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May 13, 2016

AMD Forms China X86 Server Chip Joint Venture

AMD Forms China X86 Server Chip Joint Venture
by Patrick Moorhead on 05-13-2016 at 4:00 pm
Categories: EDA

We have written a lot of research and notes about the China server market and their unique needs as it relates to security and intellectual property and the ways western server OEMs and chipmakers like Intel, Advanced Micro Devices, ARM Holdings, Qualcomm and IBM’s OpenPOWER are addressing the challenge.

Basically, China wants their “own” hardware and software for government-funded institutions. This was driven by the Snowden revelations and the cooling of the China economy. For software, it means submitting source code to inspect for things like back doors, but also having Chinese institutions buy software from Chinese software vendors. It’s a bit more complex on the hardware side. Net-net, on the server side it involves Chinese companies integrating core IP from western countries, adding their own “special sauce” like security and accelerators and selling to Chinese server OEMs. This is exactly what happened with Advanced Micro Devices announcement today of its China JV.

Advanced Micro Devices (AMD) has created a JV with THATIC (Tianjin Haiguang Advanced Technology Investment Co., Ltd.) to develop SoCs for the Chinese server market. Essentially, AMD will license its x86 processor technology and the IP (intellectual property) related to designing an SoC (system on chip), so I expect this involves IP like memory controllers, input/output and caching, but not GPU technology.
Neither THATIC or AMD is commenting on which flavor cores these will be or any more technical details, but I have to expect that it is Zen as AMD hasn’t had much of any success in servers with its current CPU cores. This lack of detail doesn’t strike me as that they haven’t determined this, I think it’s more about secrecy from their competitors. This needs to be Zen for the most success. If not Zen, then this will most likely be focused on appliance servers like storage and networking.

Photo credit: AMD

The deal also gives AMD a minimum of $293M in cash as long as AMD meets their IP delivery dates. AMD’s Q1 earnings results include $52 million net cash received from the IP licensing agreement and will be another $25M in Q2. According to AMD, as soon as JV parts start shipping, it would also involve royalties on top of the licensing dollars on a per-shipment basis. Cash is good for AMD at this point, but leaving the analysis there isn’t doing this justice.

Years back, Advanced Micro Devices disclosed that it would attempt to monetize its IP in areas that aren’t being monetized, which AMD called “key areas”. And AMD has good IP. There are only two “big” GPU producers and AMD is one of them. I could also argue there are four, maybe five people with the expertise to do “big” CPU cores, and AMD is one of them. This deal is at least one victory lap on monetizing its IP. I expect more to come in the future, especially with GPUs.
I like this deal for AMD for many reasons:

Delivers on the promise of expanded IP monetization
Increases AMD’s cash balance
Has a royalty back-end after the license fees run out
Extends AMD’s reach with technology that for the most part, has already been created. AMD won’t have to spend 100s and millions of dollars to deliver on this.
Doesn’t block AMD from having their own branded X86-based processor in China

In terms of uniqueness, from publicly-based information, this is the only X86-based server SoC put together with a Chinese company. Intel cut a deal in January in China for an MCP (multi-chip package) which could become an SoC, but for now, it’s an MCP. The end result is a custom Chinese solution for both, but an SoC just has further levels of integration.

I will be writing more on how this compares to Intel, IBM’s OpenPOWER and efforts from the ARM Holdings consortium, especially Qualcomm and AppliedMicro, as more information becomes available.

We are many years away from a real product, so many years that the JV isn’t providing a date for productization, but if the IP blocks are ready, I would expect we are two to three years away. All-in-all, this is a good direction for Advanced Micro Devices and I hope they can do even more of these arrangements, particularly in graphics.

IOT Trends In Manufacturing

IOT Trends In Manufacturing
by Bill McCabe on 05-13-2016 at 12:00 pm
Categories: IoT

Trends That Will Shape the Internet of Things in 2016
In a relatively short time, The Internet of Things (IoT) has grown from a niche technology in the global market, into a widely embraced phenomenon. Rapid advancements in IP technologies, as well as the IoT devices and industries that they’re used in, mean that devices are now able to be integrated in more ways than ever before. One particular sector that has strongly embraced IoT adoption, is the manufacturing industry.

