full height half length card, which is modular, scalable and flexible and we call it the Intel FPGA SmartNIC platform. And we're also very happy that Napatec is one of our partners on that platform. So when we come out with a platform, what we do is look to create Infrastructure Workload Acceleration Solutions downstream to our end customers and also to our partners so that they can create the systems, the intellectual property and provide the solutions in the form of a product for those end customers. So we focus our solutions using FPGAs, Intel Ethernet components, SoCs and others to make sure that they have the maximum amount of flexibility and programmability at both the hardware and software level.
So for infrastructure for SmartNICs, We are really targeted at the cloud service provider market and the comms service provider market, Telco, which includes Telco Cloud, which is a new and growing market within telco. So very exciting. So we have a platform approach to the market. This is the first one that we've launched that pairs the FPGA with the SoC. And again, very happy to have Napatec along with us as a valued solution partner.
This is that platform. It's the Intel FPGA Cloud SmartNIC platform called the C5000X PL for platform That pairs the Intel Stratix 10 FPGA with the Hewlett Lake D Xeon D SoC from Intel. This, as I mentioned previously, is the architecture of the hyperscalers. It matches pretty closely that has been selected by multiple hyperscale cloud service providers for their SmartNIC needs in their data centers. It is both hardware and software programmable, standard software programming through the SoC tools, compilers, libraries and stacks that are already optimized for the Intel product.
It's hardware programmable through PGA tools and that can be done either by the end customer or by the ecosystem partners. It's agile therefore with the future in mind. So the idea is to deploy this as a standard looking NIC form factor into the customers' data centers and standard servers and allow them the ability to customize their workloads, do like the hyperscalers do, and differentiate and gain advantages for their applications that they run. Another exciting area for future partnership between Intel PSG and Napatec is around the software stack. We have the new Intel Open FPGA stack that was released last November and its goal is to address the developer dilemma for software, hardware and applications basically make FPGA based platforms easier to use and get the most benefit possible out of the FPGA component that is in that platform.
This is an open FPGA stack. It is delivered via Git repositories and is source accessible. So this will really allow us to scale our common business faster and to put the game changing FPGA acceleration technology in front of the end customer in a way that leads to their success and their scaling of their business. So let me again say a big thank you to Napatek. Thank you for inviting us to come in and speak about our growing partnership around the Intel FPGA Programmable Acceleration PAC cards.
The Intel FPGA SmartNIC C5000X PL platform for SmartNIC and future IPUs And looking forward into the future with solutions based around the Intel Open FPGA stack, It really has been a pleasure working with Napatec over these years, and I look forward to many more years of Wonderful partnership.
Hi. My name is Halas Beal, and I'm the Director of Technical Marketing for Exelio. Exelio addresses the needs of enterprise and government cybersecurity analysts to accelerate intrusion detection and response. Using the Napatec SmartNIC, we developed NAPA Tech's high performance SmartNIC enabled us to design a product that's taking today's rack size 100 gigabit per second packet capture and analysis solutions and condensing it into a high density 3 u form factor. By maximizing storage and compute power, Packet Express allows users also virtualized their security analysis applications directly on our platform.
When we were creating PacketExpress, Napatec's Application programming interface, extensive documentation, and development team gave us the competitive advantage we needed to accelerate our development and provide the capabilities our We're very thankful for the great support from the Napatec developers. We've had many calls with them that not only helped us solve the problems we are facing, but also offer insight on how we can expand the value of our integration. This partnership allowed us to grow successfully into adjacent applications such Just high volume IoT sensor telemetry data and analytics of high speed financial market data feeds. With Napatec's help, we built a solution that's unlike anything in the market and we look forward to building on the success together with the Napatec team going forward. Thank you.
Hello. I'm Shunsuke Takasu. I'm Vice President of Corporate Software and Technology in Toyo Corporation, Japan. I started my career as a development engineer 40 years ago In Toyo Corporation, as a CTO in 1990s, I had helped the launch of ClearSite Networks, a network management company. And recently, I was also involved in a Cybersecurity Business.
Now I am responsible for planning the business strategy of the company From a technological perspective, currently I'm involved in Cinesis, the packet capture business and the new network monitoring to NetEyes product. Shineshishi is the world's fastest packet capture appliance in 2016, which is able to capture at 100 gigabits without any packet loss. With using our patent on data lighting device and method, we also introduced 200 gigabits Portable in 2020. And we are working on next generation's packet capture for coming faster network era. As I mentioned, the concept of synergies These 2 capture 100% without any loss.
But why? Please let me explain why we focus on 100% Our customer is mainly Telecom, Government and Financial. Telecom customers need to provide excellent network quality, and thus they cannot miss any loss of the packet. While government and financial customers need to record every single packet for projects, Nowadays, COVID-nineteen, digital transformation, remote working requires us More network reliability. Packet never lie and 100% capture is based to know what happened in your network.
That's why we need to keep This simple concept for Synapse. And that also why we have a partnership with Napatec.
Hello, everyone. I'm Manoj Sukumaran, Senior Analyst for Data Center Compute at Omnia. And as a part of my research, I track the Ethernet adapter market And technology disruptions there very closely. The year 2020 was a year like no other. And we saw radical transformations The pandemic has created a lasting impact on the day to day life of people across the globe and the way business is done.
On one side, we have increased demand for cloud services, and computing demands are also increasing with the emergence of artificial intelligence, machine learning, analytics, transaction processing, etcetera. And the volume and complexity of data is also soaring with increasing number of consumer devices, increased bandwidth and connectivity, emerging edge computing use cases, deployments of sensors and IoT technologies in various industries. But on the other side, CPU technology advancements are struggling to catch up because of the challenges in transistor miniaturization. One of the ways to overcome this challenge and increase compute capacity of server is by using more discrete silicon and sharing the compute workloads. Offloading specific workloads to an accelerator or a coprocessor is an efficient way to increase compute density, and that is where programmable Ethernet adapters like those from Napatec comes to play.
Omnia expects by 2024, over 90% of Ethernet adapter ports will have The capability to offload some workloads from CPU, typically like storage, networking, or security functions. And 1 third of all adapter ports will fall under the category of programmable Ethernet adapter or SmartNIC, Providing the flexibility for the user to define functions to be offloaded or define custom functions as it provides programmability. These smart NICs are expected to be 33% of Ethernet adapter ports shipped by calendar year 2024, which is up from 12% in calendar year 2019. And the revenue is growing at a compounded annual growth rate of 41%. And this will be a 2,600,000,000 market opportunity by 2024.
However, a significant portion of the demand would come from hyperscale cloud service providers like Amazon and Microsoft who deploys programmable adapters on all their servers and they develop their own hardware and software for it. But the enterprise adoption of smart needs are also going up. And customers in the banking, financial services, and trading industries are deploying programmable adapters to handle the increased network traffic by offloading compliance, forensics and cybersecurity functions to these adapters. In their virtualized networks for offloading user plane functions, implementing firewalls, the Telecom customer segment. And that is actually one of the key advantage vendors like Napatek, who has a robust software portfolio.
