Yesterday Avago and Broadcom announced that they will be merging. What will be the impact on SWKS. AVGO is a competitor and this merger will probably make them a stronger competitor because it will allow them to offer more functionality/content (and perhaps in a single chip eventually) to their customers.
Here are some interesting parts of the above article:
For example, from its so-called “FBAR” wireless filters for mobile devices, Avago can now broaden out to the the so-called “RF front-end module,” a business dominated by Skyworks Solutions (SWKS) and Qorvo (QRVO), which may give pause to those two companies:
You should know that, in general, the trend in high-end smartphones is to the number of bands continuing to increase very, very linearly. So, from one generation to the next, we are seeing significant increases in our content. In many of those [devices] we are selling not just the discrete FBAR, but also the RF front end modules, including the power amplifiers. It is definitely a continued increase in dollar content. Regarding China, yes, there is a continuing increase in demand for FBAR for use on China LTE bands, as penetration of those phones increases. We continue to be somewhat limited in our ability to support this market except through large global OEMs, and that’s relating to capacity. Our capacity increase in our FBAR fabs continues to expand according to plan.
With a nod to the threats to Qorvo and Skyworks, one analyst asked whether, given that Broadcom already requires some power amplifiers to be sold along with its WiFi chips, the two companies “can automatically include the Avago amp,” or if the Broadcom parts would “still be open to others?”
Said Samuelli “Certainly there’s an opportunity to provide some added value; many WiFi chips we now sell offer some amplifiers with them. Now that we offer so many more types of technology together, we will be able to offer a more complete platform. That’s a real added value going forward.”
Drilling into this subject even further, an analyst asked if there was “anything that Broadcom brings to table to allow you to create more sophisticated SOC [system on chip] or FEM?”
Tan replied that “It’s a bit premature,” adding,
Our strength has been in the cellular bands for RF, and filters and amplifiers. There’s lots of silicon SOC requirements that Avago has never been able to focus on. Obviously with this combination, our managers will be much more sensitive to such opportunities. But I won’t speculate at this point.
Another perceived area of combined strength is chips for networking, given that Broadcom sells one of the most powerful parts in switches for data centers, the so-called Trident chipset.
Said Tan, “At this point, we are still operating as distinct companies; Avago offers solutions on enterprise storage, BRCM offers switches and controllers, both are very distinct.”
“We like to believe there’s some synergy in terms of broader range of products we can sell to the same customers, but it’s early for us to predict.”
McGregor observed, “We have a number of complimentary products, there’s an opportunity for a broader footprint and to offer more value.”