Offering a range of benefits, IoT will be a major force in shaping manufacturing throughout 2016 and beyond.

Manufacturers Will Become Increasingly Software Centric
Manufacturing hardware, processes, and even operational processes, will become more reliant on software. Whether referring to the embedded apps and software within devices, or the server-side software that controls machines and automations, manufacturers that adopt IoT as part of their strategy will need to focus investment and knowledge building around software. Not only will this affect the depth and complexity of their IoT integration, but it will also mean that these manufacturers will need to procure new talent or upskill existing staff with specific IoT skillsets in IT.

Costs will Decrease, Increasing Adoption
Cost has been a significant factor for manufacturers who have been hesitant to adopt widespread IoT systems in manufacturing. As IoT technologies continue to mature, implementation costs will decrease. Because IoT provides significant benefits in operational efficiency, price shrinkages will influence manufacturers who were previously undecided on the financial benefits of IoT.

RFID Will Be a Major Technology in Manufacturing
Research firm Markets and Markets, has projected that RFID will be widely adopted in the manufacturing sector. There are a number of factors contributing to this, including the ability to use passive RFID chips in manufacturing, with little additional cost. NFC is expected to experience the highest level of growth. Manufacturers will be able to benefit from RFID tracking on the production floor, but also in packaging and distribution.

In case studies, such as the use of RFID to track luggage at Hong Kong International Airport, RFID tags have been shown to provide read rates of up to 97%, compared to 80% for optically read barcode tags.

North America will Lead IoT use in Manufacturing
Although China and the United States have often swapped positions at the top spot of total manufacturing output, it is the U.S. that will lead IoT implementation in manufacturing for 2016. This is mostly due to high automation, frequent technological advancements, and a history of early-adoption of new technologies. This contrasts greatly with China, where output is high, but production methods differ, favoring low-cost labor in place of high levels of automation.

This increased trend in IoT adoption is expected to benefit other areas of North American industry, such as the R&D and software sectors. Cisco Systems, Microsoft, Intel, IBM, and General Electric are all U.S. based multinationals that lead in IoT sensor and software development. German companies SAP SE, Siemens, and Bosch, are also IoT leaders that will benefit from increased demand for IoT solutions in manufacturing.

Bottom Line – IoT Shows no Signs of Slowing Down
Regardless of initial reluctance to adopt, and increasing security concerns surrounding IoT devices, the industry as a whole is showing no signs of slowing down. Firms like Gartner research have predicted that there will be almost 7 billion sensors in use by the end of 2016, and that enterprise level software spend will total over $860bn, globally.

Manufacturers will realize more efficient operations which stretch from administration, to production floors, and even distribution. The internet of things doesn’t represent a flawless group of technologies, but it is set to be a significant aspect of the future of high tech manufacturing, no matter which way you look at it.

For more information on IOT Recruiting please check out our new website www.internetofthingsrecruiting.com
Bill McCabe

May 13, 2016

Si Photonics in a 300mm Fab – This is Getting Serious!

Si Photonics in a 300mm Fab – This is Getting Serious!
by Mitch Heins on 05-13-2016 at 7:00 am
Categories: Silicon Photonics

Greater demand for more data exchange within data centers is being driven by mobile computing and the Internet-of-Everything. In 2011, it was estimated that over 1 Zettabytes (ZB) of data was pushed through the internet. That’s 1×10[SUP]21[/SUP] bytes of data. And, that amount has been doubling every 3 years since. Given that rate, it is estimated that by 2017 we will be looking at 7ZB of data being exchanged over the internet per year. This semiconductor industry has responded with 100Gbps transceivers and work is active on 400Gbps versions. With 400Gbps comes two additional pushes. The first is a move to longer reach fiber-based connections to overcome copper’s current limitation of 100 meters. The fiber/optical connections promise up to 2km reach at these speeds and higher. The second is the push towards using fiber/optical for ultra-short reach board-to-board and even chip-to-chip connections where 10’s of Terabytes per second rates are desired (see figure).