Bigger enterprise software vendors are in early stages of their software development to take advantage of the programmable Ethernet adapters to optimize their workloads. For example, VMware recently announced an initiative to port their virtualization software to run on SmartMakes. Such initiatives are expected to boost the appeal of Programmable Adapters among Enterprise and Telco Customer segments. On the hardware side, there are 2 approaches to develop smartNICs. 1 is using FPGAs like Navatek products and another using network processors or SoCs.
We believe the FPGA based designs will have a larger customer appeal Because of the deterministic latency, efficiency and flexibility it provides over SoC based products. It is worth to remember that the disruption in this space is still in the early stages and use cases, workloads and standards are just evolving for programmer adapters. FPGAs provides the capability to accommodate these emerging workloads and use cases as the logic scales can be reprogrammed unlike SoCs. If you look at the market share of programmable NIC Vendors, excluding Microsoft and Amazon, who developed their own NICs, Please note that, there are many Silicon vendors also listed here, but we have taken only their SmartMik product revenue and not the Silicon revenue here. It is clearly the product leadership which is helping Napatec to compete with other multi $1,000,000,000 companies and be in the top 3 vendors in terms of revenue market share.
To summarize, Programmable adapters are a lucrative market segment, growing at over 40% CAGR. And Navidec is a vendor and closely following as they have the good mix of software and hardware product portfolio to capitalize this opportunity.
Thank you to the speakers from Intel and Omnia and the customer testimonials from Axelio and Toyo. I'm Jared Sickett, our Chief Marketing Officer, Speaking with you today from Pittsburgh, Pennsylvania, where I'll spend a few minutes sharing with you our perspective on the programmable SmartDIC market and Napatec's opportunity, including our product strategy and the solutions that underpin our growth aspirations. The one thing that's constant is change. That adage is often easily proven in information technology. It's especially notable today as there are several megatrends occurring simultaneously The combined are changing how people communicate and most importantly to Napatec, the way networks are built to support them.
1st, 5 gs telecommunications operators are building new data centers and expanding the number of access points to a massive scale, all to unlock unimaginable new services based on greater bandwidth and lower latency. 2nd, cloud operators And new edge computing data center operators continue to expand at hyperscale. They're delivering more intelligent, localized, autonomous computing resources for an increasing set of users and applications. 3rd, the Internet of Things scales to new heights with the invention of devices and sensors spanning personal use, Entertainment, quality of life to factory automation, public safety, connected cities, smart grids, all with new applications powered by machine learning and artificial intelligence. While these megatrends are unique in their own ways, One thing they share in common is the need for a new class of network for the communications infrastructure that underpins their vision.
These solutions are moving from technology planning and research to real world implementations, and it's that transition that defines the opportunity that lies in front of NapaTech. The sum of these new technologies creates a place where there are tens of millions of network servers, 1,000,000,000 of connected people and trillions of devices, machines and sensors, all powered by a nearly infinite set of applications and services that revolutionized the way we communicate, work, and live. Challenging requirements already existed for user mobility and borderless communications in support of connecting any device at any time from any place, while still preserving the security and data integrity. New trends in working from home have further exaggerated these demands on the network traffic as patterns have shifted and traditional security parameters have disappeared. In this new world, everything becomes intelligent or smart.
Everything is connected. The network endpoints exist at a new massive scale, and the physical network infrastructure must be dynamic, not static. It's dynamic because it has to evolve at the speed of innovation for new protocols, new standards, and for new applications and services to be deployed for revenue while at the same time protecting against an ever changing threat landscape. As a result, these new networks are dominated by open standard computing platforms, and applications and services are deployed as software on standard servers. The exciting impact for Napatek is that every one of these servers needs connectivity in the form of 1, 2, 4, and sometime upwards of 8 network interface cards.
To meet the complete set of these requirements, a new network architecture has emerged for data centers. The networks are transitioning away from expensive, large, proprietary monolithic vertically integrated systems. A new method of software defined networking is being used where network functions are being disaggregated from the hardware, virtualized, and delivered as software instances on open, standard, Low cost computing platforms. While few things stay the same for very long in high-tech, one item that has remained constant was the confidence that designers had that their systems could double in performance and reduce in cost every few years. At a time when Moore's Law is needed most, There is now uncertainty.
The cost of transistors are no longer in decline and are actually showing signs of increasing. At the same time, networking throughput is growing exponentially faster than the CPU's capacity to handle it. The cost to build new processors is the highest in history, often making new ventures cost prohibitive. And there are a rare few number of foundry companies that remain to manufacture devices in the latest processing nodes. The hard questions have now become what does computing look like after Moore's Law?
And do the processing limitations of CPUs put all of these visions at risk? To overcome the challenges created by the decline of Moore's Law, a new heterogeneous processing architecture exists where the most expensive and burdensome workloads are offloaded from the CPUs. This model has been proven to be successful in the past, with GPUs offloading video and graphics processing from the CPU. This same model is now being applied for data, network and security processing. This results in a world where best in breed solutions can interchangeably come together across servers, processors, accelerators, Applications and operating systems in a low cost manner.
Smart network interface cards or SmartNICs are now the preferred method to avoid these problems and help advance data center computing as Moore's Law ends while these other megatrends take flight. Programmable SmartNICs are in high demand by network builders everywhere. Engineers that build appliances and servers for original equipment manufacturers are using programmable SmartNICs to power their next generation designs. These highly valued OEMs make up 60% to 70% of Napatec's revenue today and provide a solid foundation for our business in the form of long term recurring revenue from each design win. End users who build and deploy their own systems are following suit and are the primary driver in the expansion of our total addressable and serviceable market.
As a result, modern data center servers powered by programmable SmartNICs can be found in networks of all types today, including cloud and edge service providers, 5 gs Mobile Telecommunications Companies, Fortune 5000 Enterprises and government and university networks. With Napatek Programmable SmartNIC hardware and software, IT operators of every size can mimic the architectures and designs of the largest hyperscale cloud who invented these technologies while themselves achieving all the benefits of cost and performance with a simple and easy to use out of box experience. With more than 200 satisfied customers and having shipped more than 125,000 SmartNIC ports, Napatek has established itself as a leader and the number one global vendor of FPGA based smart NICs. Napatec has also earned a pull position among other NIC vendors who are vying for a piece of this emerging market. And as you've seen earlier today, That NIC market is expected to more than double to $4,800,000,000 by 2024, where 1 in 3 NICs will be programmable Smart NICs while making up nearly 55% of the revenue.
Programmable SmartNICs are envisioned to power so many servers across these different network types because of the wide range of applications they approve. Perhaps the best example of where programmable smart NICs are used today is in cybersecurity such as next generation firewalls, data loss prevention systems, intrusion and detection and prevention systems, and many others. These types of applications best exemplify the types of problems where smart NICs are needed because the network speeds are increasing while at the same time, The amount of packet processing is expanding because of the constantly evolving threats from cyber criminals. They're also used today to improve 5 gs mobile applications for infrastructure virtualization, signaling gateways, subscriber authentication, and service delivery. They're used in cloud and edge computing For network and server virtualization and tenant isolation, they're regularly found in financial services markets for high frequency trading and trading algorithm simulation.
