Remember that my posts are never investment advice or financial consultations; please read the disclaimer at the end of the post.
Broadcom Inc. stands out as a undisputed leader in the semiconductor industry, focusing on the design, development, and supply of complex semiconductor devices. Its primary emphasis lies on devices based on complex digital and mixed signals, including those using complementary metal oxide semiconductor (CMOS) and analog III-V based products. The company, with a global presence, operates through two distinct segments: Semiconductor Solutions and Infrastructure Software.
The Semiconductor Solutions segment encompasses a wide range of products, including chips for wireless connectivity, broadband access solutions, and data center networking equipment. On the other hand, the Infrastructure Software segment deals with products that support and manage the infrastructure of computer networks, such as network switches, routers, and storage devices.
The lifeblood of Broadcom’s revenue lies in the Semiconductor Solutions segment, contributing predominantly to the overall revenue with 78.83% in the last reported quarter. This sector has demonstrated consistent growth, highlighted by a 26.66% increase in revenue in the last fiscal year. Similarly, the Infrastructure Software segment, representing 21.17% of total revenue, has also shown growth, with a 5.16% increase in revenue in the last quarter.
In summary, Broadcom’s business model is centered around the design, development, and supply of semiconductor devices, focusing on complex digital and mixed signals, with particular attention to complementary metal oxide semiconductor (CMOS) devices and analog III-V based products. The driving force behind the company’s revenue is the Semiconductor Solutions segment, which has demonstrated robust growth in recent years.
Industry Context: Trends and Challenges in Semiconductors
The semiconductor industry plays a pivotal role in the field of technology, serving as a driving force for a wide range of applications, from consumer electronics to advanced computing and communication systems. In recent years, the industry has undergone significant transformations and faced notable challenges, shaping a dynamic and competitive landscape.
Recent Trends and Innovations:
A key characteristic of the semiconductor industry is the relentless pursuit of innovation. Recent trends highlight a growing emphasis on advanced technologies such as artificial intelligence (AI), the Internet of Things (IoT), and 5G. Companies in the industry are tasked with developing increasingly powerful and efficient semiconductors to support these emerging applications. In particular, the convergence of sectors like automotive and healthcare has given rise to new opportunities for the design of high-performance semiconductors.
Challenges and Technological Complexity:
Alongside opportunities, companies in the industry face significant challenges. The ongoing miniaturization of components, in line with Moore’s Law, has reached unprecedented levels, making the design and production of semiconductors increasingly complex. This increasing complexity poses challenges related to thermal management, energy efficiency, and security, requiring a constant commitment to research and development.
Crucial Role of Design and Development:
Design and development of semiconductors emerge as crucial aspects in this dynamic context. The ability to design devices that meet the growing demands for computational power, energy efficiency, and security represents a fundamental competitive advantage. The speed at which a company can bring innovative solutions to the market often depends on the strength of its design and development process.
In summary, the context of the semiconductor industry is characterized by a constant race toward innovation and the resolution of increasingly complex technological challenges. In this scenario, the design and development of semiconductors emerge as fundamental pillars for the success of companies in the industry, directly influencing their ability to adapt to emerging trends and overcome evolving challenges.
History and Background of Broadcom Inc.: Successes, Acquisitions, and Key Partnerships
The history of Broadcom Inc. is a compelling narrative that unfolds through the dynamic evolutions of the technology sector, revealing a series of successes, strategic acquisitions, and key partnerships that have contributed to shaping the company into what it is today.
Foundation and Early Steps:
Broadcom Inc. traces its roots back to 1991 when it was founded in Irvine, California, as Broadcom Corporation. From the outset, the company demonstrated a commitment to innovation, focusing its efforts on the design and development of advanced semiconductors. Over the years, its dedication to quality and cutting-edge technology allowed it to emerge as one of the industry leaders.
Past Successes:
Broadcom has accumulated a series of notable successes throughout its history. It played a crucial role in developing key technologies for communication networks, including products for wireless connectivity and broadband solutions. Its ability to anticipate market needs and deliver innovative products contributed to its consolidation as a prominent name in the technology landscape.
Significant Acquisitions:
Broadcom’s expansion has been driven by strategic acquisitions that expanded its reach and offerings. Significant acquisitions have included companies specializing in areas such as networking, semiconductors, and software. Each acquisition added a key element to Broadcom’s product suite and expertise, enabling the company to offer more comprehensive and diversified solutions.
On May 28, 2015, Avago announced the acquisition of Broadcom Corporation for $37 billion ($17 billion in cash and $20 billion in shares). The resulting company, named Broadcom Ltd., would have an annual revenue of $15 billion and a market capitalization of $77 billion. This merger significantly strengthened Avago Technologies’ patent position in key sectors such as mobile, data centers, and the Internet of Things, making the company the ninth-largest holder of patents among the top semiconductor vendors, according to an analysis by technology consulting firm LexInnova. The transaction closed on February 1, 2016, as stated on the company’s website.