We have heard a lot about integrated photonics and how it will be deployed to address bandwidth challenges, yet we have not seen adoption of photonic processes by the major fabs. Then I read chapter 10, in a recently published book entitled, Silicon Photonics III and I was stunned. The chapter was contributed by a team from ST Microelectronicswhere they published no less than 35 pages detailing their efforts to integrate a photonics process into one of their 300mm SOI fabs. How did I miss this? Until reading this, everything else I had read about photonic detailed achievements in laboratories and universities where photonic engineers were investigating new materials or defining better ways to modulate or control light. Chapter 10 put things into a totally different light (pun intended). This was a group of serious semiconductor professionals doing what they do best. They were integrating a process in preparation for large scale production.

You can tell things are getting serious when you starting reading phrases such as these:
– Qualification runs
– Reliability test chips
– Optical & Electrical wafer sorting
– Production test methodologies and equipment
– Photonic process integration and process control
– Process monitoring / characterization
– Silicon-based model extraction
– Optical SPICE modeling
– Silicon-to-SPICE model correlation (see figure)
– Stress and temperature dependent modeling

Add to this, seeing wafer maps showing cross-wafer parameter variance and whisker charts showing lot-to-lot performance of various metrics and you know that you are no longer looking at an experiment in a lab. The ST team was detailing what they were doing to bring about a production worthy optical platform. Then consider all of this work is wrapped around the words “300mm” and you also realize that a major investment is being made even as we speak. One shudders to think of how many more resources are being deployed working on products to fill this line once it is fully up and running. The good news for ST is that they claim that this effort uses the same fab equipment as their regular SOI lines, at least on the fabrication side. That means new capital investments were minimal. That is not to say however that this photonic process is the same as their existing SOI logic processes. In fact, the book chapter is littered with new three and four letter acronyms that would imply otherwise. Things like DSOI which stands for double-SOI where ST is modifying the base wafer to improve the surface coupling efficiency of gratings used to bring light on and off of the IC. They did this by adding a polysilicon layer buried in the BOX to create the equivalent of a Bragg reflector that reduces the amount of light lost through the silicon. Additionally, they added the ability to do multiple partial etch steps enabling them to etch to different depths in different areas of the die. This enables ST to optimize the photonic wave guides for lower loss and tighter turns, which means smaller footprint die. There has also been a considerable amount of work done to quantify the effects of stress and temperature on the various photonic components. This is because ST knows that they will be flip-chip assembling electronic die on top of photonic die and interposers and the photonics must work even when stressed by Cu Pillars and TSVs (through-silicon-vias) and by the heat generated from the electrical die.

While there is still much work to be done, this article to me was a watershed event as it represents a real shift of photonics out of the labs and into the fabs. It doesn’t yet represent a fabless photonic eco-system but moving silicon photonics into a 300mm fab is a serious step forward for photonics and that’s good for anyone working in this space.

May 12, 2016June 14, 2019

Getting Low Power Design Right in Mixed Signal Designs

Getting Low Power Design Right in Mixed Signal Designs
by Bernard Murphy on 05-12-2016 at 4:00 pm
Categories: Cadence, EDA

Mixed-signal design creates all sorts of interesting problems for implementation and verification flows, particularly when it comes to design for low power. We tend to think of mixed-signal as a few blocks like PLLs, ADCs and PHYs on the periphery of the design. Constrain and verify the digital power requirements up to analog boundaries, let the analog guys do their thing, check (probably manually) very carefully at the interfaces and you should be good, right?

Unfortunately, not so much these days. It’s much more common to find nested analog and digital (some call these sandwiches of analog and digital) for digitally tuning analog performance, using a DSP embedded in an RF section to drive programmable beam-forming, for managing self-test features and other tricks. This greatly complicates defining and checking constraints and verifying through these nested objects.

You no longer have one digital domain touching islands of analog on the periphery. You now have islands of digital floating in seas of analog, floating in seas of digital, … But those digital islands still need to be optimized for power (and for timing, layout and everything else). Manually island-hopping constraints/intent/verification between these digital pieces no longer looks practical.

But whether you are building IoT devices or full-featured mobile platforms, these designs have sensors, they have radios and they have a lot of digital logic, even in the IoT edge nodes. That’s a lot of hungry transistors to feed on a very limited energy budget, so you still have to squeeze every drop of power out of the design. Manual steps have to be automated out, and an automated flow has to start with an infrastructure supporting mixed analog/digital; at Cadence the OpenAccess database is already set up for this.