And they have a long and proven track record of success in numerous network monitoring, Recording and testing applications. It's at this intersection of network operator types and their applications where an increasing number of servers are being deployed. And it's here that Napatek Programmable SmartNICs provide the connectivity to the modern data center. The benefits provided by Napatek Programmable SmartNICs start with focus and ends with making the best technology decisions. Napatek is singularly focused on programmable SmartNICs for networking applications.
Our success in these areas come from our commitment to field programmable gate arrays as the best processor technology over lesser suited alternatives that include X86 based CPUs, ARM based SoCs, network processors, ASICs and other similar devices. Unlike any other alternative, Only FPGAs provide the networking performance and device programmability to deliver hardware performance with the speed of software innovation. Today, FPGAs make up more than 70% of the programmable SmartNICs deployed globally, and it's expanding. With the best technology decisions in place, Our product strategy is shaped by 3 key aspects. 1st, we are application driven.
Our primary focus is on driving investments in software and hardware to align our solutions with the highest volume and fastest growing applications in data centers. 2nd, we're software focused. The value of Napatec Solutions shine through in our software. We deliver production grade, high quality, high performance and feature rich FPGAs that brings life to FPGA based programmable smart NICs. Finally, we're hardware independent.
Napatek designs and develops its own family of FPGA based smart and network hardware, but also partners with other leading vendors. We offer solutions that scale connectivity from 1 to 100 gigabits and beyond. And most importantly, Napatec ensures that our software designs deliver the same stunning performance and features across a wide range of FPGAs from industry leading suppliers. We believe that anywhere an FPGA is deployed inside of a data center to improve networking performance is a home for Napatek software. In success, people buy Napatek SmartNICs because of the performance, rich feature set and hardware and software programmability.
Combined, this makes their applications run faster and their servers operate more efficiently. Our greatest value and most defensible IP is in our SmartNIC software. This is where we're making the most investments in order to make our SmartNICs more valuable to a wider set of the highest growth applications in more network types. With our SmartNIC software, Napatec uniquely delivers upon a full set of operator requirements, including performance. This means line rate networking with ultra low latency that scales from 25 gigabits to 100 gigabit Ethernet and beyond.
Agility is tightly coupled with performance. In a world of software defined everything, The network must provide hardware performance at the speed of software innovation. This equates to programmability that allows the hardware to evolve as fast as new networking protocols and standards emerge without allowing those changes to degrade performance. Efficiency demands The most valuable and expensive resources within the data center servers, those central processing units, spend most of their time supporting the applications, services and revenue that they were intended for. We do this by offloading the most burdensome workloads such as networking, data and security processing.
Economics at this scale cannot be forgotten. A fundamental requirement for minimal costs shifts the design of these networks towards open, standard and commodity off the shelf products. Scalability simply means that the orchestration and management of so many elements at this scale must be done with new methods for automation, configuration and control. Sustainability is the final component that ensures the network operates as required, but in an environmentally friendly size and power configuration. In summary, programmable SmartNICs were invented in the cloud And early demand was weighted by the hyperscale cloud operators that built their own hardware and software.
But today, An increasing percentage of the future consumption will come from other cloud, telecom, enterprise and government networks that will capture the same benefits that the hyperscalers enjoy today, but in an open, standard and easy to consume package from commercial vendors like Napa As a result, Napatec participates in one of the fastest growing global markets, leveraging more than 15 years of unmatched expertise in FPGA SmartNIC design, we're making the software investments to transition our products and solutions to align with modern network architectures and applications. As a result, we've earned the opportunity to win new business from our current customers and new prospects alike. Thank you for your time today. Please allow me to hand things back over to our CEO, Ray Smets, for the final presentation of the day.
I would like to summarize the NapaTech opportunity in the last formal section of our Capital Markets Day presentations today and highlight How we're performing against our aspirations for growth. To set context, I thought it would be good to start with a short retrospective about our business over the last 2 years to give you a sense of where we're at and where we're going. When I joined Napatec in 2018, my mission was to quickly make the needed changes and demonstrate our potential to build a growing and profitable tech business. These changes that we put in place brought us new opportunities, And our team has capitalized on them. We focused on our core competencies with our FPGA software expertise, streamlined our business to create operating leverage and recommitted ourselves to transparency and building trust.
In 2019, we set realistic expectations And we strive to reach higher by executing 3 pronged strategy for our products that both solidified our core near term product revenues while investing in new product innovation. As we gained momentum that year, we achieved positive cash flow earlier than promised. What should be evident here is that we have been executing on our aspirational strategy for growth now for a couple of years. Of course, we need to invest in our core products to keep them competitive. And then we needed to invest and bring them to mark bring to market new products and solutions, earning new design wins to get access to greater opportunities in the marketplace and grow revenues.
But we didn't stop there. In order to get more access to the greater number of customers in 2021 and beyond, we have been building key partnerships to bring our products into the spotlight and build more momentum towards revenue growth. A recent PR roll What we believe is very significant news for Napatec has been unveiled so far here in 2021. In summary, our core and new products together, along with new design wins, which add a longer arc of revenue and new key partnerships With a focus on our newest product solutions, all add up together to momentum that we chase that we have to chase in the marketplace, and it's a growing opportunity for our company. We have been working hard, and these headlines are some of the achievements and progress we've been making over the last year.
So let me go through them. Firstly, as I presented upfront, our 2020 financial performance was solid. On all fronts, on almost every metric, we met and beat our guidance to the capital markets, demonstrating both our product value in the market as well as our ability to deliver as expected and promised. Let me highlight some of the latest announcements on the partnership front. Our recently announced partnership with Lenovo is very, very important to note as it signals an important turning point for NapaTech.
Lenovo is a top 3 server maker with long and deep relationships with the kinds of customers we want to get access to that aren't so easy to get access to sometimes. And this partnership, which has been worked in progress really for over a year brings our latest solution focused on virtual networking to the marketplace. We will be delivering Lenovo branded based on Napatec's 25 100 gigabit per second solutions running our newest link virtualization SmartNIC software designed to accelerate apps and services, meeting the most demanding virtual requirements of 5 gs mobile telecom operators and cloud service providers. Starting with 5 gs Telecom and Cloud Data Center Operators in the Greater China market, Lenovo, together with Napatec, plans to extend the SmartNIC solutions globally to the world's top network operators. Napatek estimates that the revenue potential of this design win to exceed $10,000,000 over the life of the product.
Of course, we'll do as best as we can to exceed that. But our customer orders will not begin until late 2021 and will ramp into 2022 beyond. Another key and important partnership to note is the one we just announced last week with Silicon, a well respected industry leader provide leading provider of high performance networking and data infrastructure solutions, and they're based in Israel. Napatek software will power the Silicon SmartNIC, so which is based on the Intel's FPGA SmartNIC reference design. Very important point.