Subsequently, in May 2016, Cypress Semiconductor announced the acquisition of Broadcom Corporation’s entire portfolio of IoT products for $550 million. Under this deal, Cypress acquired Broadcom’s IoT products and intellectual property for Wi-Fi, Bluetooth, and Zigbee connectivity, along with Broadcom’s WICED platform and SDK for developers. This move combined Broadcom’s developer tools and connectivity technologies for IoT devices with Cypress’s programmable system-on-a-chip (SoC) products that provide memory, computing, and graphics processing for low-power devices within the Internet of Things.
Key Partnerships:
Beyond acquisitions, key partnerships have played a decisive role in Broadcom’s growth and success. Collaborations with other technology companies and service providers have contributed to consolidating its global presence and facilitating the development of interconnected solutions. These strategic alliances have also fostered access to new markets and enhanced its competitive position.
Contextualizing the history and background of Broadcom Inc. provides an essential framework for understanding the company’s evolutionary path and its role in the contemporary technology landscape. The constant commitment to innovation, strategic acquisitions, and key partnerships outline a success story that has allowed Broadcom to keep pace with the changing dynamics of the industry.
Focus on Design and Development: Broadcom’s Excellence in Semiconductors
Broadcom’s reputation in the design and development of semiconductors is a fundamental pillar of its leadership in the technology sector. The company has demonstrated a consistent commitment to innovation, anticipating market needs and developing cutting-edge solutions that have significantly contributed to its prominent position.
Technological Innovation:
Broadcom’s semiconductor design is characterized by a continuous commitment to innovation. The company stands out for its ability to develop advanced technologies ranging from chips for wireless connectivity to solutions for broadband access and networking equipment for data centers. Its constant attention to new technological frontiers makes it a pioneer in integrating state-of-the-art features into its products.
Key Products and Solutions:
Broadcom has played a significant role in the digital transformation through a series of key products and solutions. Its chips for wireless connectivity have become the backbone of numerous devices, enabling wireless communication in various contexts. Broadband access solutions have made high-speed connectivity expansion possible in homes and businesses. Additionally, networking equipment for data centers has played an essential role in facilitating the efficient transmission of data on a large scale.
Contributions to the Technology Community:
Broadcom’s design efforts go beyond meeting market needs to include contributions to the technology community. The company is recognized for its commitment to sharing knowledge through open standards and collaborations with other industry leaders. This approach has fostered the development of broader technological ecosystems and solidified its reputation as a respected innovator.
In conclusion, Broadcom’s reputation in the design and development of semiconductors is built on constant innovation, the creation of key products and solutions, and a commitment to contributing to the growth of the entire technology community. Its prominent position in the industry is the result of an unwavering focus on quality and research, allowing Broadcom to remain a beacon of excellence in the vast semiconductor landscape.
Success Factors: Broadcom’s Triumph in Semiconductor Design
Broadcom’s success in semiconductor design can be attributed to a combination of key factors that underscore its leadership position in the technology industry. These factors, intrinsically woven with the company’s commitment and vision, have shaped a story of success and innovation in the semiconductor landscape.
Pioneering Technological Innovation:
One fundamental pillar of Broadcom’s success is constant and pioneering technological innovation. The company has demonstrated a distinctive ability to anticipate market trends and develop cutting-edge solutions. This proactive approach has allowed Broadcom to deliver products that not only meet current market needs but often anticipate and drive technological evolution.
Sustained Investments in Research and Development:
Targeted and sustained investments in research and development (R&D) represent another key element of Broadcom’s success. The company has shown a steadfast dedication to allocating significant resources to the research of new technologies, solutions, and design methodologies. This approach has fueled its ability to consistently innovate, maintaining a competitive edge in the industry.
Effective Executive Leadership:
Key People 2023:
- Henry Samueli (born September 20, 1954) is an American businessman, engineer, and philanthropist (Chairman).
- Tan Hock Eng born 1951 or 1952 in Malausian Chinese business executive and philanthropist (President and CEO).
Effective corporate management plays a crucial role in Broadcom’s successes. Strong executive leadership has guided the company through periods of growth, market changes, and significant acquisitions. Strategic vision and the ability to make informed decisions have enabled Broadcom to successfully navigate a dynamic technological environment.
Adoption of Open Standards and Strategic Collaborations:
Broadcom has embraced a philosophy of collaboration and adherence to open industry standards. This openness has facilitated strategic collaborations with other industry giants and the sharing of knowledge. Adherence to common standards has contributed to creating broader ecosystems, fostering interoperability, and solidifying Broadcom’s position as a trusted partner.
