Broadcom’s Expanding Portfolio Will Help It Defend Its Connectivity Market Share

Despite the intense competition in the market, we believe that continuous product innovation will help Broadcom (NASDAQ:BRCM) retain its market share in connectivity solutions. Broadcom has been the leader in connectivity solutions for many years, currently accounting for approximately 30% of the market. Thanks to Broadcom, wireless technologies such as Bluetooth and Wi-Fi have become household names. The company has always been at the forefront of technology innovation for wireless connectivity solutions, and an ever expanding product portfolio has helped Broadcom retain its share in the market. At the Consumer Electronics Show (CES) 2016, held last week in Las Vegas, Broadcom showcased a range of consumer innovations optimized to enhance connectivity in the home, in the car and on – the – go. (Details mentioned below)

The wireless connectivity business is the most valuable segment for Broadcom in our view, accounting for 38% of its valuation and more than 40% of its revenue. Owing to the rising competition in the market and the declining profit base, the company exited the cellular baseband business in 2014. Broadcom’s connectivity business and baseband business went hand-in-hand, and the baseband exit was expected to cost the company some customers in connectivity. However, the concerns Broadcom had about the loss of business on exiting basebands have not materialized and the company does not expect them to at this point.

See Our Complete Analysis for Broadcom Here

The new products and platforms introduced by Broadcom at the 2016 CES include –

– A new Global Navigation Satellite System (GNSS) chip (BCM89774) for the automotive segment: The new chip  provides improved location and positioning while lowering power consumption for in-vehicle applications. The company claims that automotive GPS shipments are expected to more than double by 2022.

– The industry’s highest performing Near Field Communications (NFC) controller (BCM20797), which provides greater transaction range, improved security and faster transaction speeds, ideal for mobile payments and transit applications.

– Broadcom’s lowest power Wi-Fi/Bluetooth combo chip for mobile platforms and accessories (BCM43012), which delivers up to 3X longer battery life compared to the company’s previous combo chips.

– The industry’s first 64bit quad-core processor for high-end routers (BCM4908) for smart home and Internet of Things (IoT).

– A new family of enhanced low-power multi-protocol Bluetooth/802.15.4 combo systems-on-a-chip (SoCs), further enhancing its Wireless Internet Connectivity for Embedded Devices (WICED) portfolio. Broadcom’s WICED CORE ELP devices provide original equipment manufacturers (OEMs) with the ideal platform for IoT products and applications. (Read Press Release for more info)

An Expanding Footprint in IoT Will Help Broadcom Sustain Its Leadership In Connectivity Solutions

As smartphones and tablets achieve wide penetration, there is little doubt that IoT will be the next major driver of growth for the semiconductor industry. Though its parameters and standards are only now being established, its impact is likely to be both wide and deep. IoT technology allows computing and control functions to be deployed widely across everyday devices via a number of wireless communications, ranging from Near-Field through Bluetooth to WiFi and cellular spectra. The installed base for IoT devices is estimated to grow from around 10 billion connected devices today to as many as 30 billion devices (or 50 as per some estimates) by 2020.

Being a leader in wireless connectivity, Broadcom is at the forefront of IoT innovation, offering a gamut of connectivity hardware and software solutions for a broad range of IoT end markets. Over the years, Broadcom has strengthened and diversified its portfolio with new low power connectivity solutions for IoT. Broadcom’s expertise in wireless solutions positions the company well to leverage IoT expansion across a wide range of market segments.

Note: Broadcom is to be acquired by Avago Limited, a leading designer, developer and global supplier of a broad range of analog semiconductor devices. The acquisition is expected to close by the end of the first calendar quarter of 2016, subject to regulatory approvals in various jurisdictions, and the combined company will be known as Broadcom.

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