To be clear, this is a partnership that brings the Napatec software combined with the Intel FPGA based SmartNIC provides a unique and compelling choice for server connectivity to modern data center operators with benefits of increased performance, The speed and agility benefits of the FPGA, greater benefits around efficiency and security and improved data center economics. We are super excited about this partnership with our friends at Silicon, and we'll work hard to help Silicon win new deals, which is a win win for both companies. So look forward to that one. To top off our year of progress, we've made great strides in winning new design wins with both Existing and new companies, some are shown here on the slide, along with others that are not permitted to be shown. These are new design wins that span our product lines and offer us a long arc of revenue from these engagements.
And as we announced in the mid 2020 time frame, we punctuated that with a key new financial technology design win that we're making great to show that we're making great strides in the financial technology marketplace. The new design win was with a global financial services trading firm specializing in proprietary, high frequency and algorithmic trading with data centers and major financial hubs in the US, Europe, and Asia. This growing group of customers is buying our products to accelerate applications within their data centers and to improve trading behavior that maximizes revenue and derisks their transactions, all while strengthening the security of the data in flight across the trading networks. We know how speed and accuracy and performance matters trading firms trying to squeeze every nanosecond of time from the trading process, which when done right, adds huge value to these kinds of customers. Industry analysts have reported an uptick in smart NIC demand in the segment, and we'll work to capitalize on that growth the best we can.
Napatek has a clear view of how we wish to grow our business. The graphic on the left side is a little complicated, but it shows how we stack up from our hardware and software product line through to our target markets. Each of these levels in the chart have their own strategy and plans of how we are bringing our hardware and software solution to end user customers in the cloud and data centers, service providers, enterprises, and government agencies, and solving problems across multiple application segments in cybersecurity, network monitoring, infrastructure, cloud and edge, mobile and financial technology. In a nutshell, we exist to improve performance of applications that run on servers. Our plan for growth is to focus on our product strategy.
We've talked about it before as our 3 pronged product strategy. Let me rearticulate it. We will expand our core product revenues with new competitive features. We'll grow new product revenues with in line active in line features to as to access the firewall market that's out there for us to take. And we will gain traction in fast growing virtual use cases with an addressable market needing apps deployed as a virtual instance on a virtual machine, such as in 5 gs Mobile or Cloud and Edge.
This multi pronged approach assures we are building new revenues on a solid foundation and core expertise while enthusiastically building new revenues in areas we think we can win. 2020 was all about earning a path to the next level of growth. We have momentum with building best in class FPGA based Spartanics and software, solving real world problems, accelerating applications and growing market segments like networking and security, 5 gs Mobile, Cloud and Edge and Financial Services. We help make networks faster and are making servers more powerful while reducing our customers' data center costs. All of this is real value for customers solving problems today.
And with this momentum, the future does look bright. Our solid core product momentum that we have demonstrated creates a stable foundation for growth, driving healthy cash flow to keep up with the investments in product innovation. Then our success in creating new revenues from our new product initiatives show how we will increase our potential to win. New important and key design wins and gaining traction with new partnerships, as we have revealed over the last few months, We'll truly move the needle in significant ways when we get to the market with them. We have earned a path to the next level, But the work really has just begun.
We have a lot of work to do, and it won't come easy. But we remain committed to make up make as good of an effort as we can to bring Napatec into the center of the spotlight where we can to make a big impact. We presented our guidance in our interim management report on the 27th February. We won't go through this in detail today here in Capital Markets Day, but we do expect 2021 will be another year of building momentum and growth. We said that we would expect revenue in U.
S. Dollars to be in the range of $35,000,000 to $38,000,000 reflecting growth rates from 17.8% to 29.1%. We expect strong gross margins to be between 70% 72%, and we will keep costs in check and expect resulting cash and earnings to be positive. With performance in the middle of the guided ranges, we expect EBITDAK and EBIT to be DKK 26,200,000. Finally, I would like to provide our capital markets an update to our growth rates in 2022 and beyond.
Overall, we are in line and on track with the aspirations that we communicated in the last Capital Markets Day. First, let's start with our revenue CAGR for 2020 through 2022. We communicated that this would be between 20% 30%. We are on track for achieving the aspiration for growth that this brings over this period. And we expect that the CAGR for 2020 through 2021 will be greater than 20% by the end of 2021, which puts us in line with these aspirations.
We also aspire to a yearly growth of 30% or more from 2022 and onwards, and we're getting there. Our margins are on track with our expected aspirations and continue to expect they will be around 70%. As we develop our plans for growth with large OEMs, end users and software only channels to the market, even with greater volume, We feel that this is a good gross margin result for Napatek. Our operating costs, CAGR, for 2020 through 2022 are coming in quite positively over the 2020 to 2022 period. We expect it to be at 2% CAGR by the end of 2021, and we will stay on track in 2020 through 2022.
This gives us significant room for investing in our business to unlock the growth we want to achieve. To provide our aspirations for revenue mix to shift towards software only revenue, which requires us to increase sales of our software on hardware made by other companies. And we believe we're making progress. The work we've done with Intel over the last few years where a core Packet capture software runs on the Intel Packet Acceleration Card was our starting point. Our announcement about our partnership with Silicon is part of this evolution.
So you can see that this aspiration is emerging, And the focus on unlocking this mix shift towards software only is beginning to move in the right direction. So let's bring this to a close, and let's move on to the Q and A. We know that our investors are looking for growth companies that will deliver results for years to come. We are working to be that kind of company. As a demonstration of that progress, we have emerged and delivered a combination of stability, growth, positive cash flow and positive earnings.
We believe that the market we serve provides the headroom we need to grow. And we will see some exciting times as this market matures and expands. We will make investments to bring our most innovative solutions to the market and win new customers and design wins. And we have worked hard to put these new partnerships in place and expect that we will that these will get us access to more customers. And we always strive to give you a realistic view of what we can achieve, and then we're committed to go find a way to beat it.
So it's time to move on to the q and a session. I'd like to ask Jim Dworkin of Intel, Manoj Sukumarin of OMDIA, Heine Thorsgard, our CFO, and Jared to join me to conduct a live Q and A session. We'll try to do this on Teams with all of us together. We'll see how it works. As a reminder, there is a box below the webcast presentation to enter questions you might have.
We have questions in queue already, so we can start with the first one. I will do my best to make sure we cover as many of these questions as possible as we get into the Q and A session. So let's go ahead and give it a try. All right. Well, I hope everyone enjoyed the presentation so far.
And, And I hope everybody had a chance to listen to the key messages that we've been delivering throughout this presentation as well as since our IMS for I did want to highlight, one thing that, was excluded in the, one of the final presentation slides, the aspiration slides and I just wanted to make sure I underscore it here. It's in the, it's in the downloadable deck that you can get online and that's available, both from the on our Investor Relations website for this webcast. But I wanted to reiterate that we're on track for achieving our aspirations that we previously communicated for a 20% or plus growth rate by the end of 2021. So, we feel very good about that. We've Aspirations are intended to be forward looking, and the good news is that we're executing on our aspirations.
We do expect annual growth rates to exceed 30% from 2022 onwards. And just underscoring that one more time, The way we unlock growth there is through a multi pronged approach to the marketplace. Obviously it starts with We've been investing in our product strategy, building our products to support that kind of growth. And then adding on top of the product strategy at the right time is bringing the partnerships to the table that can get us access to the market that we want to achieve that growth with. There has been a couple of questions about this during the course of the webcast and if we have chance we'll go into it a little greater detail.