The infrastructure is in place for passing constraints back and forth between islands through macro-models for the analog pieces. Macro models abstract the analog functionality and enable implementation and verification in the context of the power intent for the design. There is support for timing constraints (of course) and for CPF power intent. In the Virtuoso schematic editor, analog designers can build CPF macro-models which then allow digital designers to stitch these together with the digital components in the context of the power intent. UPF flows also work up to the boundaries of digital circuitry, and since the infrastructure is already in place for CPF macro-model definition and support, Cadence doesn’t anticipate significant development effort to extend this to UPF.

Conformal Low Power can now handle mixed-signal designs as you progress through the design flow. One of the big challenges for everyone in these cases is to minimize false violations. Macro-models and netlisting the design correctly is a central component of this solution; Cadence has created a seamless interface between Virtuoso and Conformal to ease this flow.

Additionally, power-aware dynamic verification before implementation can be challenging due to problems in interpretation and communication of intent at the interfaces between the analog and digital domains. Cadence has done a lot of work in this area to simplify the AMS low power verification flow; this is available for both the CPF and UPF flows.

Power estimation and analysis for mixed-signal designs continues to grow in importance. Analog blocks can be powered down just like digital blocks. Getting to an optimal power solution requires careful and accurate analysis. Cadence’s recently launched Joules product, supporting both both power intent standards, claims to accurately estimate power at the RTL stage and to be within 15% of power seen at signoff.

Handling low power design in modern mixed-signal designs is getting complex. Cadence seems to have most of the tools in place to help. To learn more about the Cadence low power flow for AMS, click HERE.

Channel Operating Margin (COM) — A Standard for SI Analysis

Channel Operating Margin (COM) — A Standard for SI Analysis
by Tom Dillinger on 05-12-2016 at 12:00 pm
Categories: EDA, Siemens EDA

There’s an old adage, attributed to renowned computer scientist Andrew Tannenbaum, one that perhaps only engineers find amusing: “The nice thing about standards is that you have so many to choose from.” Nevertheless, IEEE standards arise from customer requirements in the electronics industry. Many relate to the definition of complex communication protocols, such as the emerging 100Gigabit Ethernet interface (100GbE). A recent version of this protocol standard — IEEE 802.3bj-2014 — added a 4-lane X 25Gbps physical specification for backplanes, connectors, and twinax copper cables.
Continue reading “Channel Operating Margin (COM) — A Standard for SI Analysis”

May 12, 2016

CEO Insight: Transformation of Vayavya Labs into System Design Automation

CEO Insight: Transformation of Vayavya Labs into System Design Automation
by Pawan Fangaria on 05-12-2016 at 7:00 am
Categories: EDA

With the advent of SoCs, design abstractions and verification has moved up at the system level. It’s imperative that EDA moves up the value chain to start design automation at system level. The System Design Automation will be the new face of EDA in coming years.
Continue reading “CEO Insight: Transformation of Vayavya Labs into System Design Automation”

May 11, 2016

Facebook and the Internet-Of-Things

Facebook and the Internet-Of-Things
by Sudeep Kanjilal on 05-11-2016 at 4:00 pm
Categories: IoT

Something very important happened recently at the annual developer conference (F8). Facebook firmly staked its claim on IOT. Facebook events (like the Google annual developer events) are always interesting, as they give a tantalizing view of what is coming next. Yes, it lacks the panache the Apple events have. However, just because Facebook and Google events are deeply technical, does not mean they are not momentous, or exciting.

Several interesting data points were shared, several important consumer features announcements were made. I will not repeat them here, expect perhaps point out an important point – F8 was perhaps the pivot where Facebook finally shed its web legacy and became a native mobile ecosystem player.

Russian Nested Dolls – Stack within Stack within Stack

What, however, caught my attention was something that was not consumer facing – something regarding Parse, a mobile app backend / platform-as-a-service firm that Facebook acquired 3 years ago and then seemed to have forgotten about it.

At the level of the consumer internet, it’s been clear for some time that Apple and Google won the platform war. That leaves other consumer-facing/consumer-service firms in an interesting predicament – how do they survive, and thrive, on someone else’s platform? How far can they capture attention and intent of the consumers, what other interaction models will emerge, and so on.

