Silicon Labs is not only doubling down on IoT, it is staking its future on anticipated “hypergrowth” in the market, according to CEO Tyson Tuttle. The Austin, Texas company announced Thursday the sale of the company’s Infrastructure & Automotive business to Skyworks for $2.75 billion.
Skyworks, best known for claiming the global lead in RF semiconductors for 5G, will gain a complementary product portfolio. The Irvine, Calif., company believes the deal will accelerate its expansion in fast-growing market segments that include electric and hybrid vehicles and 5G wireless infrastructure.
In contrast, Silicon Labs is walking away from the more than 40 percent of its revenue generated last year by its infrastructure and automotive (I&A) business. “We are swinging for the fences,” said Silicon Labs CEO, bringing “focus and acceleration” to the IoT products that earned nearly 60 percent of the company’s revenue last year.
To be sold to Skyworks are Silicon Labs’ technology portfolios and related assets in power, isolation, timing, and broadcast products. More than 350 Silicon Labs’ employees associated with I&A, together with its I&A senior management, will join Skyworks, according to the announcement.
Transition to a pure-play IoT company
For a long time, I&A was Silicon Labs’ bread and butter. Tuttle wrote in his LinkedIn post on Thursday:
I’ve spent the majority of my tenure at Silicon Labs as an active contributor to our I&A business, and it’s a part of who I am. In 2003, I started the company’s line of radio and TV tuner chips to receive over-the-air signals first in mobile phones and media players, and later in consumer products and automotive.
While Silicon Labs saw “modest growth value” in doing I&A, the company decided that this is the moment to commit itself whole hog to IoT.
Asked if it is perilous to forsake such a large chunk of business and narrow the company’s focus, Tuttle said, “Not at all. …Look at Cree. Cree gave up on LED and lighting businesses to pursue silicon carbide, which is now one of the hottest market segments.” Tuttle also cited Marvell Technology; by ditching Wi-Fi connectivity business, Marvell directed its full focus to the accelerated growth of data centers, 5G and computing.
Silicon Labs expects to receive $2.3 billion in net proceeds from the deal and will return about $2 billion to shareholders through a combination of special dividends and buybacks.
The deal is expected to close in the third quarter of 2021, according to Silicon Labs.
As noted in his LinkedIn post, Tuttle sees Silicon Labs’ IoT business as a “rocket ship.” He wrote:
We have a clear path to becoming the pure-play leader of intelligent wireless connectivity for the IoT…and I can’t wait to tell that story to the industry.
How Silicon Labs defined IoT in early days
This reporter first interviewed Tuttle in 2014 at a restaurant in Shanghai. Then, he said, the Internet of Things generated more than 15% of Silicon Labs’ 2013 revenue.
In the early days of IoT hype, executives in the electronics industry tended to define IoT according to their own convenience. To some, IoT was about sensors, while others said it’s all about connectivity. There was talk about wearables, smart lighting, and smart buildings. While the tradition of defining IoT loosely lingers, Tuttle, in 2014, went ahead and resolutely narrowed the company’s IoT focus on “connected microcontrollers.” While many MCU companies saw a role of MCUs in the IoT market, nobody was zooming in on the development of MCUs embedded with a variety of connectivity — both software and hardware.
During that EE Times interview, Tuttle drew up an IoT SoC block diagram on a back of a napkin – where he conceptualized the basic building blocks necessary to add connectivity every device (without using PCs or mobile phones). “That basic concept hasn’t changed even today,” said Tuttle.
Looking back, he noted, devices with no connectivity are “racing to the bottom.”
Over the last several years, Silicon Labs has spent 70 percent of its R&D money on IoT, acquiring eight companies that enriched the company’s IoT hardware and software portfolio. To scale the company’s IoT business not just as a chip but as “a platform” consisting of silicon and software, further investment is crucial, stressed Tuttle. “To lead the IoT market, we must run faster” than anybody else.
Although this sale cuts off its I&A business revenue, Silicon Labs projects a return to its current size in a couple of years, based on its expectation of 20 percent annual growth in IoT. Silicon Labs believes that the company’s products and technologies “will address a $10 billion market by 2023,” said Johnson in a statement.
Separately, Silicon Labs announced Thursday the promotion of Matt Johnson to president, effective immediately. Johnson earlier served as the company’s vice president & general manager of IoT Products.
The post Silicon Labs Sells Infrastructure & Auto Biz to Get on IoT Rocket Ship appeared first on EETimes.