But I wanted to underscore that it's the product strategy combined with the go to market strategy and the partnerships that together unlock that next level of growth. So that's what we're communicating here And we think we're putting some numbers on the table from an aspirational perspective that's quite positive. If you take that in combination And set an expectation there. We do expect that annual revenues can achieve $100,000,000 in revenue by the 2024 to 2025 timeframe. So hopefully everybody got a nice overview of that.
So, so looking at the Q and A, that we have so far, we have a number of questions that have come in during the course of the webcast and, I'll take the first one. And let me see if I can summarize it. I have about 4 or 5 questions on a similar topic. What does the partnership with silicon mean for you and what kind of revenues can you expect from silicon? Will the silicon FPGAs intel based cards open the door to the 5 gs markets or others.
And if you can answer, did you already secure any design wins with silicon? So, just a quick commentary. I've communicated a little bit about Silicon in the, in the, prior session. But, you know, first of all, we're super happy to have this partnership with Silicon. It's super meaningful to Napa Tech.
And, and I guess you guys know it's Easy to say, hard to do sometimes. Relationships take time. We have a relationship. We've had a relationship with Silicon really since the the day I walked in the door at NapaTech. And we've been building on that relationship with Avi and Shaika over at over at Silicon really ever since.
And, we're super, super happy to have them as part of what we consider our partnership community of great companies. We're porting our software that we have running on our hardware over to their hardware solution, which is an Intel based hardware solution. And this is intended to be part of the success of this potential partnership. It's a win win. We intend to get access to the virtual data center and service provider opportunities through this relationship by harnessing the silicon relationship in that particular market through their hardware initiative.
This is part of their go to market program. It wouldn't be right for us to on what the potential revenue of this opportunity could be. We're just getting our legs under us in terms of bringing this to market. But we are optimistic about the potential for revenues here in late 2020 beyond 2021 and beyond. And, but you know, we're, we're just getting it started.
And we're looking forward to working with the Silicon team to bring to the market with Silicon what we believe is the top performing feature rich solution to address that part of the marketplace. So, so we've been communicating this since, since the Q4 IMS, about our strategy around partnerships. It is a very important part of our strategy going forward. The Silicon relationship is clearly aligned with that partnership strategy And it served us well in the recent past and we expect to make a silicon a success through our partnership with silicon. We don't have any design wins to announce at this point in time since we've just started the relationship with silicon and obviously once we make some progress there and Obviously with the consideration of what we can communicate with this relationship, we will endeavor to communicate that to the capital markets.
So, so that's the first question. The, we've had a, there is a couple other questions regarding silicon. Come back to those if we have some time. So I just want to keep moving forward. Manoj, you had a great presentation obviously spurred a couple of questions along the way.
The next one I think is more kind of in your neck of the woods and maybe Jared you can comment about this as we get into it. But here's the question knowing that Microsoft and Amazon are included in the programmable nick market. How should we see the Napatec addressable market evolving over the next few years given that Microsoft makes their own solution and takes up so much of that market. Does it make sense to remove them from the market? Manoj, could you help us with that one?
Yep. Yep. Am I audible? Yes. Okay.
Awesome. So that's a great question. So when we track a particular market, we track that market very comprehensively, Including all players and the total opportunity for all the vendors who play in that market. So in this particular case, Amazon and Microsoft are, I would say pioneers in this space. They actually show the world how to use, programmable adapters At scale to optimize their compute resources for, large scale deployments.
And it is just that they manufacture or they optimize their designs Both on the hardware and software side and, basically, the hardware gets manufactured by a third party manufacturer, an ODM or a contract manufacturer, and they deployed these NICS on their Dairy Centers with their own software. So I would treat this as a high volume, low margin market market opportunity where there is a high barrier to entry. So when I look at the market as an Overall perspective, I think it is best to include Microsoft and Amazon as well. And As I mentioned in my presentation, the programmable NIC adapter is a very nascent market. And the technology Disruptions are happening in this market on a weekly basis or a monthly basis.
So, And the technology disruptions can come from companies irrespective of their size. So If there is, a attractive, proposition from either on a hardware or on a software side, even if it comes from a smaller company, I believe that will be an opportunity that even Microsoft or Amazon would be an opportunity for those companies. So that's the reason I would take a comprehensive view of the market than isolating Amazon and Microsoft.
Thank you. Thank you for that answer. Jared, curious, would you like to add anything to that? You're muted.
I thank you for that. No. Ray, thank you. I don't think too much that. I would just echo the fact that the Within this market, those large hyperscale data center operators were the pioneers and they built their own solutions because there were no commercially available offerings.
Now as a few years have passed and it's become not only deployed and successful at scale and And networks of all types across telco, edge computing, tier 2 cloud and even enterprises now are mimicking these designs to get the same benefits out of their network. Commercial vendors like Napatec have come along to service that demand. And now we're in a position to provide solutions even for those hyperscales who once didn't have them. So I think it's right that the industry analysts like Omnia and most others include the full demand within their forecasts and market measurements.
All right. Super. Thank you for that. Just jumping into the next question, this one also feels like it could go towards Manoj. Your investors want to get some sense of volume versus price, why will volume increase over time for programmable smart NICs And as the market grows, why won't prices plummet?
Is that factored into the market share, market mix in the future? So Manoj, I'm curious if you could
Yeah, absolutely. So, yeah, there is actually The economies of scale playing out. But, one need to understand that there are 2 components in this particular space. One is actually the hardware and the second one is the software part of it. And obviously, a good solution need to have a very tight
Alright. Technical difficulties. We lost Manoj or There maybe Manoj has disappeared. So that's, it was a good start to the answer. And so Jared, We get this question from time to time also in terms of stability around price in this particular market as volumes increase.
What's your point?
Yeah. Thanks again, Ray. It's much like any market, especially in tech. Companies like Napatek have a portfolio of products that span the price performance curve. There are market segments and applications being deployed that require a solution, that, where the configurations scale into the, you know, $5,000 $10,000 type of range.
There are market segments like hyperscale cloud and telco deployments, especially for 5 gs, where a typical deployment could be 10, 25, 50, even 100,000 units a year or more. And in those configurations, they actually require a different product. So in our portfolio, these are part of the investments we've made over the past 2 years to be able to service these new markets where The cards do sell at a lower price. They can be as low as $1,000 but they're designed and engineered for these markets and still preserve the great margins
that we have that come with the combined
hardware and software solution.
Alright. Super. Thank you for that. And We've guided our aspirations around 70% gross margin over the aspirational period for that purpose And we feel very strongly about that. And as product mix changes, keep in mind that will also have an impact on our ability to maintain gross margins as our software products will be combined with our software hardware products and we'll continue to drive gross margins in the right direction.
So we feel pretty good about that expectation that we've set. I don't see Jim Dworkin on the line. So yes, I see Jim is Jim is there, but Manoj is gone. I hope we get Manoj back, but we have plenty of questions to cover. I think this one may be going in your direction.
