In contrast to much of the industry, the US-China trade war has been good to congatec, which has its board manufacturing in Europe. Even the entry of new players in the computer on module (COM) business such as Xilinx and the current component shortages doesn’t dent the optimism of CEO Jason Carlson.
The company was sold to a private equity fund last year for €115m to provide funds for expansion and acquisitions, with most of the senior team staying with the company.
“I think we are in a very good position for a variety of reasons,” Carlson told eeNews Europe. “Our founding team, many of whom are still with congatec, have been involved in the creation of the computer module market and driving standards to where it is today. That legacy is still alive and well at congatec and for me there’s never been a more exciting time for COM than right now.”
The company has been key to the development of COM standards such as COM-HPC and SMARC.
“While it would be great if there were no trade wars it has certainly made our life easier as congatec doesn’t manufacture in mainland China – it was specifically part of the stategy to be ‘fabless’ and multisite and specifically not be in mainland China, so I’m very bullish,” he said.
“Within EMEA we are pretty well known but there’s plenty of room to expand. The US is a very large addressable market and we are growing there faster than any other region – our strength in EMEA speaks to that – there are many US customer who are happy our supply chain is not in China. The US is a huge market and homogenous.
“APAC is smaller but there’s plenty of room for growth but there really is a significant difference in Taiwan, Korea and Japan. For me personally I think there’s a tremendous opportunity in Japan – its strong in industrial automation, medical and automotive and these are markets that we play to. Japan is the most similar to Germany when I compare the two so its about intelligently investing in each country,” he said.
“We’ve been in China and growing nicely and cautiously, interested in customers with a long term view. In Japan that’s pretty much the standard. In Korea we have a long history in medical and we are working to expand in AI and robotics.”
The component shortages are an issue.
“This is my fifth CEO role and mostly in semiconductors so I’m used to the allocation and semi cycles but I can’t recall a time when the shortages felt as broad in technologies, companies and regions as right now – this to me is surprising, frustrating and challenging.”
“Back in the fall we saw NXP extend their lead times – we thought it was more of an NXP issue than industry, then there were wafer shortages, then it was memories, power management ICs, then copper, so this feels unprecedented.
“With a fabless model, you have 1000 components on a board, whether it’s a 20c capacitor or $500 CPU if you are missing either you can’t build or ship the board. We have our CEMs and their buying volume is large and we do our best to use that but even when there is no allocation we have a global supply chain team that builds relationships with suppliers of the key components – now the reality is that 8 to 10 weeks has turned into 40 to 50 weeks lead times and its hard to respond to that as we don’t carry a year’ worth of inventory, so we re buying products on the spot market.”
That is especially tough with higher demand as part of the response to the Covid-19 pandemic.
“We tend to be close to 1:1 book to bill ratio, but in Q1 if we booked at that level the whole year we would be twice the size so we had an unprecedented 2:1 ratio and that’s where the danger lies,” he said.
“The Covid-9 experience has been a catalyst for Industry 4.0. If you had a plan to automate processes, then all of a sudden that schedule has to move faster and we are seeing the benefits of that, but there is the creation of entirely new applications to do things in a fully automated way and adding intelligence at the edge 24/7 so they want the compute power at the edge,” he said.
“We are and will remain CPU agnostic, what the market wants we will respond, not only x86 or only ARM – the GPU thing is very interesting, we have applications with CPUs and GPUs side by side and that’s very interesting – where there is complexity there’s opportunity for congatec.
Long term supply is a key issue for industrial applications.
“Our customers look to us for high performance high reliability products that will be available for a good long while that are around for 5 to 10 to 15 years. With Qualcomm I question the long term commitment to the markets we server for more than ten years – its finding that balance.”
One key issue is the increasing role of software with the boards. This was highlighted with the acquisition of German hypervisor software developer RTS in 2018.
“Its easy for a semiconductor maker to develop software that customer will use if you bundle it for free. My strategy in acquiring RTS is if I want this to be a significant software company it has to run on our competitors hardware. I think we have to create more value there and get paid for it.”
He has no plans to compete as a cloud services supplier with the likes of with Google, IBM, Microsoft and Amazon, but there is an opportunity for specialist cloud services to industrial companies.
“What I do see, and where we want to invest more, is that this is a market that does not want to connect their devices,” he said. “If a CPU maker has a problem in the field, in the past the only way to do an upgrade is a firmware update on a thumb drive. We could provide software to allow them to do that in a secure way. We will add value where others can’t as can do this from the IOs up through the hypervisor.”
Overall Carlson is bullish.
“There’s plenty of opportunity for us to have very nice growth over the next five years – when you think about the increase in complexity and performance, there’s the i.MX8, V100, v2000, Ice Lake, we can get designed into something with 20 or 30 complicated sensors. That increasing complexity with multiple OS on the same silicon speaks to our focus and strength. If someone wants that complicated system and for congatec to be the embedded brains, I see tremendous opportunity. I think the average ASP will increase as there are more and more volume opportunities for the higher performance CPU product.”
“With ComHPC youwill see more and more of that – we will get to address applications that we never could before with the higher number of IO and bandwidth, its super exciting.”
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