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Synaptics strengthens IoT play through acquisition of Broadcom’s wireless IoT business

July 10, 2020  | Subscribers Only

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Synaptics strengthens IoT play through acquisition of Broadcom’s wireless IoT business

Synaptics has signed definitive agreements to acquire certain assets and manufacturing rights associated with Broadcom’s wireless IoT business. Synaptics will pay $250 million in cash for certain rights to Broadcom’s existing Wi-Fi, Bluetooth and GPS/GNSS products and will co-develop two roadmap IoT products with Broadcom. It will finance the acquisition from existing funds, including cash received from the April 2020 $139 million sale of its mobile LCD business, TDDI.

Under the terms of the agreement, Synaptics will benefit from 3-year exclusivity during which Broadcom will preclude itself from re-licensing the rights. Synaptics has also agreed not to sell into certain markets that will be reserved for Broadcom. As part of the deal, an engineering support team of around 60 people will be transferred from Broadcom to Synaptics. It expects that the deal will close in Synaptics’ fiscal Q1 2021 (July-September 2020) and will not require regulatory approval.

Our analysis

This is Synaptics third major acquisition in recent years. In 2017 it acquired Conexant Systems, a provider of voice and audio processing technologies for smart home applications and the multimedia solutions business of Marvell Technology Group, a provider of video and audio processing applications for the smart home. These acquisitions helped drive the development of Synaptics existing IoT portfolio, which spans edge computing SoCs (system on a chip), high-speed video interface and digital audio, voice and video processing. These technologies seek to improve the interaction between humans and devices, such as voice control of media streaming devices.

In the year to date, Synaptics’ existing IoT business accounted for 28% of its revenue. It expects that acquisition of the wireless IoT business will drive IoT’s revenue contribution to 40% over the long term. In Synaptics’ last fiscal year to 30 June 2019 it generated total revenue of $1.47 billion.

The current annualised sales of the business Synaptics is acquiring is around $65 million: consumer, industrial and surveillance represent the largest sources of revenue. Synaptics believes that its entry into wireless IoT connectivity through this acquisition will enable it to provide a more complete reference design to OEM customers and meaningfully expand its addressable market in IoT over the long term.

The revenue opportunities it sees include the entry into greenfield markets, such as surveillance, which need both edge AI capabilities and wireless connectivity; integrating its own, rather than third-party wireless connectivity, with its edge SoCs; and a significant connectivity-only opportunity across both existing customer segments like automotive and gaming and new areas like industrial and home appliances.

Synaptics views the continuing, post-deal cooperation with Broadcom as key to its future success. Answering questions during a call on the deal, Synaptics’ President and CEO, Michael Hurlston, who has previously served as general manager of Broadcom’s mobile connectivity products/wireless communications and connectivity division at Broadcom, said that unlike Broadcom’s previous sale of wireless IoT (Wi-Fi, Bluetooth and ZigBee) assets to Cypress Semiconductor in 2016, the current deal will give it continuing access (over the 3-year period of exclusivity) to Broadcom’s expertise in high-performance, low power design. Broadcom will help it develop two roadmap products (likely integrating Wi-Fi6E), allowing to focus on customer acquisition and develop its own design team over time. Following the completion of its acquisition of wireless IoT from Broadcom in 2016, the share of IoT and automotive within Cypress Semiconductor’s total revenue rose from 65% in Q4 2017 to 79% in Q4 2019. Cypress Semiconductor was itself acquired by Infineon in 2019.

Despite some headwinds from Covid-19, Omdia expects the installed base of consumer IoT devices (spanning home appliances, home automation, home consumer electronics and others) to grow from some 6 billion in 2020 to over 10 billion by 2025. As discussed in our January 2020 insight, Will Wi-Fi 6E be a game changer?, home gateways, set-top boxes, gaming laptops and VR/AR devices are among some of the promising early target applications for the latest iteration of Wi-Fi.  

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