Hey, welcome back Manoj. So Jim, this is I think going to go in your direction and maybe Jared you Follow-up on this one as well. It says, can you talk to the competitive nature of each of the competing FPGA architectures like the SoC or the ASIC? Given that intel has solutions that span FPGAs ASICs and ASIC based NICs, how do you see buying decisions taking place by customers that need programmable SmartNICs versus other solutions. Jim, do you have a point of view on that?
Sure. Thanks, Ray. Can you all hear me okay?
Yes.
It's hard to tell if there's a delay. Okay. So, yeah, thanks for the question. As we've noted in the past, SmartNIC solutions can be built Well, SmartNIC to us is defined as having either a CPU or an FPGA or both, so it needs a compute element. And as you can see from the presentation I gave, we have a platform approach to the market for cloud driven out of our FPGA group, which I'm a part of.
But, Intel has a number of different solution types in its portfolio. So as you mentioned, SoC We have a very strong leadership position in the Ethernet products group overall with foundational NICs leading into Smart NICs. So, we have Some exciting future products, on the roadmap, coming. So, you'll see different solution types to address the growing SmartNIC market segment itself. So, you know, we make decisions on that based on the market segmentation, Based on the success that we've had in the market and the existing customer engagements and customer relationships that we have, what do we see as the requirements and the care abouts and the buying patterns of the Next Wave, Jared mentioned Tier 2, we call them Next Wave Cloud.
We also see the cloudification of the telco space coming where the telcos want to increasingly compete in the cloud computing space, so those requirements kind of blend between telco and cloud. So, there is no 1 size fits all SmartNIC solution today, which really creates a climate of maximum, I would say utility maximum value of the FPGA due to its hardware reconfigurability aspects. Then in the platform that we've built, Adding in that standard Xeon D Intel architecture CPU right alongside tightly coupled to that FPGA has just been a killer combination, really. It just makes that an ideal solution for the market At this time, now the market will evolve. We look at actually do our analysis across a 10 or even more, year horizon, And there's some really interesting dynamics coming that we haven't even been super vocal about publicly, but we have been working privately with our customer base.
Okay. So again, really just want to reiterate that happiness to be partnering with companies like Napatek, like the software solution. And I just just a quick note, Ray, sorry to take a long time with this answer, but to answer the question about the go to market strategy and the partnerships, Our strategy is to do what Intel does best and that in my mind, which is platform enablement reference designs. And that's what this cloud platform for SmartNIC is all about. We have, solution integration partners like, Silicon that produce orderable products for the end customers.
We're very happy to see the partnership between Napatek and Silicom. We are in the process of onboarding more, and we have strategy to onboard more solution integration partners that will create the end product, orderable product that the customer will buy. So we'll see how that all plays out in the future, but We certainly imagine in our go to market vision, a wide set of ecosystem partners that are creating and customizing these solutions for the end customer. And then sort of back full circle to the subject of the question, It could be based on a range of different Intel technologies over the long term. But in the short term, the FPGAs have been winning and winning big, And that's why we created this platform, and we think that that's the right one for the time.
That's really great. And thank you very much for commenting about the relationship with Silicon in the midst of your answer. If it wasn't for Intel establishing that platform, we would not have the ability to create that strategic value in the ecosystem that you guys are ultimately developing. So we're really grateful for that. It's the catalyst that brought Silicon and Napatec together in our recently announced partnership.
So thanks for that very much. We got announced partnership. So thanks for that very much. We got a bunch of questions regarding the revenue aspirations and partnerships and I'll try to cover 3 questions here in one chunk. I may ask Taina for a little help along the way, but we'll get to that point.
So can you comment on the revenue aspirations? What is driving growth to over 30%? Along the way of that discussion, you have 73% revenue share from OEMs today. How do you expect this share Going forward, given your revenue aspirations and what can you say when you're investing in new partnerships? What kind of partnerships are you talking about?
So this covers a couple of I would say pretty meaty topics here. I think we've covered it in multiple ways, but I'll try to summarize one more time. So, as I've said before, in order for us to grow as a company, it really has to start with product strategy. If you have, you can always sell harder, You can always market harder, that provides a temporary bump in revenue growth. But the way you really get long term revenue growth, which is what we're talking about here in the session is you got to invest in the product.
That's been our strategy really ever since I walked in the door, but it's really been our strategy at Napa tech really since the very beginning of time for an appetite. So it starts with product strategy. It's about having the right products that address the market needs in the market today and in the near future and getting those products to market at the right time, not too early, not too late, but just about the right time. And I feel pretty confident that our investment in kind of the virtual opportunity is kind of just arriving at the right time. So we've been investing in this product strategy for years, but you can't grow the business on that alone.
You also have to have a go to market strategy. And part of that is making sure that you have proper channels to the market, proper target customers in the marketplace. And we do that through our direct and indirect sales initiatives. But the partnerships is really where you get the enrichment opportunity. Partnerships can range from OEM type partnerships to go to market partnerships.
And we put Lenovo for example, Lenovo is if you look at Classic definition of an OEM, Lenovo is an OEM, but it goes bigger and beyond some of the OEM relationships that we have. It's a partnership and we classify it as strategic to the company in that regard because we're collaborating with a product solution and helping them bring that product to market. We would endeavor to say that our silicon relationship, although you might classify it as a classic OEM relationship, it goes above and beyond what we typically would say about our typical OEM relationships because it's new, it's fresh, it's innovative And it requires that level of collaboration that goes above and beyond some of the relationships that we have on the OEM side. So we do intend that these relationships will drive growth. They will also give us access to markets that we currently don't have access to we don't have easy access to just given the size of Napa Tech.
We're leveraging and harnessing the size factor with partnerships like that. The intel relationship is also a key partnership for us not only from a platform perspective, but as we have announced A couple of years ago we have been going to market with intel with a software only solution that runs on the intel pack cards that Jim Dworkin Presented a little bit earlier in his presentation. And honestly, when I talk about earning A path to growth and unlocking the future of growth. There is a question or 2 on that, for Questioning and even debating whether we've properly set the tone on that. These partnerships take time.
And the fact that we put this in place with Intel and we've been executing on that partnership strategy with Intel now for a couple of years Kind of unlocked the opportunity and kind of earned our way to the next level of growth through the platform relationship we have with Intel and also getting our alignment in place with silicon. So you can see this is a bit of a snowball. So So the key to growth and how we get to 30% and beyond in revenue growth is really through the development of product, bringing them to the market at the time and building partnerships that get us access to the market that we currently can't get access to for our typical sales channels. And the last Part of the question. I hope I've covered it in terms of what kind of partners are you talking about.
As I had mentioned earlier, partnerships can range from OEM relationships to go to market partnerships. That may not be necessarily classically defined as OEM, but the goal here is to get access to a large and growing market opportunity. There is a question. For you yet. So we'll see where that takes us in the next couple of minutes.
But can you comment on the leverage you see with the smart nicks reducing total cost of ownership. Is this a big enough driver over developing and deploying more servers to solve the growing demand for applications. How do you want to approach that one, Jared?