Commitment to Quality and Security:
The constant focus on product quality and security has cemented Broadcom’s reputation as a reliable provider in the semiconductor industry. This commitment translates into robust, reliable products that adhere to the highest standards, instilling confidence in customers and contributing to the ongoing success of the company.
In summary, Broadcom’s success in semiconductor design is fueled by a mix of innovation, targeted investments, effective leadership, strategic collaborations, and a steadfast commitment to quality. These factors, coupled with the ability to dynamically adapt to changing technological landscapes, have been instrumental in positioning Broadcom as one of the undisputed leaders in the industry.
Financial Performance
Image and chart source: https://finchat.io with data obtained from https://www.stratosphere.io
From the Company
While there have been a small number of requests to push out certain orders, we know that these are the exceptions and they have not had a material impact on our business. Because we ship linearly throughout the quarter to our customers, inventory on our books has been consistent around 80 days and overall inventory of Broadcom products across the ecosystem remains very well managed.
We continue, needless to say, to be very disciplined in shipping our backlog only as and when needed by our end customers. With that, let me now provide more color on each of our end markets. Starting with networking.
Networking revenue was $2.3 billion and was up 20% year-on-year, in line with guidance, representing 32% of our semiconductor revenue. We see continued deployment of our advanced Tomahawk switches by hyperscalers in their leaf and spine architectures.
Even as we deliver on increased bandwidth for the hyperscalers, having said that, power remains a major challenge. So just this week, we announced the industry’s first integrated silicon photonics networking solution code name Bailey, which integrates the active optical interconnects with our next-generation Tomahawk 5 switch at 51.2 terabit per second.
Bailey doubles switching performance but it will reduce total system power. Keep in mind that at hyperscalers, a growing portion of our switches have been deployed within their AI networks, which are separate from the traditional x86 CPU scale outrunning existing workloads.
From the analysts
Bernstein analyst Stacy Rasgon reiterated an Outperform rating and $1,000.00 price target on Broadcom Limited (NASDAQ: AVGO) after the Information reported that Google is exploring replacing Broadcom as their supplier of AI TPU chips “as early as 2027” in favor of future in-house offerings.
The analyst commented: “What Broadcom does is not easy. They supply key IP blocks (particularly best-in-class SerDes which enables high bandwidth high speed data transfer important for AI operations) as well as network connectivity, various analog functionality, processing, and advanced packaging expertise… Given the run the stock has had on the back of the AI story we get the (modest) move today on the back of the news. But we still like it, and would stick with it. Certainly the AI story is not going away anytime soon (and 4 years is an eternity in this space, and one where complexity is only going to get greater). The VMWare deal offers significant accretion forthcoming. And the shares, even after the recent run, remain inexpensive.”
My thoughts
This company is one of those in my portfolio that has surpassed its all-time highs, even after the bear market of 2022. I am in a position from the price of $888 on $AVGO with a current unrealized profit of 10.00%. Considering the research and considerations on the information and data, I remain long at least until the price of $1000. At this time of the year, the overall market is factoring in the bullish seasonality, colloquially referred to as the Christmas rally. We await updates for Earnings & Revenue, which will be communicated on the next date of December 7, 2023. Very satisfied with this position that I have touched multiple times throughout the year 2023.
19.11.2023
Algorithmic Trend Analysis
My proprietary algorithm Z-VOLT signals a strong bullish trend since the beginning of the year 2023, with initial powerful accumulation points in the early months.
It’s important to remember that considerations made about a company for trading analysis are complex, and with this approach, such work that starts from the ground up, attempting to analyze every element useful for trading, requires skills, time, and effort. Considerations can change at any moment, depending on market conditions. For this reason, it is never advisable to rely solely on such an analysis for making operational choices. An analysis like this is usually published after a significant portion of the trend has already occurred, to prevent competitors from unduly benefiting from one’s hard work. If you want real-time updates, follow me on eToro.
Follow me on eToro, the world’s most renowned Social Investing platform: DonyTrader on eToro
Read my books, available on the world’s largest marketplace, Amazon: Books Page
Ciao!
Ivan Donatiello
DISCLAMER: The information provided in this post is for informational purposes only and does not constitute financial, legal, or investment advice. The author is not a financial advisor and disclaims any responsibility for decisions made based on the information provided. Investments involve risks, and past performance is not indicative of future results. Before making financial decisions, it is recommended to consult with a qualified professional. The author may have positions in the mentioned securities and may make changes to positions at any time. This post is not sponsored and reflects the author’s personal opinions.