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Making Markets EP46: Silicon Labs President and CEO Matt Johnson on the State of the Market, Scaling IoT, and the Impact of AI

Making Markets EP46- Silicon Labs President and CEO Matt Johnson on the State of the Market, Scaling IoT, and the Impact of AI

In this episode of Making Markets, Matt Johnson, President and CEO of Silicon Labs, talks with host Daniel Newman about the state of the market, scaling Internet of Things (IoT) and the impact that red-hot AI has on that part of the company’s business. Matt also shares some insight into his role in the semiconductor industry as chair of the SIA, and how the industry has quietly helped the world advance, amidst the complexities and challenges of the current geopolitical environment.

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Transcript:

Daniel Newman: In this episode of Making Markets, we have Matt Johnson, President and CEO of Silicon Labs. We’ll be talking about the state of the market, scaling IoT, and the impact that red-hot AI has on that part of the company’s business. We’ll also dig in a little bit into Matt Johnson’s role in the semiconductor industry as chair of the SIA. We will cover this and so much more. You’re tuned in to Making Markets.

Announcer: This is the Making Markets podcast, brought to you by the Futurum Group. We bring you top executives from the world’s most exciting technology companies, bridging the gap between strategy, markets, innovation, and the companies featured on the show. The Making Markets podcast is for information and entertainment purposes only. Please do not take anything reflected in this show as investment advice.

Now your host, CEO of the Futurum Group, Daniel Newman.

Daniel Newman: Matt Johnson, President and CEO of Silicon Labs, welcome back to Making Markets.

Matt Johnson: Thanks, Daniel. How’s it going?

Daniel Newman: It’s great to have you. It’s been a minute, but it hasn’t been too long. I think I spoke to you maybe after one of your most recent quarters. Always great to have you here. I know you’re in a quiet period, so I’m going to have a little different conversation with you. Promise I’ll stay away from that. But here on Making Markets, we love to bring CEOs of top companies across the technology sphere to look at the shape of the market, technology, economics, and so many more things. And I think that’d be a great place to start with you. We’ve had a yo-yo of conversations and the semiconductor industry is kind of the boom bust industry of all boom bust industries. We spoke a year ago. It was boom times. This was a boom for IoT. It was a boom for Silicon Labs. But there was a bit of a feeling that maybe there was going to be a hangover post-pandemic, interest rates, inflation, lots of things going on.

So where are we at? How are you seeing the market right now?

Matt Johnson: Yeah, it’s definitely an interesting time out there in the market for all of us. I think, not trivializing any of this, but I think everyone knows and sees what’s going on with the overall economy. I think that no one knows exactly how that’s going to play out. When it gets into the semi space, as you pointed out 100%, we have just a fascinating industry of boom bust and kind of swinging the pendulum too far on either end of the cycles around this and I think that’s what we’re seeing now.

So if you step back and look at our space, I don’t see any of the fundamentals changing around the importance of semiconductors, the need for semiconductors. If anything, the world’s more aware of the criticality of what semiconductors do. We like to say, “Imagine the world with and without semiconductors” and then it becomes very real very quickly how elemental they are to the future. So those fundamentals haven’t changed. And within IoT, I don’t see those fundamentals having changed either.

So if you step back, the need for connected devices, digitized devices at the edge, hasn’t changed at all. So I think what we’re going through is this cycle, which is a function of the overall macro environment and the semi cycle. But the fundamentals that underpin all this haven’t changed. And honestly, it’s probably the most exciting time I think most of us have seen in semis, in IoT as well for a long time.

Daniel Newman: Yeah. And I’m glad you mentioned at the end, kind of diving into IoT, Matt, because we all know that AI and generative AI have… they’ve sucked a lot of wind out of everything. And we’re going to talk about that here in a little bit, but it’s kind of easy to skip by. I’ve noticed a little bit, companies that are cloud-centric are talking about AI. Companies that were Edge-centric are talking about AI. Companies that were automotive-centric are talking about AI, software-centric, AI.

And my point is, I take a little bit of issue as an analyst that’s been calling AI for a long time that, one, a lot of what we’re seeing isn’t new. Yes, there are some new capabilities and large language models have been democratized somewhat, but it’s not all new. And it’s like, “Yes, I get it. Marketecture, we need to market. We need to tell stories. We need to align with what people care about. We need to keep the buzz high.” But companies are sort of straying from their core competencies in some ways to make sure they build this message around that topic.

