Ms. Grieshaber begins by observing, “The semiconductor industry landscape is changing dramatically. The rapid development of the Internet of Things (IoT) is driving the need for semiconductor vendors to bring comprehensive silicon and software solutions to market, helping customers simplify and accelerate IoT design. The huge number of connected devices (IHS Markit forecasts 75.4 billion IoT devices deployed by 2025), the diversity of applications and market segments, and the need for fast time to market present both challenges and opportunities for IoT solution providers.”
Outlook on Industry Trends and Challenges; Semiconductor Industry Growth
“The semiconductor industry has matured to a steady pace of incremental, single-digit growth. Leading analysts agree that industry growth in 2016 will be [retrospectively seen to be] virtually flat, with a growth rate well below 1%. This tepid growth is due in part to the slowdown of the computer and mobile handset markets. Chip industry growth is expected to resume again in 2017. The World Semiconductor Trade Statistics (WSTS) organization forecasts the global semiconductor market to be up about 3% in 2017. Despite this cautious outlook, we’ll see pockets of accelerated growth driven by technology innovation and market demand. Compelling growth markets include automotive (ADAS/autonomous cars, connected cars and infotainment systems), virtual reality/augmented reality (VR/AR) systems, and several Internet of Thing segments including home automation, connected lighting, security and wearables.
“More connected devices will be joining the IoT in 2017. Consumers will be interacting with an average of three or more connected devices on a daily basis, and we will continue see more IoT connectivity throughout all aspects of our lives. Silicon Labs is well-positioned to benefit from IoT growth markets by offering comprehensive silicon and software solutions targeting IoT end node applications requiring low-power wireless connectivity. IoT product sales are approaching nearly half of Silicon Labs’ annual revenues, and our strategic growth target for IoT products is 20% per year. We expect this strong IoT growth trend to continue in 2017 and beyond.”
next; Industry Consolidation (Mergers and Acquisitions)
Industry Consolidation (Mergers and Acquisitions)
“We’re in a period of unprecedented mergers and acquisition (M&A) activity in the semiconductor industry as leading companies consolidate in an effort to fill gaps in product/technology portfolios, offset slow growth in PCs and smartphones, and rapidly enter faster-growing markets such as automated automotive systems and the IoT. M&A activity in the semiconductor industry reached an all-time high in 2015 at $103.8B in total M&A value, and industry analysts expect 2016 to be the second most active year in the industry’s history, topping $60B in value.
“A key distinction between the wave of acquisitions in 2015 and 2016 is that recent M&A transactions have involved parts of business and product lines, and not just entire companies. A case in point is Cypress’s acquisition of Broadcom’s Wireless Internet of Things business. In addition, we are seeing software companies acquiring hardware companies and vice versa. Examples include Softbank’s acquisition of ARM, and on a smaller scale, Silicon Labs’ acquisition of the RTOS market leader Micrium.
“At Silicon Labs, we believe a balanced blend of organic growth and strategic acquisitions provides an optimal way to scale the business. Over the past four years, we have successfully completed five acquisitions. In 2012, we added Ember, the ZigBee market leader and mesh networking innovator, setting the stage for our influential role in the Thread Group. In 2013, we acquired the energy-friendly MCU pioneer Energy Micro, expanding our ARM-based MCU portfolio. In 2015, we expanded our wireless portfolio with the addition of Bluegiga, a successful module supplier providing Bluetooth and Wi-Fi solutions, and also Telegesis, a leading supplier of mesh networking modules based on our ZigBee SoCs and software. Micrium, our most recent acquisition in Q4 2016, expands our ability to deliver comprehensive software solutions to our IoT customers.
“Many analysts believe that the semiconductor industry is still somewhat fragmented and has a potential to consolidate further in 2017 and beyond. Whatever transpires in 2017, it promises to be an interesting year of continued growth and innovation in the semiconductor industry.”
“Securing the IoT from end nodes to the cloud requires constant vigilance and ongoing development efforts across all layers of the IoT ecosystem. Every new security attack teaches us new things that we have to guard against to secure the IoT. Varying levels of security levels are required for different IoT applications, ranging from simple connected toys that don’t need sophisticated security functionality to advanced metering applications that need the highest levels of security to thwart malicious attackers.
“IoT device vendors are highly motivated to secure their end products. However, security technology increases cost, design complexity and time-to-market. System designers must weigh the tradeoffs of cost, ease of use and development effort when adding advanced security to IoT end node applications.
“The key to scaling secure wireless connectivity is to establish and harden standard protocols. Examples of such standards include Wi-Fi, ZigBee, Thread and Bluetooth. Over the past decade, many of these protocols have been scrutinized and hacked, and with each hack, the security capabilities of the latest protocol versions have evolved to stay one step ahead of hackers.
“The crux to securing wireless protocols is key distribution — commissioning connected devices into a network with pre-configured keys and cryptographic key exchanges. This is when usability and security require a careful tradeoff and design compromise. Ease of use typically means less security, but also simpler more scalable deployment. Securing the IoT in a cost-effective manner ultimately requires the use of hardened, well-established security standards and wireless protocols.”
next page; Developments at Silicon Labs
Michele Grieshaber continues, “Silicon Labs is well-positioned for growth in the IoT by providing enabling technology that is connecting the world. We have built a comprehensive portfolio of silicon, software and solutions to address power-sensitive IoT end node applications. Our broad portfolio of wireless system-on-chip (SoC) devices, energy-friendly MCUs, sensors, software stacks and development tools continues to grow, making it easy for developers to add connectivity to virtually any device.”