The smart answer is – build your own stack inside someone else stack/platform

That’s what Facebook and Amazon have been up to, for the past couple of years – moving up and down the stack simultaneously.

Moving up, these firms are building a new run-time overlaying the runtime embedded in the iOS and Android. Zuckerberg pointed out at F8 that five years ago, most content on Facebook was text. Now it’s photos, soon it will be video, and eventually it will be immersive content like virtual reality and augmented reality. If the content sharing of the future requires a headset, Facebook needed one, so it acquired Oculus.Moving down, Facebook acquired Parse.

Facebook wants to manage all interactions – between people, between people and things, and between things

We’re rushing headfirst into this era of “Internet of Things” — a time of connected coffee makers, connected fridges, connected light switches. There’s been very little done, however, in the way of standardizing how these things work (and work with each other) behind the scenes.

And that’s where Parse related announcement comes into play. Parse launched SDKs that act as the backend brains for IoT projects. It’s compatible with Arduino first, with other platforms on the way.

So, Facebook, which was basically an app (the top consumer layer) on the iOS and Android based mobile ecosystem/stack, expanded that into a full 5-layer stack. Third party consumers apps as the top layer, Occulus as the runtime/second layer, facebook itself, along with Messenger as the service/third layer (which will include payments!), Parse as the infrastructure/fourth layer.

What it means in layman terms is that Facebook could very well become the central control for Smart Home, Smart Auto, Smart Health, etc. Basically, on the day it completed the pivot from web to mobile, it also took the first step towards the next ecosystem – IOT!

May 11, 2016

Paranoia, Porsche, Paul Newman & Self-Driving Cars

Paranoia, Porsche, Paul Newman & Self-Driving Cars
by Roger C. Lanctot on 05-11-2016 at 12:00 pm
Categories: Automotive

I was watching a documentary on the racing life of Paul Newman yesterday and I couldn’t get over the disconnect between Paul Newman’s near-obsession with auto racing and the general public’s understanding of the man. Most of us know Newman for salad dressing and iconic movie roles, but it appears, based on the testimony of friends and family members, that racing was his real passion.

He wasn’t much good at it when he got started. But like his acting he worked hard at it and ultimately became a winning driver and team owner. In interviews in the documentary he is pretty much at a loss to explain his passion other than to say that unlike the Academy Awards you don’t vote for the winner of the race, either you cross the finish line first or you don’t.

But it’s Newman’s passion for driving which fascinates me. For me, driving is an obligation, maybe a privilege, and occasionally fun. Driving can be empowering and it can be dangerous. I clearly lack Newman’s passion for this activity.

I was thinking of this because I had just visited Porsche in Stuttgart last week. I had a nice chat with the executive I was visiting and as I turned to leave I asked who at Porsche was working on self-driving car technology – the current industry rage. My host looked at me incredulously. “Oh,” I said. “Sorry. Porsche. That’s right. No self-driving cars.”

A Web search turned up February 2016 reports of Porsche CEO Oliver Blume’s comments that Porsche would never create a self-driving car.

http://tinyurl.com/hbm6rrf – “Porsche CEO: Don’t Expect to See a Self-Driving Porsche Any Time Soon” – RoadandTrack.com

Blume’s position seems a little severe given the fact that nearly every other car company on the planet is working on this technology. Even governments are getting into the act setting rules and, in some cases, providing funding.

Where Porsche leaves off in objecting to self-driving cars, the paranoid step in. Website EricPetersAutos.com paints a gloomy picture of sheeple financially shackled to remote controlled drone cars under the command of car makers or the government or both.

http://tinyurl.com/zdyro73 – “Why the Hard Sell for the Self-Driving Car?”

Setting hysteria and driving tradition aside it’s important to understand the spectrum of self-driving and what it means to every day driving. The industry’s and government’s effort to master automated driving is having the collateral outcome of accelerating progress toward reducing car crashes and saving millions of lives.

Mania further reflects the fact that outside of Paul Newman and millions of other driving enthusiasts driving and owning cars is a headache. The effort to master automated driving may ultimately raise questions regarding vehicle ownership (thereby undermining the assumptions behind the paranoid screed linked to above) but it will also open up new employment opportunities and may help to reduce congestion, emissions and, most definitely, collisions.