Yeah. Thanks, Ray. When you talk to these, The network operators that are responsible for the data centers in cloud, telco and some of the new edge computing requirements, They're dealing with a scale that we've not seen before. We often call it hyperscale because it's just a massive number of computing elements. And at every point in their decision making, things like the cost per rack, the power and the space and the cooling all play factors.
The sustainability of these networks is paramount. The single most expensive resource in those networks are the central processing units that sit inside of those servers. And when you're going to take on that expense, those computing resources have to be doing what they were intended for, which is either generating revenue, delivering apps and services or being leased out to tenants in their business model. And so, one of the key tenants of the SmartNIC is to offload those central processing units from the things that detract from its goal. And, you know, accelerators have been around for a long time.
Many of us are familiar with graphics processing units or GPUs that sit right beside a CPU, offloading the burdensome video and graphics related processing. Now in modern data centers where it is all about data, data processing, network processing, security processing, Those elements now consume just an inordinate amount of the central processing unit. And your only alternative is to stack more and more servers, which require more and more processors, more space, more power, more cooling. So it's this notion of smart NICs that have come along To provide acceleration for all kinds of workloads. You know, the folks at Intel have solutions for FPGAs that range from artificial intelligence to machine learning, other forms of video, Bitcoin mining, you name it, there's no shortage.
We at Napatek, we're singularly focused on what we believe is the most burdensome workload inside of data centers, and that's the network and packet processing. And in summary, Across the board in every use case where a SmartNIC is deployed, the cost and performance benefits are easily demonstrable and measurable.
All right. Thank you. Thank you, Jared. We have about another 15 minutes of Q and A here. I want to try to get to the next Q and A very quickly.
And this one is kind of directed more to Jim and Manoj. So maybe we'll give those You guys can jump all this one and see who takes it first. It says, packet capture has become an established area for FPGA deployments. The growth in offload seems to be primarily driven ASIC based NICS while programmable NICS seem like a sweet spot for FPGAs but also SOCs. What is the key use cases for a major step up in volume for FPGAs which is envisioned?
You mentioned 5 gs, but what else? Do either of you guys want to take that one?
Yep. Surely. So, as I mentioned in in my presentation, This is like an evolving space. There are more use cases being identified. The new more use cases are coming up.
More technology is being transferred to, programmer adapters. So, while the SoCs provide a fixed set of features and a limited flexibility in terms of how the processing, packet processing can be done mostly at a software level. FPGAs have the advantages of, means the the The native advantages of the programmability within the silicon itself. And that is actually, would be the big differentiator. So, for the evolving, technology adoptions in this space, I believe FPGAs will be More capable of accommodating it.
At the same time, providing a very efficient and low latency packet processing or the data packet processing. So I believe FPGAs will have an edge over SoCs in the programmable adapter space.
Thanks for that point of view, Manoj. We tend to agree with you. Jim, I want to give you an opportunity to add any value there You may have opinions.
Yeah. Thanks, Ray. Manoj, being in the FPGA group at Intel, it would be hard me to argue with you. However, as I mentioned earlier, we do have a, portfolio and a number of different architecture types that we can, you know, components we can bring together to address the needs of the SmartNIC evolving market and some of the future stuff that I was, also teasing earlier. So, for for the platform for cloud, one of the, let's say killer apps or killer use cases that we've seen is the convergence of networking and storage.
And so this can't be underestimated, and I think it should be intuitive to everyone listening how important storage has become in our You know, online and connected world, and there are, I can't rattle the numbers off the top of my head, but whatever is higher than, you know, orders of magnitude Higher than petabytes. The amount of data that's created on the planet every minute, every day, every year is truly awesome. So, the needs to analyze all that data that and analyze unstructured data has become Just a huge and growing problem and challenge for the market to solve. So, for the evolution of the NIC market into smart NICs, that's one of the You know, most killer applications is to use the convergence of networking and storage use cases and transports to solve, that problem, among others. Of course, AI is a big one.
Security is a huge one too. So just simply porting a bare metal service as a cloud provider, which means you you you you rent out the entire server as if it was the customer's server, but you have a NIC plugged in there, into that server. So, It's important, it's critically important for the cloud operator to retain control over their own network If they're going to rent 1 server out to 1, client and then another server right next to it on the same network out to another client and make sure that they're not damaging each other, damaging the network, their security threats, so on. Napotek is so well positioned in that segment historically in driving use cases that work in the security realm. So, security, networking, storage, those are all some of the killer apps and use cases that are driving forward the SmartNIC market into the future.
And there are, as I said earlier, there are other ones that, are coming soon. And I, we here at Intel intend to stay very close to our partners like, Napatec in order to develop those so that this is a long term growth segment that that, Ray, you were talking about, Okay, and sets us up for success jointly in the future.
All right, super. Thank you very much for that point of view, Jim. And Manoj, super helpful and thanks for that question also. We've got a few others popping in here. The next one is back to silicon and then there's a follow on question regarding our software only solution.
I'll try to cover the first one and then maybe Hainan and I can collaborate on the second one. Silicon's FPGA cards compete with yours. So which advantage do you see when partnering with Silicon and giving them access to your IP? Silicon cards do not come with an I. P.
So I don't think this gives them an advantage in terms of hardware. What do you think about that? Well, the As Jared talked about and you've heard us talk about a couple of times in regards to what we bring to market, the software that we're developing on top of our hardware offering is really kind of the secret to our success. We consider it a strategic key strategic advantage to Napa Tech that you're not just investing in a hardware company, but you're investing in a software company that delivers its software on hardware both on a platform level and also the platform that we build ourselves. So we think this gives us I think a unique opportunity to not only grow the market but also maintain our gross margins as we go forward in that marketplace.
So we've made a decision to build great smart mix software hardware solutions for customers who need to buy the hardware software combined. But it makes a lot of sense for us as a company to exploit the position we have with software. So we validated this strategy with intel A couple of years back through the programmable acceleration cards that we sell on that we still are in market with intel and we endeavor to do the same with silicon that we intend to engage at that level. The relationship that we have Consummated with silicon is really to combine our best in class IP with their best in class solution built on the platform that is put into the marketplace by intel and we see this as a win win solution. We don't see this as a competitive situation or giving a competitor a leg up in any way shape or form.
As we've communicated, this market has plenty of headroom for all of us to exist and flourish and grow. And we wanna activate all of the different channels to the marketplace that we can activate to engage that growth opportunity in the marketplace. So we see this as a market expansionary opportunity for our company. And we're not kind of giving it away if you will. We're engaging a partnership here to grow the opportunity for both companies.
The next kind of related question is could you speak about your software solution as a standalone product? Explain a little bit more about the advantages of your solution versus others, which market potential do you see for that product in terms of potential for revenues in terms of recurring revenues also about the gross margins for the standalone. What is your gross margins So that's a very loaded question. I think we could spend the next 30, 45 minutes talking about it. I'll try to encapsulate very quickly.
I'll let Jared comment a little bit as well on this one. And then maybe Heine, you can talk a little bit about the gross margin vector for the software only products. So the software only solution is a standalone product really is Has really been part of our strategy for a couple of years as I've already said, and I don't want to repeat myself too much for brevity of time. But once again, it's the key to our success is delivering a solution that our customers want to consume right now, that adds real value. And in order for a Smart Nick to do what it needs to do.
