Silicon Labs emerging as rising heavyweight in IoT electronics

Silicon Labs cannot be matched in mesh networking technology that is widely used in IoT, according to one analyst. (Silicon Labs)

Fabless semiconductor maker Silicon Labs envisions a future heavily focused on Internet of Things technology and the chips behind IoT. And that’s for good reason.

“IoT is happening. It’s not a buzz word. It’s out of the trough of disillusionment on the hype curve,” said Daniel Cooley, chief strategy officer for Silicon Labs in an interview with FierceElectronics.

“Hundreds of companies we see every week are using this IoT connectivity technology to make money and transform business models and lower costs. It’s getting very big now, and chip companies are seeing it,” Cooley said.

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With 1,500 employees and headquarters in Austin, Texas, and Singapore, Silicon Labs realized $868 million in 2018 revenues, a 13% increase from 2017 atop a string of annual increases. About 58% of that 2018 total came from IoT-related products in three segments: microcontrollers, wireless connectivity and sensors. 

Silicon Labs’ chips and related electronics run in products such as Nest thermostats, Amazon Echo Plus, Samsung’s Smart Things hub and the Google Hub Wi-Fi mesh router. Its technology supports various other protocols such as BLE and Zigbee Pro. In all, the company serves 3,500 customers and has amassed 1700 patents, many related to industrial IoT and auto as well as consumer.

Silicon Labs is a very important player in IoT connectivity, said analyst Lee Ratliff at IHS Markit. “Few other companies have a wireless IoT portfolio to match Silicon Labs’. They control the market for Z-Wave and are by far the strongest vendor for Zigbee Pro chips,” he said. “They also have good positions in Bluetooth Low Energy and low-power Wi-Fi. They are the leading vendor for Thread, used mostly by Google/Nest.”

Its standout capability is in mesh networking products. “No other competitor regardless of size can match Silicon Labs’ expertise in mesh networking and this is a key technology in many IoT applications,” Ratliff added. Z-Wave, Zigbee and Thread are all mesh protocols and BLE can be run on a standard mesh layer.

The breadth of Silicon Labs’ low-power wireless portfolio is another distinguishing feature. Only Texas Instruments and NXP have similar low-power wireless portfolios. Considering that those competitors are much larger, “Silicon Labs definitely punches above its weight class when it comes to IoT,” Ratliff said.

Silicon Labs foresees an $11.7 billion opportunity pipeline for IoT products in coming years heavily focused on smart metering, smart home and security, lighting and the broader industrial market. Its products are not just silicon but also software and cloud connectivity.

While IoT products provide nearly 60% of its revenues, about 20% comes from timing and isolation products and another 15% from automotive radio and TV tuners. The rest is focused on more mature markets for modems and Power over Ethernet products. 

Nine out of 10 telecom equipment providers use its high-performance clocks and oscillators, including those used in 5G base stations. The company’s isolation products are built on a mantra of protecting devices, data and people from high voltages associated with industrial uses and manufacturing.

In all, Cooley estimated that Silicon Labs ships about 1 billion chips a year, including 150 million mesh networking devices. TSMC in Taiwan fabricates about 60% of its chips, while the other 40% are made by four companies whose names Silicon Labs does not publicly disclose.

Long term, Silicon Labs designers study emerging technology trends that are on the minds of all chip makers. “Chiplets are real and impacting everybody,” Cooley said. “We have flexibility on chips and we do multiple chips in a package. As for machine learning, it is going to change things, but not as fast as people think. That’s really early days.”

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