As we assess the self-driving car opportunity it is best to recall that we may only want or need self-driving in particular circumstances – while on the highway, when in the midst of a medical emergency, when we are tired or disabled, or when we are in rush hour traffic. Some of these capabilities already exist and some do not. But 1.25M annual highway fatalities is intolerable and every car company and even governments have a responsibility to explore any technology capable of mitigating that toll.

It is best not to view self-driving cars in absolutist terms. We know there are governmental organizations that have tried or expressed interest in remote control of cars and Google’s proposed removal of the steering wheel and pedals is troubling to enthusiasts. If some consumers would rather be driven than drive, then the market should decide. Just remember, it will be impossible to look as cool as Paul Newman if you are in a self-driving car.

Roger C. Lanctot is Associate Director in the Global Automotive Practice at Strategy Analytics. More details about Strategy Analytics can be found here: https://www.strategyanalytics.com/access-services/automotive#.VuGdXfkrKUk

May 11, 2016

We All Need To Get Serious About Protecting Company Data With Hardened, Multi-Factor Authentication

We All Need To Get Serious About Protecting Company Data With Hardened, Multi-Factor Authentication
by Patrick Moorhead on 05-11-2016 at 7:00 am
Categories: Security

The world is becoming a less and less secure place due to the plethora of hacks that have happened over the course of the past few years. Companies like Sony, T-Mobile, Anthem, Target and their customers have been victims of countless cyber-attacks that resulted in many people’s information being compromised.

These breaches have become almost somewhat normal in terms of day to day news, but companies really need to start to protecting themselves better against these threats and one of the best ways to do. One of the most effective ways of preventing stolen login information from being used against a company is through the use of multi-factor authentication (MFA). We have written a more detailedpaper here if you want a deeper dive.

Hundreds of millions of users have seen their account data compromised as a result of major breaches in the past few years and the speed and size of breaches is only increasing. Companies are being compromised due to a multitude of reasons, however many of these attacks occur remotely after a 3rd party has their credentials compromised and their credentials are used to access a company’s systems in order to gain access to their entire network. In the case of a company like Target, the company’s board of directors asked for their CIO and CEO to resign as a consequence of their reaction to the biggest breach in the company’s history.

With more millennials entering the workforce, which we wrote about here, there are more computers and other endpoints like tablets and smartphones traveling around with their users. As a result, the risk to companies having their networks be compromised due to an external threat thanks to stolen credentials is greater than it has ever been before. Thankfully, there are new operating systems like Windows 10 that are inherently designed with security in mind and focus heavily on maintaining a trusted and secure computing environment for both users and enterprises. One of the biggest features of Microsoft Windows 10 that enables it to be so secure is its ability to natively support multi-factor authentication and to transmit it securely.

One of the best ways that an enterprise can take advantage of multi-factor authentication is to deploy a system with hardenedmulti-factor authentication. One example of this is Intel’s new Authenticate platform, which I wrote a lot about here at Intel’s 6th Generation Core vPro Processors announcement. This platform takes advantage of biometric technologies like fingerprint sensors and ensures that they are hardened against attacks and that their usage is heavily protected against external threats. This platform in combination with Windows 10 and the right network security policies should help almost any enterprise to more safely protect itself against external attacks and unauthorized network access using compromised credentials. PCs that are still running single-factor authentication are now a vulnerability as they now become an easier point of attack for attackers.

Tom Garrison, VP and GM of Business Client s presenting at Intel vPro event earlier this year

While no client platform can guarantee identity security, this is the best one I have seen so far. The stakes have never been higher as it’s not just the company and customers who are impacted but employees of the hacked company. Senior management is now getting fired as company boards are now realizing that their companies decided not to adequately protect their businesses. Just check out what happened at Target. CEO and CIO out.

If you’d like to read more about the current enterprise security threats and how hardened, multi-factor authentication helps make PCs part of the security solution, please click here to read our paper.