It needs software. A Smart Nick alone cannot perform the duties that that it needs to perform in terms of accelerating applications and making them better at what they do without the software that we build on top of that hardware. So so it is a strategic advantage for us to use that asset as a go to market and growth opportunity for the company and we've been looking for ways to unlock that and it's a rather progressive innovative way of going to market. You know, and I hope our investors give us some credit for doing this. We could easily go to market in the same old fashioned way we've done for the last decade and a half as a hardware solution with some software that happens to add some value rather we're going taking a different path with our software standalone solution as leading with our software as the key differentiator for an appetite solution and leveraging hardware solutions across the industry to get us access to that market.
So once again, it is very, very important to us. We're aspiring in the recommendations to a product mix that begins to see more software over time as the product mix evolves. And we think we've taken a few steps here in the right direction. Jared, do you want to add anything to that commentary?
I can. I would just say that we heard from Manos today that an increasing number of the NICs deployed are going to be programmable smart NICs. And we know today that the majority of those NICs, more than 70% of them today are based on FPGAs. So we think we've made the right technology decision and that that trend will continue. So outside of Napatec, there are The tier 1 global multibillion dollar companies that develop FPGAs as well as server companies that have a vision for an FPGA to be deployed every server.
It will be a standard offering. And Our perspective on that is anywhere that those FPGAs live, either in accelerator cards from Napatec, other boards from 3rd party companies, even FPGA technologies embedded inside of CPUs, anywhere there's an FPGA deployed in the data center, that's a home for our software in a place that we can help those servers run faster or better more efficiently.
All right, great. Thank you for that. And Heine, do you want to comment about the gross margins associated with software as a standalone product?
Sure. Thanks. We don't have any third party software components as part of our software solutions. So software only revenue would basically be 100% margin for us. So of course, that's like a big part of why we feel comfortable about the future expectations to our overall gross margin for the company.
So Software only is 100% margin.
All right. That's a short and sweet And good answer to the question. Just looking at, we have a couple other questions that have come in. Let me see if I can articulate them. So this one is this one kind of goes towards the Intel direction and an omnia direction.
So I'll just read them and Jim and Manoj, I'll just let you Comment on them if you see fit. So this one says, for Intel, how many suppliers do you work with in your strategic ecosystem, are they complementary or used for various solutions? So that's the first part of the question. Jim, do you have a point of view on that?
Okay. Yeah. I mean, I'll presume that the question is related to the cloud SmartNIC platform and Maybe just related also to our PAC card program, because obviously Intel works with a staggering number of partners globally. But for our business and what we drive for the cloud platform, We have been public with Inventeq and Silicon, Inventeq building the initial hardware and Silicon being our first, what we call solution integration partner, and that's the one that creates the orderable product for the, the end customer. So we have a strategic Direction and vision to have, I guess the right word would be a handful.
Limited at the moment as we, Intel support our platform to the next, level of partner, in this case, silicon being that solution integrator, and obviously, you have that partnership along with silicon for that. So, I would say a handful is what is practical in this generation of the platform for us to scale out, but we're generating Strong momentum with that, and we intend for all of our platform and solution integration partners that we will eventually have with this particular 2 by 25 gig platform to come along with us into the 100 gig and higher link speed and higher performance performance per watt versions of the platform in the future. So, that's kind of the scale of the thing. I think, Ray, it was you that mentioned the snowball, so that's the effect we're looking to go for here. And, yeah, that's our strategic intent.
Yeah. Thank you. Thank you, Jim. And I think we're coming up close to the end of time, but there's one question that Is a follow on question for Omdia and Manoj, I'm curious if you would be willing to comment on this. It says for Omdia, Yes, Mino, as you said, Napatec has a potential lead from a product perspective.
Can you explain that point that you made in your presentation a bit further? Very interesting for investors to hear.
Yeah, of course. So I analyzed the various SmartDIC providers in this market or programmable adapter, vendors in this market. And, there are Multiple types of vendors who's playing out in the space. 1 is, vendors who provide just the hardware platform for 3rd party ISVs or other solution providers to build software on top of it and provide it to the end customer. And there is another category of customers who provides both hardware and software as an integrated package.
And there is another category of products, I mean, it's vendors who provides only the software part of it, But primarily, buying the hardware part from a vendor like maybe from Intel or from any other hardware service provider or hardware provider. So, when I look at all these product categories, the, all these vendor categories, those vendors who are providing, a Hardware plus software solution, which is very tightly coupled with software and hardware, has a larger customer appeal. And You have to remember that the end customer does not have a huge engineering expertise or technology expertise to, what is that, to deploy and operate these cards. So they are expecting a package which is easily deployable, Low main maintenance and what it just works off the shelf. So, the the vendors who provides These solutions as a single package from, with a highly optimized software running on a highly optimized hardware, Always have a larger customer appeal.
So I'm talking about the customers outside of the hyperscale Cloud service providers. Hyperscalers have got their internal engineering and technology expertise to optimize the software, port the software and build On on, basically, the off the shelf hardware. But those enterprise customers or the telco customers do not have those engineering expertise to deploy or to Deploy Ethernet adapters integrating various technologies. So that is why I like Napatec who is providing A highly optimized solution to vendors combining the best of hardware and the best of software.
Thank you. Thank you for that. I really appreciate your point of view on that, Manoj. I think, we've, exceeded our time limits here. So I'd like to bring this to close.
First of all, I want to thank Jim and Manoj For, for joining us today. I'm super grateful for the partnership that we have with Intel and, I We commit to Intel to continue to be a great partner in the ecosystem, partnership community that you're creating and we will do everything we can to exploit the position together and win going forward. Manoj, your data that you provide to us is extraordinarily important. It adds a lot of color to the opportunity that we have going forward. And we always feel very aligned with the data that's coming from you, which is highly independent and we need that independent source.
It also offers a lot of questions for our investors. Thank you so much today for providing your point of view on that. It's super helpful to us and we look forward to seeing more data coming from you as we keep growing our market opportunity. I also want to thank our investors for participating with us today. I know these virtual events can be a little bit challenging sometimes.
We hope we've made it interesting for you. We really are trying hard to be as open and transparent with you about the opportunity. We feel very good about our business. We feel confident that we are making all of the right calls. But of course, this is still work in progress.
I commit to you From an appetite perspective and from a leadership perspective that we have in Denmark and around the world that we're going to continue to execute the best we can on our strategy going forward. And I will also commit to you to be open and transparent about the opportunities that we see ahead of us. You're seeing us be a little bit more optimistic about the potential here, but we've earned it. We've put the pieces in place to do that. We didn't have the chance to do that a few years ago.
We even couldn't do that last year. We had to put a few years of execution between us and the past to be able to earn that respect to be listened to in this regard. And we're doing everything we can to bring an opportunity to our investor base that we think is compelling and interesting and we'll continue to do our best to execute on it. So with that, I'll bring our 2021 Capital Markets Day Meeting to a close. Thanks, Heine and Jared for your participations as well.
And we look forward to seeing everybody in future meetings and endeavors in the near future.