The News: Lattice Semiconductor Corporation announced its Q2 2024 results, highlighting its resilience amid cyclic industry headwinds and strategic focus on long-term growth. See the complete press release on Lattice Semiconductor’s Q2 2024 earnings on the Lattice Semiconductor website.
Lattice Semiconductor Maintains Growth Trajectory in Q2 2024
Analyst Take: Lattice Semiconductor’s Q2 2024 earnings report reveals a company navigating through a challenging period in the semiconductor industry with strategic agility and a clear focus on long-term growth. The significant year-over-year percentage revenue decline of 34.7% highlights the broader market’s cyclic nature and inventory normalization trends. However, the company’s stable gross margin and disciplined financial management underscore its resilient business model.
The company has managed well, protecting its high margins and has seen its growth slow at a lower rate than its nearest competitors, Xilinx and Altera. Also, the company is seeing demand normalize and its channel more cautious with taking on inventory. As this fully normalizes shipments and revenues will rise.
Of concern, the communications business has been brutal and has been for a long time. Not unique to Lattice but given it is a big part of the company’s business, the rise in AI PC and smartphone as well as its broader data center business will need to pick up the slack. Automotive is way off too.
Lattice saw its business outperform for a number of quarters after the broader chip space sold off in late 2021. It is now experiencing a lag in momentum that has the catalyst of device cycles (AI) and strong data center growth to buoy it—which appears to be nearing, but not entirely clear if in the next quarter.
Key developments include the launch of the Advanced 3D Sensor Fusion Reference Design, the new logic-optimized Certus-NX FPGA devices, and the MachXO5D-NX secure control FPGAs, addressing the needs of industrial, automotive, and security-focused applications.
From my view, these product innovations underscore Lattice’s commitment to delivering low-power, high-performance solutions that enhance customer capabilities in critical areas such as autonomous technology and cybersecurity. The company continues to expand its product portfolio while maintaining disciplined financial management and prioritizing shareholder value through ongoing share repurchases.
Financial Performance Overview
The Q2 2024 revenue of $124.1 million represents a notable decrease from the $190.1 million reported in Q2 2023. This decline is primarily attributed to the cyclic downturn affecting the semiconductor industry, reducing demand and inventory adjustments across the sector. Despite these challenges, Lattice Semiconductor has managed to maintain a substantial GAAP gross margin of 68.3%, consistent with the previous quarter.
The company’s non-GAAP gross margin of 69.0% further illustrates its effective cost management and operational efficiency. Despite revenue fluctuations, this stability in gross margin highlights the company’s flexible pricing strategies and cost control measures.
Lattice Semiconductor’s operating expenses for Q2 2024 were $62.2 million, a significant reduction from the $79.5 million reported in Q2 2023. This 21.9% decrease in operating expenses demonstrates the company’s commitment to maintaining financial discipline during challenging times. The reduction in SG&A expenses from 19.4% to 16.1% of revenue indicates streamlined operations and improved cost efficiency.
Operating income rose by 36.1% quarter-over-quarter to $22.6 million, although it represents a 57.5% decrease compared to last year. The company’s ability to improve operational income sequentially amidst revenue declines reflects its strategic focus on maintaining profitability.
The GAAP net income for Q2 2024 was $22.6 million, translating to $0.16 per diluted share, while the non-GAAP net income was $31.4 million, or $0.23 per diluted share. These figures indicate a sequential improvement from the previous quarter, where GAAP net income was $14.8 million, or $0.11 per diluted share. I find that this improvement highlights the company’s effective cost management and operational adjustments in response to market conditions.
Product Portfolio Expansion
One of the significant highlights of the quarter was Lattice’s continued expansion of its product portfolio. The launch of the Certus-NX-28 and Certus-NX-09 devices and multiple package options positions the company well within the low-power FPGA market. These products offer improvements in power efficiency, small size, and reliability with flexible migration options, catering to diverse industrial, automotive, and communications customer needs.
Additionally, introducing the Lattice MachXO5D-NX family of advanced secure control FPGAs and the latest Lattice Sentry solution stack extends the company’s security-focused hardware and software leadership. From my perspective, these innovations are crucial in addressing the growing demand for secure, reliable, programmable application solutions.
Strategic Focus and Market Position
Despite the current market challenges, Lattice Semiconductor remains well positioned for long-term growth. The company’s strategic focus on expanding its product portfolio and enhancing its technological capabilities aligns with emerging market trends and customer needs. The emphasis on low-power, high-performance, and secure programmable solutions continue to drive customer engagement and market penetration.
The company’s second annual Developers Conference in December 2024 is expected to further strengthen its market position by showcasing its latest innovations and fostering collaboration with ecosystem partners and customers. This event will provide a platform for technical sessions and keynote addresses, highlighting Lattice Semiconductor’s commitment to advancing its technology and supporting its customer base.
Shareholder Value and Financial Stability
Lattice Semiconductor’s consistent share repurchase program, now in its fifteenth consecutive quarter, underscores its commitment to returning value to shareholders. The company’s disciplined financial management and focus on cash flow prioritization have enabled it to navigate the current industry downturn while maintaining a strong balance sheet.
As of June 29, 2024, Lattice Semiconductor reported cash and cash equivalents of $109.2 million, providing ample liquidity to support its strategic initiatives and operational needs. The company’s prudent financial management and strategic focus on long-term growth position it well to capitalize on emerging opportunities as the market recovers.
