The Six Five team discusses Lattice Q2CY24 earnings.
If you are interested in watching the full episode you can check it out here.
Disclaimer: The Six Five Webcast is for information and entertainment purposes only. Over the course of this webcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we ask that you do not treat us as such.
Transcript:
Daniel Newman: So Lattice has been in transition, new leadership, Jim Anderson went over to Coherent. Now you got Esam leading the charge. We had the chance to speak to him on earnings day. They’re still where, they’re still kind of in this position of digging out right now. The FPGA space was sort of interesting because it held a little bit longer. They were pretty well diversified in industrials and comm and PC and devices and data center. And so if you actually remember when other chip makers and memory, it all started tanking. Lattice had three or four quarters that they kept going up and it was like, wow, it was like 11, 12 record quarters in a row. Well, those chickens have come home to roost. And I mean the last three have been pretty rough and I’m looking for the good spots in the business. I think the best thing that I could say about their print was better than the other FPGA businesses right now.
Stacy Rasgon: Xilinx, and Altera, AMD, and Intel are, their FPGA business are pretty bad.
Daniel Newman: Even worse.
Stacy Rasgon: The general trends are the same.
Daniel Newman: Yeah.
Stacy Rasgon: By the way, you can look at the other analogs, the guys that do industrial and auto, it’s not great out there right now in those broader diversified markets.
Daniel Newman: By the way, when Qualcomm showed its big IoT number, I said to Cristiano, I said, I don’t get it. I said, I don’t see any data that’s showing strength. And then he reminded me about the XR business and I’m like, got it.
Stacy Rasgon: Yeah, consumers actually not bad. But with PCs and smartphones and XR and tablets, those already collapsed. So you’ve already hit bottom. We’ve had in general kind of an asynchronous kind of cycle where the different end markets have been rolling over and bottoming at different times. So it has the effect of actually elongating the whole thing. But depending on where you’re exposed, you could have already seen it or it could be still to come.
Daniel Newman: So with much of Lattice’s stuff sitting in industrial automotive communications, they just have a lot of parts of their business that are down. And industrials has been tough. Comms has been, it’s funny you said T-Mobile’s actually up, but comms, the actual hardware comm space has been a mess for just a long time. And so the overall space, Lattice I think is managing it well. They’ve been able to protect their margins, keeping it close to 70%. They’re still delivering, but they had had such a run-up, that on a year-over-year basis, it just looks terrible. And so they’re performing, they’re operating, they’re managing, they’re expanding their TAM with their mid-range products. And overall, like I said, I think it’s as good as they could do given circumstances. They’re not a huge company, but in this case, maybe that’s playing in their favor. They’re in that space. They’re focused on it.
Stacy Rasgon: Yeah, I mean there’s not anything that’s specific to them. It’s just, again, the markets are weak and they overshipped, just like a lot of folks did. And so you have to work that off. It takes time.
Patrick Moorhead: Yeah, I do the self-inflicted, market inflicted and absolutely market inflicted. You compare, like you guys said, to Altera and AMD, and they’re down less and they have been down less. The thing that’s really interesting here is that all of their business, 99% of it right now are these lowest power small FPGAs with small amount of LUTs and they’re doing-
Stacy Rasgon: Vivanta.
Patrick Moorhead: Yeah, now with Vant, mid-range, which very small percent, super small percent right now. So it’s all upside. And they’re going after AMD and Altera with brand new designs in leading edge fabs. And by the way, FPGAs, we’re not talking about three nanometer here, okay? Anything smaller than 22 is small, and I think that’s big. The other that I find interesting, it’s not just about the hardware, is the attach rate on the software. I think the company said they have a 50% attach to their software, and that does two things. First of all, it drives revenue because it’s an incremental cost. And second of all, it’s stickiness. As we know, hello Nvidia, write something directly to a piece of software and you might be like, well Pat people don’t dump FPGAs for ASIC at the low end. For the most part, you’re right. But you give them less of a chance and motivation to do that by connecting the software. Last comment, all that software works together between the low-end and the mid-range, so I think it’s going to, the company has the potential for a very bright future.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
