Huge News for Silicon Laboratories (SLAB)
Silicon Laboratories SLAB put out a Press Release after the market close, noting that one of their latest mobile handset chips has been adopted by Samsung.
Silicon Laboratories Inc., a leader in high-performance, analog-intensive, mixed-signal ICs, today announced Samsung has selected the Aero(R) IIe EDGE transceiver for multiple handset platforms. The Aero IIe transceiver is the industry’s easiest-to-use, highest performance RF transceiver for GSM/GPRS/EDGE handsets, smart phones and data modems. Based on Silicon Laboratories’ proven Aero transceiver architecture, the Aero IIe transceiver offers a high level of integration, small footprint and industry-leading performance to enable lower total system costs for handset makers.
Samsung is Silicon Labs’ largest customer, having accounted for as much as 20% of the Company’s sales in some years. However, the contribution from Samsung was declining, and practically single-handedly accounted for the slowdown in the Company’s growth rate over the last couple of years.
Silicon Laboratories’ particular area of expertise is using standard complementary metal oxide semiconductor (CMOS) technology, as analog and mixed-signal components typically require more exotic materials. By designing on CMOS, Silicon Laboratories can improve the performance and dramatically reduce the cost, size and system power requirements of devices their customers sell to end-users.
By designing directly on CMOS, Silicon Laboratories creates products that are far cheaper and less power-consuming than competitive products designed using more exotic materials. However, since designing on CMOS is more difficult their products tend to be later to market. While the cost advantages of silicon components typically allow them to gain share later in the product life cycle, the Company can be left out during the early stages of new product categories, as happened when cellular carriers using the world-dominant GSM standard began upgrading to the technology known as EDGE.
With their largest customer now having adopted their next key innovation, the Company could soon get back on the growth track.
Disclosure: William Trent has a long position in SMH.
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[...] The article suggests that Silicon Labs is having trouble providing the support needed to convince customers to buy its AeroFone single-chip radio. However, long testing periods led Samsung, Silicon Labs’ largest customer, to only recently adopt its Aero Edge, which was introduced well over a year ago. So, while we don’t necessarily believe that is the catalyst for a potential sale of the company, we do agree that SLAB’s technology would make an attractive fit for a number of chipmakers, and given the ongoing industry consolidation we wouldn’t be at all surprised if it happened. The author may hold a position in the securities discussed. The author’s current holdings are as follows: Long: Union Pacific (UNP) put options; Air Products (APD) put options; Nasdaq 100 (QQQQ) put options; FedEx (FDX - Annual Report) put options; Intuit (INTU) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA - Annual Report; Ion Media Networks (ION); Three Five Systems (TFS); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Landstar (LSTR - Annual Report) put options; Ceradyne (CRDN) put options; Dell (DELL) put options; Plantronics (PLT) put options; [...]