Sunday, February 17, 2008
On Sramana Mitra's site...
In the prequel, I discussed the positive aspects of the breadth of Broadcom’s portfolio. A broad product range certainly comes with its issues as well. Perhaps my biggest worry about Broadcom is its loss of focus at times. My point: You cannot be the jack of all trades and master of none in the semiconductor industry (or in any industry, for that matter).
The mobile push is a good illustration of my point. Much of its time and resource has been spent on the aggressive product development and marketing of this business area. In order to stay ahead of the competition, it has posted ambitious sampling deadlines for its 3G chipsets. An equal or greater attention has been given to it legal wrangling with Qualcomm as part of its PR exercise to project itself as a mobile chipset powerhouse with substantial IP. It (and the market temporarily) seems to have gotten carried away with its recent wins against Qualcomm. I also believe that its accelerated 65 nanometer migration is also motivated by its mobile push because its competitors in the other markets are yet to migrate to this new process. The implementation and the pricing in these non-mobile markets do not necessarily lead to the fastest process technology, since the form factor pressure is much lower than in mobile.
Broadcom’s strategic thinking behind many of these moves is well-motivated. Tomorrow’s wireless will be based on convergence devices. These devices will become more pervasive over the next few years. So, for continued growth, Broadcom almost imperatively needs to get into the mobile space. Associated with this move is also the need to prove its performance and production capabilities fast. Simultaneously, it needs to obtain early and substantial design wins that can complement its claims and provide additional credibility. So, the company is making an all out effort to leverage on this product-line.
This certainly comes with an opportunity cost. While the mobile-line is yet proven, focusing its engineering resources on them is eroding its WLAN market share, for example. Also, if these other products are no longer competitive in performance, then Broadcom will try to retain its market share through an aggressive pricing strategy. This, in turn, reduces the already low margins from the semiconductor business. I will also be watching out for quality reviews and customer opinions on these other product lines. If we find it losing existing accounts for these products in the next couple of years, you know it has miffed customers.
The coming days will tell if Broadcom’s strategy will pay off. The space is tough and so are the competitors. But the company has created enough noise to raise expectations. One big design win can help the situation. Else, the company will hit a downward spiral. In either case, it is vital that it does not lose in its core competencies. It should not shy away from throwing non-performing product-lines away. Broadcom should start to focus.
Disclaimer: These are my perspectives on Broadcom and does not necessarily reflect the views of Atheros Communications or Tensorcomm.