“To address the rapid growth of the IoT, we introduced a multiprotocol, multiband Wireless Gecko SoC portfolio in 2016 that reduces the cost and complexity of creating connected devices. Wireless Gecko supports Bluetooth, Thread, ZigBee and proprietary protocols while scaling from sub-GHz to 2.4 GHz frequencies. By supporting multiple wireless standards on a single SoC platform, developers benefit from simpler designs, reduced BOM cost and faster time to market. Our Wireless Gecko portfolio provides game-changing functionality for developers that will drive Silicon Labs’ growth in the IoT market for years ahead.
“Silicon Labs’ Wireless Gecko SoCs are also integrated into modules. Our wireless module portfolio includes options for mesh networking (ZigBee and Thread) and Bluetooth. We recently launched ultra-small Bluetooth system-in-package (SiP) modules offering the industry’s smallest footprint including the antenna. Wireless modules provide an effective way to drive design simplicity by minimizing engineering cost and effort and speeding time to market. Silicon Labs is one of the few companies in the industry offering customers a module-to-SoC migration path that enables software reuse and hardware feature compatibility with minimal system redesign.
“To further simplify IoT design, we introduced Thunderboard React and Sense development kits, which make it easy to connect wireless sensor nodes to mobile devices for cloud-based data analytics. Our Thunderboard kits provide developers with the sensing, processing and RF components and tools they need to create sensor-to-cloud connectivity innovations.
“As the IoT continues to mature, a new class of embedded applications is emerging…
“As the IoT continues to mature, a new class of embedded applications is emerging, presenting feature-rich and task-intensive use cases. This growing complexity is driving the need for real-time operating systems (RTOS) to help simplify software development for IoT applications by coordinating and prioritizing multiprotocol connectivity, SoC peripherals and other system-level activities. In addition to being able to manage numerous application tasks, an RTOS enhances scalability, and makes complex applications predictable and reliable.
To address these application needs, Silicon Labs recently acquired Micrium, the leading embedded RTOS provider. Micrium has established itself as one of the most reliable, high performance and trusted RTOS software platforms in the market, with an installed base that has grown to millions of devices. Micrium’s commercial-grade RTOS enables safety-critical systems for automotive, medical, avionics, industrial and consumer electronics devices.
This acquisition serves as a unique differentiator, further solidifying Silicon Labs’ position as a leading IoT solutions provider and accelerating the evolution of the IoT ecosystem. Silicon Labs and Micrium share a common goal: to provide innovative hardware and software solutions to the embedded systems market that enable developers to simplify their designs and create applications quickly and easily.
“With software becoming increasingly important to successful IoT applications, Silicon Labs has made key investments to offer developers best-in-class tools and wireless protocol stacks. In 2016, we released a major update of our award-winning Simplicity Studio software development tools to give developers more capabilities and easier access to Silicon Labs’ full range of IoT products. Simplicity Studio provides one-click access to everything developers need to complete their projects, including a powerful suite of tools for energy profiling, configuration and wireless network analysis.
“Silicon Labs has shipped more than 100 million mesh networking devices worldwide to date. As a leading provider of ZigBee and a founding member of the Thread Group, Silicon Labs offers more than a decade of leadership in the development and certification of standards-based mesh networking solutions. Our customers rely on our deep understanding of mesh technology and RF certification. They also appreciate that we offer the tools and stacks they need to simplify development, as well as software updates and migration paths that safeguard their IoT products from being stranded on older technologies and standards.
“In 2016, we marked our 20th anniversary as a company known for delivering breakthrough connectivity solutions that improve lives and transform industries in dramatic ways. Our vision is to connect people, devices and data across multiple markets and applications. We continue to expand our comprehensive portfolio of silicon, software and solutions to address growth areas in the IoT, as well as Internet and industrial infrastructure applications.”
“Over the past two decades, we have become one of the best-positioned semiconductor companies in the industry targeting the IoT. We are pleased with our solid financial performance in 2016 and excited about what lies ahead in 2017 for our company, partners and customers around the world.”
Michele Grieshaber joined Silicon Labs in April 2014 as Chief Marketing Officer, driving the company’s marketing strategies and overseeing marketing and corporate communications programs including digital and content marketing, lead generation, event marketing, media and analyst relations, social media and corporate branding. Prior to Silicon Labs, Michele led 200 marketing professionals as IBM’s Vice President of North America. A 20-year IBM veteran, Michele also served as Vice President of Marketing for IBM’s Global Financing unit. During her IBM tenure, she held strategic positions in software, hardware and services businesses including positions based in Europe and Asia. Michele holds a PhD in mechanical engineering from Virginia Tech and was a Fulbright Scholar to France. She is an adjunct professor of Global Business Ethics at St. Edward’s University in Austin, Texas, and is a frequent guest lecturer at The University of Texas at Austin McCombs School of Business. In 2014, Michele joined the Board of Advisors for the College of Engineering at Virginia Tech.