Analysis of Cypress Semiconductor acquisition of Broadcom wireless IoT assets

Analysis of Cypress Semiconductor acquisition of Broadcom wireless IoT assets
by Dale Ford on 05-10-2016 at 4:00 pm
Categories: Automotive, IoT, Mobile
2 Comments

Cypress Semiconductor announced that it will acquire Broadcom’s wireless Internet of Things (IoT) business in a $550 million deal. The deal was announced on Thursday, April 28, at the same time it announced that T.J. Rodgers will step down as CEO. The deal transfers Broadcom’s Bluetooth, Wi-Fi and Zigbee product lines, their associated intellectual property, WICED (Wireless Internet Connectivity for Embedded Devices) branding and developer network. In a press release announcing the deal, Rodgers stated, “Cypress is a significant player in the IoT today because of our ultra-low-power PSoC programmable system-on-chip technology, but we’ve only been able to pair it with generic radios so far. Now we have the highly regarded Broadcom IoT business—state-of-the-art Wi-Fi, Bluetooth and Zigbee RF technologies—that will transform us into a force in IoT and provide us with new market opportunities as well.”

Cypress plans to move further into the consumer IoT market as well as build on its portfolio in its core business of embedded technology, including automotive and industrial applications. Broadcom will retain its smartphone, set-top box and wireless access businesses. The deal is expected to be completed in the third quarter of 2016.

Broadcom Ltd. was formed after Avago’s acquisition of Broadcom in February 2016. As part of management’s presentation to investors in May 2015, the combined company was billed as being “levered to numerous secular growth trends,” among them the connected home and Internet of Things (IoT) markets. However, Broadcom has stepped away from this market opportunity now with the sale of its wireless IoT business.

While this move may seem counter to the initial acquisition investor presentation mentioned above, there has been historical precedent for Broadcom Ltd. management to sell pieces of businesses that it acquires as part of or after the close of such deals. Not long after Avago completed the purchase of LSI in May of 2014, it sold the LSI flash associated business to Seagate for $450 million in cash and the LSI Axxia networking business to Intel for $650 million.

Such post-acquisition sales could take place due to a litany of factors including improving overall corporate profitability or exiting non-core businesses. Broadcom stated that revenue from the wireless IoT unit was about $189 million in the 12 months prior to the sale, with approximately 430 employees resulting in less than $440,000 per employee. This is much lower than the over $830,000 of revenue per employee for Avago as a whole according to its revenue of $6.8 billion and approximately 8,200 employees listed in its last 10-K filed in December 2015.

From another perspective, the asset sale may be a smart move for Broadcom. Broadcom’s entire corporate culture is built around serving top-10 OEMs in very large markets such as set-top boxes and smartphones. Broadcom’s goal is to become the number-one or number-two share leader in large markets. If it doesn’t have a clear path for achieving this goal, Broadcom re-evaluates its participation in that market, often either making acquisitions to double-down on its bet or divesting to exit the market.

This strategy has resulted in an organization that is very focused on the needs of specifically identified large OEMs while avoiding the distraction of mass-market customers that are likely to drive relatively low volumes. Illustrating this point is the fact that a non-disclosure agreement (NDA) is required to see the datasheets for many of Broadcom’s highest-volume products. In fact, Broadcom has never released a full datasheet for the BCM283x that serves as the processor for the Raspberry Pi, despite its enormous popularity in the maker community as a single board computer.

The sale of IoT wireless assets to Cypress may be a tacit acknowledgement on the part of Broadcom that its lack of mass market support infrastructure has become an obstacle to achieving success in the IoT market and that several years of effort trying to address that failing have come to naught. Broadcom’s line of WICED development tools was meant to solve mass-market support issues, but WICED has not proven to be enough. It really comes down to an issue of corporate culture. This divesture clearly signals that Broadcom Ltd. will concentrate its efforts on selling front-end module (FEM) integrated circuits (ICs) and Wi-Fi combo chips to its key mobile customers.

Companies such as Texas Instruments and Atmel have mass market support in their DNA, having made it a cornerstone of their corporate strategy over the course of a decade or longer. They have developed their websites, development tools, distribution and applications infrastructure to support tens of thousands of customers. They have encouraged and participated in user forums devoted to the use of their products. They have wholeheartedly embraced the maker community with tools, software, samples and abundant documentation. They even continue to support maker-friendly packages, such as through-hole dual in-line (DIP) packages which are no longer popular in high-volume production, but are still highly valued for prototyping and low-volume production. This is the kind of ecosystem that must exist around semiconductors that are marketed for the IoT market in order to be successful and it takes many years to develop.