And so we’ll talk about this with you, but I’m glad that you said IoT because it would’ve been really easy for you to say semiconductors and AI, but you leaned into your core competency. You were all in on IoT, made this proclamation a couple years back. Talk a little bit about that. What’s it going to take now to get that kind of back on the rails? It’s not like it ever really went off, but it hasn’t been as in focus and you are all in on it. What’s it take to build the industry to get IoT back on the rails and, of course, to make sure that you, at Silicon Labs, keep that billion-dollar business that you’ve worked so hard to build.

Matt Johnson: Yeah, absolutely. And we can always talk about the AI stuff later.

Daniel Newman: We will.

Matt Johnson: As I said before, there’s no discussion where we can avoid it right now. It’s in the hype cycle and feeding frenzy, so I know we’ll get there. On the IoT piece, it’s a good question and a good point that, as I said earlier, we don’t see the fundamentals having changed. And if you step back and look at it, the things we think that are needed for the industry to continue to scale and grow really haven’t fundamentally changed at all. And the good news for us is they’re one and the same for what the industry needs and what our company needs to do. So to be specific, we really see a need for continued progress around, for lack of a better term, user experience, developer experience. And those things get thrown around all the time.

But if you think about what needs to happen, developers need to be able to do a lot more, a lot more efficiently if we’re really going to scale and deploy this market at the level and scale that we know is going to happen and needs to happen, which is not just tens of billions of devices, but hundreds of billions of devices. And think about what we’re talking about when you start talking about those types of numbers. So that piece is critical and it’s also about the user experience as well. If these devices are not deploying, being set up and being reliable and working well, we’re not going to deploy at the scale we want and need.

So that user experience, developer experience, the industry’s made progress. Things like Matter will help. Things like Amazon Sidewalk will help. All the things we’re investing in are making it mass market, wireless connectivity and digitization of the Edge happen easier and faster every cycle. But we still need to make material progress there, I think, to realize the full potential. So that’s one.

Another one is security. And it’s not as sexy as AI to talk about, but it is honestly just as important. If devices are not trusted, this is not going to happen. So making sure that the fundamentals are there, that their devices are trusted, the connections are trusted, and it can deploy at scale is critical and that hasn’t changed. And the industry’s making progress, but we still have a long ways to go there as well.

And maybe just one other to point out that I think probably doesn’t get as much attention or appreciation is the ability to support multiple protocols from a wireless perspective. People kind of have a mindset or tendency to think of a connected device at the edge, especially at the extreme edge, really only needing one wireless protocol for its connection to the network and to the cloud. That is the case oftentimes, but increasingly, multiple wireless connections, protocols are needed moving forward. And if you think about it, it makes sense intuitively, right? Think of a handset, how many wireless technologies are there, whether it’s 5G, WiFi, Bluetooth, et cetera because they all bring something to the table and all serve a purpose.

If you have a device that sits on the edge of the network and you might want it to use sub-GHz for one connection, you could use that to talk to Amazon Sidewalk. You could use it to talk to many protocols, but then, bluetooth to talk to your phone, WiFi to talk to your network and cloud. Very quickly, you can see that the need for those to be synthesized work well, work well together, be cost-effective, be power-effective because what we’re talking about in a lot of these cases is solutions that last five years, 10 years, not hours, days, or weeks. That’s something that the industry has to become better at and that’s something that we’ve been focused on literally for almost a decade now. So that’s a critical thing that has to happen as well for, lack of a better term, full-scale deployment.

Daniel Newman: Yeah, I couldn’t agree more. I think you hit it kind of on the reliability, dependability, the scale out. The data’s going to play a huge role as well. We know that ambient data connected environments, both in the enterprise industrial complex, across homes, consumers, is really what makes the IoT so important. It’s about intelligence. It’s not really about things. It’s about what can these things enable us to do. And so as you think about that then, I do tend to think a lot about, “Well, this does feed into where we were before.” So as much as I try to desperately avoid it, Matt, the AI story comes to bear. Because in the beginning, some of that is smart and the intelligence was about things like automation, right? Do you automate the factory to make smarter robots? Do you automate the home to control? And so these were the early eras of intelligent processes being created using ambient and IoT and edge data.

But now, really interestingly enough, with AI is like, “Yeah, we like talking about the data center, GPU’s training large models, generative,” but the edge stuff tends to get missed. Whether it’s the ability to, in the near future, do edge processing on a device, you don’t always need to be able to process in the clouds. You see like PC makers and handset makers and companies being able to create some really cool stuff.

