1. Silicon Labs
NASDAQ:SLAB
Evan and Mitchell Lowery
Robert Gwydir
Brant ‘the real’ MacQuoid
Tim Barnes
2. Silicon Laboratories
• Incorporated 1996, now based in Austin, Texas
• Design and develop analog-intensive, mixed-signal
integrated circuits (ICs) for a range of applications
• Mixed-signal ICs convert analog signals(sound & radio
waves) into digital signals electronic products can
process
– Portable Devices
– Satellite set top boxes
– Amplitude/frequency modulation radios
– Networking Equipment
– Test & Measurement Equipment
3. Product Groups
• Broad-based products
– Microcontrollers
– Timing products (clocks and oscillators)
– Wireless receivers
– Isolation devices
– Human interface sensors
• Broadcast products
– Broadcast audio and video products
• Access products
– Embedded modems
– Voice over IP (VoIP) products
– Power over Ethernet devices
• Mature products
– Devices that are at the end of their respective life cycles
• Receive minimal or no continued research and development investment
– DSL analog front end ICs
– IRDA devices
4. Basic Profile
Market Cap 1.79 Billion
Fiscal Year End January 1
Last Earnings October 26
Next Earnings January 26
Institutional Ownership 110.66%
Insider Ownership 14.25%
# of Analysts 16
S&P Quality Ranking
5. Competitors
• Analog Devices, Inc.
– designs, manufactures and markets analog, mixed-
signal and digital signal processing integrated circuits
– $10.57 Billion
• Broadcom Corporation
– Provider of semiconductors for wired and wireless
communications
– $17.66 Billion
• Texas Instruments Incorporated
– Designing and making of semiconductors
– $34.34 Billion
6. Risk Factors
• Unable to develop or acquire new and enhanced products that achieve market acceptance in a
timely manner
• R&D efforts are focused on a limited number of new technologies and products
• Limited number of customers for a substantial portion of revenues
– 10 customers: 36% of revenues
• Significant litigation over intellectual property
• Inventory risks and costs
– Build products based on forecasts provided by customers before receiving purchase orders for the products
• Products are complex and may contain errors which could lead to product liability
• Customers require our products to undergo a lengthy and expensive qualification process without
any assurance of product sales
• Increased international activities significantly and plan to continue such efforts
• Rely on third parties to manufacture, assemble and test products
• Risks relating to product concentration
• Most current manufacturers, assemblers, test service providers, distributors and customers are
concentrated in the same geographic region
• Semiconductor manufacturing process is highly complex and, from time to time, manufacturing
yields may fall below expectations
7. Mergers and Acquisitions
• Silicon Clocks – April 2010 for $21 million
– Designed and developed microelectromechanical system
(MEMS) technology to enable the manufacture of silicon
resonators and sensors directly on standard CMOS wafers
– Effort to leverage CMOS-based timing products into high-
volume applications such as consumer electronics
– Accelerate entry into the low end timing market while
further scaling the Company’s engineering team
• ChipSensors Ltd – October 2010 for $11.7 million
– Created innovative single-chip CMOS sensors designed to
detect temperature, humidity and gases
8. Mergers and Acquisitions
• SpectraLinear Inc – January 2011 for $28.6m
– Low-power, highly programmable and small-
footprint silicon clocking solutions
– Optimized for consumer electronics and
embedded applications
– Adds a broad family of timing ICs, accelerating
penetration into high-volume applications
10. Management Discussion
• Mixed-signal ICs are critical components in a broad
range of applications in a variety of markets
– communications, consumer, industrial, automotive,
medical and power management
• Third-party fabrication, assembly, packaging, testing
and shipping
– Faster delivery
– Shorter production cycle
– Lower inventory
– Lower costs
– Increased flexibility of test capacity
11. Management Discussion
• Expertise in analog-intensive, high-
performance, mixed-signal ICs
– Enable highly differentiated solutions that address
multiple markets
• Through acquisitions and internal
development, diversifying product portfolio
– Next generation ICs with added functionality and
further integration
12. Management Discussion Q3
• Sales cycle for ICs can be 12 months or more
– 3-6 months more before customers ship significant volume
of devices incorporating our ICs
– Experience significant delay between incurring R&D and
SG&A expenses and corresponding sales
– If sales do not occur in quarter expected, expenses &
inventory could be disproportionately high
• Many ICs are designed for use in consumer products
– Demand for our products subject to seasonality
– Rapid change in our markets & across product areas make
it difficult to accurately estimate impact of seasonal factors
13. Q3 Conference Call
• TV tuner & demodulator shipments declined
– TV makers working off inventory
– Strong tier-one TV maker penetration
– Introduced tuner to Tier-two TV makers in high
volume emerging markets
• FM tuner better seasonal lift than anticipated
– Audio products continue strong design win activity
14. S-LABS
• The company develops mixed-signal
integrated circuits (ICs), which translate real-
world analog signals (such as sound) into
digital signals that can be processed by
electronic products. Silicon Labs
provides ICs used in set-top boxes, game
consoles, portable electronics, industrial
monitoring and control devices, and wireless
handsets.