Bottom line for Broadcom Ltd.: It is just following its usual playbook in this divestiture—failing fast to avoid throwing good money after bad. However, in doing so, Broadcom is potentially closing the door to one of the biggest emerging opportunities in the semiconductor industry, the IoT market.

The figures below place the revenues associated with this deal in perspective for Broadcom Ltd. IHS Technology’s published 2015 market share revenues for the products associated with this portion of Broadcom Ltd.’s business is $194 million, or 1.3 percent of its revenues in 2015. (Broadcom Ltd. stated trailing 12 month revenues as $189 million as of the end of April 2016.) Slightly more significant, these product revenues represent 4.3 percent of Broadcom Ltd.’s wireless application-specific IC revenues in 2015. Cypress Semiconductor earned only $3 million in wireless application-specific IC revenues in 2015. Almost all of Cypress Semiconductor’s revenue in wireless applications to this point has come from general purpose or programmable products, not application-specific products. With this acquisition, Cypress Semiconductor will take Broadcom Ltd.’s place as the second-largest supplier of WLAN and Bluetooth ICs for automotive, consumer and other applications as shown in Figure 3.

Figure 1: Broadcom Ltd. Wireless Application-Specific IC Revenue – 2015

Figure 2: Broadcom Ltd. Connectivity IC (WLAN/Bluetooth) Revenue – 2015

Figure 3: Market Share Automotive, Consumer, Other WLAN/Bluetooth ICs – 2015

From the Cypress Semiconductor perspective, it is planning to market Broadcom’s IoT WICED brand products in consumer, industrial and automotive sectors. These three sectors all have a large number of customers with small sales revenues per transaction. Cypress has well established sales channels into these markets where it has been selling to its existing base of 30,000 customers through distributors and its sales force.

Cypress Semiconductor’s top three customers from 2015 were all leading global semiconductor distributors—Fujitsu Electronics, Avnet and Arrow Electronics. By contrast, over the past few years, Broadcom’s top customers have been global OEMs including its top two customers, Samsung Electronics and Apple. Cypress will be expected to achieve significant synergies from cross-selling its market-leading programmable system-on-chip (PSoC) product with Broadcom’s legacy product through its existing sales channels.

The ability to supply solutions in low-power efficient controllers, memory and connectivity solutions is crucial to a successful strategy in an era of IoT strategies for most semiconductor suppliers. In addressing this strategy, the synergy of component product lines through the acquisition of Broadcom connectivity solutions is very strong. Before this acquisition, Cypress already had a strong offering of deeply embedded products offering robust flexibility.

Cypress is one of the few suppliers of processors outside of field-programmable gate array (FPGA) suppliers that allow for user-configurable hardware through its PSoC microcontroller (MCU) product series. Through its acquisition of Spansion in 2015, Cypress significantly increased its application-specific MCU portfolio as well, especially in automotive, the largest market for MCUs and arguably one of the markets primed for connectivity solutions. The combination of the original Cypress PSoC series of configurable MCUs with Spansion’s highly customized MCU portfolio serves customers at both ends of the spectrum for design strategies. The Spansion acquisition placed Cypress as the eighth-largest MCU supplier globally.

However, what has been lagging from a comprehensive IoT strategy for Cypress has been connectivity solutions that serve customers that want preconfigured solutions that are industry standard with well-recognized IP broadly applicable across multiple connectivity design demands. With the acquisition of Broadcom, Cypress will be able to address the needs of a much broader customer base with a wider range of both configurable and preconfigured solutions targeting IoT strategies.

Bottom line for Cypress Semiconductor: It is building on its strengths in serving mass market customers and strengthening its competitive position in the IoT market. This investment in future growth is strongly aligned with consensus expectations of high-growth opportunities in the future IoT market.

IHS Technology provides data and analysis in the area of wireless semiconductors and IoT devices and connectivity. For greater detail on the competitive dynamics of the wireless semiconductor market, you can go to the Wireless Semiconductor Intelligence Service here. Research can also be found in the IoT Devices & Connectivity Intelligence Service here.
Contributors to this analysis are:

Lee Ratliff, Principal Analyst
Tom Hackenberg, Principal Analyst
Christian Kim, Senior Analyst
Brad Shaffer, Senior Analyst
Dale Ford, Vice President & Chief Analyst