And then on top of that, though, it’s even further out to the edge, right? It’s all of the things. It’s the automobiles. It’s the cameras on the sides of buildings, it’s the lighting systems and TVs in your house that are going to really be able to benefit and do something meaningful with this.

So we can’t avoid AI. I don’t think you’re trying to, but I haven’t heard your story yet.

Matt Johnson: No.

Daniel Newman: So what’s the Silicon Labs story on AI?

Matt Johnson: Sure. So yeah, maybe first of all, I do believe we’re in whatever you want to call it at the most interesting place of the hype cycle around specifically generative AI and large language models. But I do think that for us, nothing’s changed on a fundamental level and I’ll explain that. First of all, we’re not changing our name. We’re not putting AI in our name or anything like that, although you’ll appreciate this. Our stock symbol is S-L-A-B, slab, and a couple investors said, “Can you change the B to an I and then you’ll be able to better index to this cycle.” And they’re joking, but we’re not going to do that. So we’re-
Daniel Newman: Silicon Laibs? Like L-A-I-B-S? Like Silicon Laibs?

So I think, big picture, I’ll get to generative AI, but our focus on AI hasn’t changed, right? As you pointed out in the beginning, we’ve been focused on AI and that hasn’t changed. What we primarily focus on is really supporting and bringing AI to the edge of the network where we focus and that’s really particularly machine learning. It’s not generative AI. And we’ve built this capability into our devices and what we see as a long-term trend is the continuing need for more compute and specifically inference at the edge and that’ll continue to happen over time, right? And we see the applications. I mean, think of it this way. It allows applications to be more useful, more valuable, and provide more useful insights for their intended purpose. It’s happening and it will continue to happen.

When it comes to… and that’s been our focus and strategy all along. When you talk about the questions we’re getting a lot lately, “Well, what does generative AI mean for the IoT?” And you and I have touched on this in the past. I do think that it’s a positive, right, and not trying to get into, yeah, we expect the short-term pop on demand because of this. I think this is a long-term play, but I think over the long-term, will there be a desire for more connected devices because they’ll be able to do more useful things in more useful ways and be able to take better advantage of all the data they provide? Absolutely. But that’ll take time to play out, especially where we are in that cycle. But it’s positive for the end demand of our industry, for sure.

If you look at it in terms of companies and the way we operate, I do think there’s some really compelling use cases there. We talked about our focus areas and helping the industry like user experience, developer experience. That can help, right? You can be much faster and more efficient in terms of support, generating sample code, development code for our customers. That’s real and that’s useful. And for sure, we’re leaning in there, but we’re not alone in that. I think you’ll see that across the board in the industry. So will it help our industry move faster? Yes. Will it help us move more efficiently? Yes. But it doesn’t change the fundamental strategy of the company in terms of the way we’re deploying end devices. And we’ve always been trying to bring inference to the edge and doing it more efficiently.

And to be clear, this is a very different type of compute than we’re talking about in other applications like Handset or PC or Automotive. As I said before, we’re talking devices that can last years on the edge with a watch battery and being able to run inference in that way is a completely different skill and game, but it’s happening and it’s real.

So hopefully, that helps a little bit in terms of framing. Fundamentals haven’t changed, but net-net, this is good for our industry. Not bad.

Daniel Newman: Yeah, I think that there is a bit of a loop that’s going on that’s not necessarily all productive. The continuation of aggregation of data, of devices that sense that intelligence that can be inferenced in real time on low power, high volume devices, lower cost. Not everything is a sophisticated supercomputer in your pocket or in the data center. There are so many devices that sense and so many devices that sense that can provide value through data, that can create chains of events or provide useful data and insights that can add value to every industry, really, from consumer to industrial, like I sort of said in the beginning, Matt. And one of the things I’ve admired about what you’ve been building at Silicon Labs is that you really have leaned in and focused on an area that people can truly say, “You” and a very small subset of companies have well defined, specialized this capability.

You’re not trying to say, all of a sudden, that you’re building out competitive chips with Nvidia. You’re saying we’ve got our notes and we know what we’re good at and we’re going to lean into what we’re good at and we’re going to continue to build a significant practice, business, and capability that’s going to scale as connected things scale. So that’s really exciting. Congratulations on that.

