IoT is the next revolution in the semiconductor market
Almost all semiconductors are preparing to get their hands on the IoT (Internet of Things) gold pot. The maturing of the PC and mobile revolution has shifted the focus of many chipmakers towards IoT, which is expected to represent 28% of semiconductor revenues by 2021, according to ABI Research.
This transition has caused many M&As (mergers and acquisitions) and divestitures. In 2015, NXP Semiconductors (NXPI) acquired Freescale to increase exposure in the automotive segment. The merged company reported its first quarterly earnings last quarter, which reported strong growth.
Recently, Cypress Semiconductor (CY) acquired Broadcom’s (AVGO) wireless IoT business to offer complete IoT solutions. However, Cypress is exploring strategic options with Goldman Sachs and has received acquisition interest from three private equity firms, according to UK blog Betaville.
Xilinx (XLNX), the dominant FPGA (field programmable gate array) manufacturer, is rumored to be an acquisition target for Qualcomm (QCOM) or Broadcom after its key rival Altera was acquired by Intel (INTC).
Xilinx, NXP, and Cypress are set to report their quarterly earnings for the June 2016 quarter on July 27 and July 28.
As the three companies have high exposure in the IoT space, they expect sequential growth in the June 2016 quarter after reporting a weak March 2016 quarter. The second half of the year is a seasonally strong time for the IoT market.
NXP’s growth in automotive could be offset by a slowdown in demand from Apple (AAPL). Xilinx’s growth might be temporarily slow as it transitions to the 16-nm (nanometer) node with the help of its foundry partner TSMC (TSM). Cypress’s growth will likely be driven by marginal improvement in memory demand.
But things look brighter for the three semiconductor companies in calendar 3Q16, as NXP could see improved demand from Apple for iPhone 7 components, Xilinx could ramp up production on the 16-nm node, and Cypress could witness strong growth in memory demand.
In this series, we’ll see a preview of the upcoming quarterly earnings of Xilinx, NXP, and Cypress.