Lattice Introduces Advanced 3D Sensor Fusion Reference Design for Autonomous Applications
Lattice Semiconductor has unveiled a new 3D sensor fusion reference design to enhance autonomous application development. This innovative design integrates Lattice Avant-E FPGA with Lumotive’s Light Control Metasurface (LCM) technology to offer superior perception and reliability. The combination is expected to significantly improve decision-making processes in complex environments, catering to industrial robotics, automotive, and smart city infrastructure industries.
The key features of the new sensor fusion reference design include advances in perception through low-power edge AI inferencing and sensor fusion processing. This synchronizes all types of sensors, such as LiDAR, radar, and cameras. The advanced solid-state LiDAR with beam steering powered by Lumotive’s LCM technology also ensures superior 3D sensing capabilities. This integration can enhance adaptability and intelligence, allowing autonomous applications to function efficiently in various scenarios.
Lattice Semiconductor will showcase these technology developments at the Embedded Vision Summit 2024, demonstrating its low-power FPGA solutions’ potential in enabling and optimizing industrial, automotive, and security applications at the edge. I see that this move underscores Lattice’s commitment to pushing the boundaries of autonomous technology, providing solutions that can redefine mobility and safety in rapidly evolving industries.
Lattice Extends Small FPGA Portfolio with New Logic-Optimized General Purpose FPGAs
Lattice Semiconductor has expanded its small FPGA portfolio by introducing new Certus-NX FPGA devices. This extension includes two new capacity points, Certus-NX-28 and Certus-NX-09, along with multiple package options designed for applications in communications, computing, industrial, and automotive sectors. These devices are optimized for low power consumption, small size, and high reliability, offering flexible migration options for diverse applications.
Built on the Nexus FPGA platform, the new Certus-NX devices deliver improved power efficiency and I/O optimization. With up to 4X lower power consumption and up to 3X smaller form factors than competing solutions, these FPGAs are purpose-designed for space-constrained applications. The devices also feature up to 2X more I/O per mm², enhancing their utility in compact and demanding environments.
The Certus-NX FPGAs prioritize reliability and security, boasting up to 100X lower soft error rates and integrated ECC for memory blocks. These features make them suitable for safety-critical applications. The latest release of Lattice Radiant design software supports the new devices, aimed at ensuring seamless integration and deployment for customers seeking advanced, low-power FPGA solutions.
Lattice Introduces New Secure Control FPGA Family with Advanced Crypto-Agility and Hardware Root of Trust
Lattice Semiconductor has launched the MachXO5D-NX FPGA family and the latest Lattice Sentry solution stack version, reinforcing its portfolio development commitment on security-focused hardware and software solutions. These new offerings are built to meet customers’ evolving security needs and protect against increasing cyber threats. The MachXO5D-NX FPGAs feature advanced crypto-agile algorithms and hardware root of trust, ensuring secure product lifecycle management.
The MachXO5D-NX FPGAs offer a range of security features, including AES-256, ECDSA-384/521, and RSA 3072/4096 algorithms, as well as an immutable boot ROM for secure dual boot with integrated flash. These devices also include fail-safe remote field updates and side channel attack resiliency, making them top candidates for safe and reliable product lifecycle management. Integrating non-volatile configuration memory and configurable user flash memory further enhances data protection and system security.
The latest Lattice Sentry solution stack, version 4.0, supports the MachXO5D-NX family and includes new capabilities for platform firmware resiliency (PFR). This includes SPDM and MCTP support for efficient platform management, expanded plug-and-play design tools, and reference designs. These enhancements can enable customers to develop secure, compliant solutions for communications, computing, industrial, and automotive applications, addressing the growing need for solid security in the digital age.
Looking Ahead: Lattice Portfolio Development Acumen Bolsters Financial Stability
I believe that Lattice Semiconductor’s strategic initiatives and innovative product expansions, including the Advanced 3D Sensor Fusion Reference Design and Certus-NX FPGA devices, position the company solidly to capitalize on emerging market opportunities. These products cater to high-demand sectors such as industrial, automotive, and security-focused applications, ensuring Lattice remains at the forefront of technological advancements. The emphasis on delivering low-power, high-performance solutions is expected to drive customer engagement and market penetration, supporting sustained revenue growth despite current industry challenges.
Financial stability remains a cornerstone of Lattice’s growth strategy. With a disciplined financial management approach, consistent share repurchase program, and strong balance sheet, the company is well-positioned to invest in strategic initiatives and operational needs. As the semiconductor industry recovers from its current downturn, Lattice’s pipeline of developing technologies and strategic partnerships can improve the overall financial outlook. From my viewpoint, the company’s ability to anticipate market trends and adapt to changing customer needs ensures it remains a pivotal player in the semiconductor industry, poised for sustained success.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
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Lattice Leveraging the AI PC Wave?
Lattice Q4 FY2023 and 2023 Earnings
Author Information
Ron is an experienced, customer-focused research expert and analyst, with over 20 years of experience in the digital and IT transformation markets, working with businesses to drive consistent revenue and sales growth.
He is a recognized authority at tracking the evolution of and identifying the key disruptive trends within the service enablement ecosystem, including a wide range of topics across software and services, infrastructure, 5G communications, Internet of Things (IoT), Artificial Intelligence (AI), analytics, security, cloud computing, revenue management, and regulatory issues.
Prior to his work with The Futurum Group, Ron worked with GlobalData Technology creating syndicated and custom research across a wide variety of technical fields. His work with Current Analysis focused on the broadband and service provider infrastructure markets.
Ron holds a Master of Arts in Public Policy from University of Nevada — Las Vegas and a Bachelor of Arts in political science/government from William and Mary.