Speaking of congratulations, you have been named the SIA, Semiconductor Industry Association, a pretty important pillar in the business. You are now the chair. I’m kind of curious amongst giants and, of course, a year of a billion, a year of taking the chair seat. What’s the year been like in that role? What are you focused on as the chair of the Semiconductor Industry Association?

Matt Johnson: Sure, yeah. Interesting experience for sure. Honestly, an honoring one and a humbling one as well. The SIA has an amazing history in our industry in the US so it’s great to be part of that. Fascinating, going to DC and seeing how Washington is thinking about our industry. And like we said in the beginning, the awareness of our industry, its importance and what it does and how it underpins effectively economies and society is stronger and the highest that it’s ever been. So that’s been an amazing experience.

And just to add to it, this is the US SIA, but I was just recently in South Korea representing the US delegation as all the global SIAs got together and we get to see that on the global stage is also a fascinating experience. But to answer your question, I think probably a couple things. Chips has gotten a ton of attention and we’re in an interesting phase right now where we’ve gone through the, “Let’s call it the hype cycle where we’re doing it and everyone was aware of it. Now, we’ve moved into the mode of, “Okay, how are we going to deploy this and do it in the best way and what’s that going to look like?” And so that’s the phase we’re in. So that’s getting a lot of attention in the SIA right now.

And then the other piece is just with the overall geopolitical environment and what’s going on, you can’t deny that the semiconductor industry is so intertwined and coupled globally. It is truly a global industry and there’s this desire in some places for that to be less coupled. So to see how that’ll play out and that will have implications in terms of investment, cost structures. Honestly, there’s components to that that are inflationary when we’re trying to reduce inflation.

So getting people to understand that and do it in a way that is actually good for the world, good for the industry, good for every country is a balancing act. And getting to be in the middle of a lot of those discussions has been, it’s like I said, humbling, trying to do my best. And to be clear, I’m not in this alone. I have an amazing team of CEOs and industry leaders right there with me all the time, so it’s awesome.

Daniel Newman: No, that’s fantastic. It’s interesting because you mentioned a lot of the supply chain. You’re implying how the supply chain works globally, how there’s few different manufacturers of equipment and different Foundry Fab options and then there’s, of course, assembly and around the world. All these things tie together. And Matt, I got a PhD in the last two years. I did 50 television appearances to talk about the supply chain and I knew about this stuff deeply, but I spent more time in policy, regulatory, and supply chain than I ever expected as an industry high-tech research CEO and analyst. And it was really prophetic to learn about this stuff. And obviously, I saw you shaking hands with presidents, diplomats, politicians. Pretty cool to have the chance to participate and meet these influencers among influencers that are really making decisions and setting policy, Matt, that’s changing the world.

Now, I will invite you in advance to come back because I would love to talk about this with you a little bit more through the lens of policy because I think there’s a lot of thoughtful debate, not disagreement, but thoughtful debate about things like how do we create a resilient supply chain with manufacturing in multiple parts of the globe without making it feel like microaggressions against certain parts of the world. How do we share intellectual property that’s going to be for the good of humanity without creating national security defense issues? How do you maintain technology leadership here amongst the Allied nations while still democratizing that?

So these things are things that we want to make them very black and white. Politicians, unfortunately, love to make these things very partisan. But I look at this stuff as, for humanity, what we’re doing in this industry matters. And so what you’re doing with the SIA really matters as well.

Matt Johnson: Yeah, I’d love to talk about it more. And it touches on something that’s so important. With this type of issue, it’s not easy because it’s not easy. There’s truth all around. There’s not this black and white, this is right and this is wrong. There are geopolitical considerations. There are cost and fundamental industry issues and constraints, right, and these things are big, slow moving ships that take time to move. And it is interesting. This is one of the few things that does have bipartisan support in Washington is around the importance of our industry and how do we navigate this. So it’s fascinating. It’s, I think, ultimately, a good thing? Sometimes, if we’re honest about it, that’s not helpful.

But I think for people to understand the industry and its importance is a win overall. And I think our industry has been quietly helping the world advance. And for people to be more aware of that and the implications and the challenges and complexities is going to be a net win. But we got to go through it and the education cycle process takes time.

Daniel Newman: Yeah, help that’s not helpful. I like that. I think I heard that at home recently.

Matt Johnson, President and CEO of Silicon Labs, thank you so much for joining me once again here on Making Markets.

Matt Johnson: Great talking to you, Daniel. Thanks much.

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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.

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