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Cisco's Internet of Things Makes Skyworks and Broadcom Solid Investments

May 21, 2014 | About:
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Cisco (CSCO)'s Internet of Things, or IoT, is a huge opportunity amounting to about $19 billion. The connected objects are expected to be around 50 billion by 2020, generating a huge volume of data that would require better infrastructure to maintain the Internet of Things as believed by Cisco. This is exciting news for the networking equipment major.

However, there are several companies looking to benefit from the evolution of the Internet. The devices need to have connectivity radios, sensors, and controllers built into them to communicate with each other. These type of solutions are provided by the likes of Skyworks Solutions (SWKS) and Broadcom (BRCM).

Skyworks to Benefit

Skyworks is in a prime position to benefit from the Internet of Things, being a manufacturer of radio frequency and mobile communications chips. The wireless connectivity is enabled by its analog and mixed signal semiconductors. The company’s power amplifiers, front-end modules, integrated radio frequency solutions, and other components help various mobile chips communicate by eliminating interference in a multi-band architecture.

Skyworks also offers a range of solutions for wireless infrastructure, such as base station products and point-to-point radio links, which should help it tap the growing need for networking equipment as well. Going forward, there’s a strong opportunity for Skyworks connectivity and power management solutions due to growth in the Internet of Things.

In addition, Skyworks is quite hopeful about General Electric (GE) Industrial Internet, which is an extension of the Internet of Things for industrial products. Skyworks’ addressable market should get bigger with GE integrating machine-to-machine communications across its industrial portfolio that includes jet engines, turbines, locomotives, medical devices, etc. According to Wikibon, technology spending on the Industrial Internet is expected to hit $514 billion in 2020, signifying a big market ahead for Skyworks.

Skyworks is providing solutions to GE Medical. Further, Skyworks has also added Boston Scientific and Medtronic as its client for medical connectivity solutions, apart from landing design wins for remote lighting, in-home monitoring security platforms, communications hubs, in-home displays, etc.

The addressable content of more than $12 is being seen by Skyworks for connectivity platforms now, approximately double the figure seen a few years back. The company believes the addressable content to continue to grow going forward with more devices coming online and with the expansion of application of the Internet.

Broadcom on a Roll

Similar to Skyworks, Broadcom also specializes in connectivity chips. But the company has dived deeper into the Internet of Things by producing specialized chips for this platform. Broadcom unveiled a couple of chips aimed at the IoT for the previous year.

The BCM20732 Bluetooth Smart system-on-a-chip technology was meant for low-cost, low-power devices compatible with Android. The chip allows equipment manufacturers to connect various devices such as heart rate monitors, pedometers, door locks, and lighting and proximity alarms, which are standard issue in a smart home.

Another solution, BCM4390 Wi-Fi system-on-a-chip, very similar to BCM20732, but allows for connectivity without the requirement of Android and Bluetooth. This chip is already seeing quite healthy demand in the market and allows for a broader use case for basic applications such as lights and cookers.

The Wireless Internet Connectivity for Embedded Devices, or WICED, platform for manufacturing chips by Broadcom is seeing a good traction from multiple customers across various end markets. Broadcom has customers that deal in home appliances, health monitoring devices, fitness companies (14 of them), thermostat makers and smartwatch suppliers.

Moreover, the Internet of Things is expected to be a catalyst for Broadcom’s data center business, which is already going quite strong. Broadcom’s data center business moved up 50% year over year. This robust momentum is expected to continue in the future with bright long-term prospects.

The rapid growth in cloud is bound to attract increased spending in data center for Broadcom. The increase in the data volume due to the Internet of Things is bound to drive this growth in the future.

Conclusion

Cisco is planning to connect the world through its Internet of Things. This concept is being extended by GE to industrial applications and has created the Industrial Internet. Now, it is quite clear that everyone is going to live in a connected world in the future, and these two giants are among the leaders of this evolution.

However, the Internet of Things won’t be a possibility without Skyworks and Broadcom, as without them, devices won’t be able to communicate with one another. Therefore these two companies could become big gainers from the Internet of Things in the future.


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