15.
16. Power
• “Top customers include Apple, Cisco, Huawei,
Nokia, Pace, Samsung, Technicolor, and Varian
Medical Systems. Most of Silicon Labs' sales
come from customers outside the US.”
20. Competitive Advantages
• What sets them apart from other
semiconductor markers?
• The Sauce… “innovated mixed signal circuit
design, there are very few companies that
have the discipline and technical talent to
create the mixed signal ICs they do.”
• “Has both analog circuits and digital circuits
on a single semiconductor die”
http://files.shareholder.com/downloads/ABEA-39NRLI/1522740570x0x448278/CD564960-
9F11-464B-A6D9-0ABA6DF2C8E5/Silicon_Labs_2010_Annual_Report.pdf
21. Competitive Advantages
• IP – They have “strategic blocks”, patents
around patents
• SLAB must continue to put money toward
good researchers, but also continue to achieve
good returns on R&D
– Consistent R&D pipeline
22. Competitive Advantages
• Forward looking, and good at it.
• “The market for energy harvesting devices is
poised to grow exponentially this decade.
IDTechEx forecasts that more than ten billion
energy harvesting devices will ship by 2019 – a
20x increase over the roughly 500 million units
that shipped in 2009.”
• “Silicon Labs has met this design challenge by
creating a wireless energy harvesting system
based on its Si10xx wireless microcontroller
(MCU) family.”
http://m2mworldnews.com/2011/05/25/56866-silicon-labs-powers-wireless-networking/
23. Competitive Advantages
• “Diversification is important because it has allowed
[them] to ride out cycles in the industry better than
many of [Silicon Labs] peers, and it has given them
insight into a broader set of markets and
applications, fueling the new product ideas that
ultimately end up in our R&D pipeline.
24.
25. Bull Say…
• “Silicon Labs has a talented R&D staff that has
allowed the firm to develop innovative mixed-
signal chips over time.
• The company took the bold step of shedding its
wireless business line, even though it was
profitable, because the firm saw increased
competition and lower profitability down the
road.
• Silicon Labs is not overly exposed to a single
customer or end market.”
http://subscriber.hoovers.com/H/company360/overview.html?companyId=59229
000000000
26. Summary
• Strong, high value, high volume, customers
– Require a lot from SLAB
• Diversification to weather highs and lows
better than competition
• Industry Growth
• Forward looking, and good at it
• “Silicon Laboratories keeps cooking up new
chips in its labs”
37. Silicon Labs- Piotroski Breakdown
Qualification Score
1. Positive Net Income 1
2. Positive Cash Flow from Operations 1
3. Increase of Return of Assets 0
4. Cash Flow from Operations > Net Income 1
5. Decrease in Long-Term Debt to Assets 1(No Debt)
6. Increase in Current Ratio 1
7. Decrease in Shares Outstanding 1
8. Increase in Gross Margin 1
9. Increase in Asset Turnover 1
Total Score 8/9
38. Price/Book Ratio
Price Multiples
Price/Earnings Ratio
Price/Sales Ratio
Price/ Operating Cash Flow