Key growth drivers
In the previous part of the series, we saw that Semtech’s (SMTC) revenue fell 9% YoY (year-over-year) in fiscal 4Q16 as a fall in the industrial and high-end consumer market offset the growth in the enterprise computing and communication market.
Let’s understand each segment and the factors affecting them in detail.
Revenue by end-consumer market
Revenue from the enterprise computing and communication markets together accounted for 52% of the company’s revenue in fiscal 4Q16. The revenue was driven by high demand for Passive Optical Network (or PON) and wireless infrastructure solutions.
Revenue from industrial and high-end consumer markets jointly accounted for 47% of the company’s fiscal 4Q16 revenue. A major portion of the company’s revenue from the high-end consumer market comes from smartphones, which have been reporting slow growth.
Large high-end handset makers Samsung (SSNLF) and Apple (AAPL) reported slow growth in smartphone sales. Large mobile chipset supplier Qualcomm (QCOM) also reported a fall in demand for high-end smartphones.
However, Semtech witnessed stabilization in demand from Korean (EWY) smartphone manufacturers in fiscal 4Q16, after seeing weakness in demand in the first three quarters of fiscal 2016.
Revenue by business segment
The company has divided its business into four segments based on product type. On a sequential basis, two segments reported falls, one reported a rise, and one reported flat revenue in fiscal 4Q16.
- Revenue from Semtech’s Signal Integrity Product Group rose 11% quarter-over-quarter due to a strong demand for PON and wireless infrastructure solutions. The group’s sales are expected to grow further in fiscal 1Q17 given strong bookings from the data center, wireless infrastructure, and PON markets.
- Revenue from Semtech’s Protection Product Group was flat on a sequential basis as strong demand from Chinese handset makers was offset by falling demand from Korean customers. However, modest growth is expected in fiscal 1Q17 as Korean and Chinese handset makers launch new smartphones in 1H16.
- Revenue from Semtech’s Wireless, Sensing, and Timing Product Group fell 5% quarter-over-quarter due to falling demand from industrial and communication customers. However, its LoRa (long range) wireless technology is gaining traction among global IoT (Internet of Things) service providers. Revenue from LoRa tripled in fiscal 2016, and it’s expected to double in fiscal 2017.
- Revenue from Semtech’s Power and High-Reliability Product Group fell 16% quarter-over-quarter due to its exposure to high-end consumers and industrial markets.
The increasing demand for PON and LoRa wireless technology from enterprise computing, communication, and IoT service providers will drive Semtech’s growth in fiscal 2017. In the next part of the series, we’ll look at the company’s overall performance in fiscal 2016.