Michael Hurlston is CEO of Synaptics, a publicly-traded developer of hardware and software used in many products, including touchpads in computers, autos and smart home devices.
In March, Synaptics showcased innovations at tinyML Summit, including edge AI tech with low-power SoCs relying on neural network engines for vision, sound-detection and speech processing. In an industrial setting, the technology can be used to remotely read multiple digital meters at once, eliminating the need to create separate connections for each meter.
While such innovations are cutting-edge, Synaptics has seen its share price plummet in recent months. There’s constant pressure on all semiconductor designers—not just Synaptics-- to iterate new products in a changing economy slammed by persistent supply shortages, aggressive inflation and a growing war in Ukraine following Russia’s invasion there. Hurlston took the helm at Synaptics in 2019 after an impressive career in the tech industry, including years at Broadcom as general manager of mobile connectivity products. He holds advanced degrees in electrical engineering and business administration.
In a wide-ranging interview with Fierce Electronics, he addressed tech labor shortages, supply chain problems and rising chip prices, the need for R&D to continue to innovate, competition with China, the future of IoT and AI and the growing market for chips in automotive.
Despite it all, Hurlston claims to love his job.
(The following interview excerpts have been edited for brevity and clarity.)
FE: How big is the IoT market for Synaptics and has the overall market progressed as quickly as you’d like, especially for Industrial IoT?
Hurlston: Our revenue from what we call IoT is roughly $1 billion, while the total addressable market is $20 billion to $25 billion. Our IoT is made up of a bunch of sub-sections such as wireless products like drones, video surveillance and meter readers, a mix of consumer and industrial, videoconferencing chips, docking stations and more. Overall, we’re pretty broad, with overall revenues of $1.5 billion to $2 billion.
Industrial IoT has been relatively slow and is not moving as fast as people projected. Consumer IoT is obviously a lot bigger. Automotive has been slow but we are starting to see a V in the curve with meaningful revenues in display drivers for auto. Our heritage has been a lot around touch and the circuit we make for auto has been the display driver and touch. It’s already a $100 million market for us and we think that can be bigger.
FE: Has Synaptics been affected much by materials shortages and how will that change this year with the war in Ukraine and the impact of inflation?
Hurlston: We have been hit hard in our supply chain and our customers have been hit hard by our inability to supply them in turn. It’s far short from what the demand is. We don’t see a near-term end of that. Despite all that, it will come to an end and then we see outsized growth will cool.
Semiconductors are in so many devices now. Who would have imaged the automobile would become a collection of semiconductor devices? Semiconductors are growing a lot faster than expected. This really rapid growth with the pandemic is naturally going to slow down. People don’t think the current growth rate is sustainable.
FE: What’s been the impact of these macroeconomic gyrations on your company in particular?
Hurlston: Our share price is down 45% from the peak in November, from $300 down to $160 [$153 on April 15]—a huge drop, which obviously has had a big impact. There’s the Ukraine crisis, inflation fears and a lot of worries. The share plummet has been a real shock. It’s quite sobering. Still, we’re optimistic, our internal numbers are good and we’re out of sync with the market. We’re actually hiring.
FE: How difficult is it to hire the talent you need?
Hurlston: Our biggest problem is getting talent. Wage inflation is probably outpacing the consumer market. The war for talent in tech is just immense and there are no safe harbors. We hire in the U.S.. Taiwan, China, Poland, Israel, UK and France. We can’t hire anywhere and job poaching is really tough. That’s one of the reasons we opened in an office in France, to get as wide a footprint as possible.
FE: How successful have you been in working with colleges to get talent more directly?
Hurlston: We have plans to work with others in education and have kicked off an initiative to hire interns around the world, in the U.S. and Poland. We were a little bit slower than we could have been.
FE: Some companies are working directly with community colleges in the U.S. because not all tech jobs require the top engineering degrees. Is that the kind of approach that’s needed?
Hurlston: Creativity is what’s required. Very few young engineers are coming out of universities and the U.S. has a particular problem. It’s a big concern of how we strike a balance to get hardware engineers with an EE major. Most grads want computer science jobs to work at places like Facebook and very few coming out are semiconductor engineers. The U.S. is losing competitiveness in this area. China is cranking out a lot of young engineers and they realize how important semiconductor engineering is. I feel that’s a major concern for anybody in this industry.
We have a footprint in China and a development center. There are super talented engineers in China, and of course there’s a big pull from state-owned enterprises and companies fueled by the government and they pay outrageous salaries. The multinational companies used to be the big payers, but that’s not true anymore.
FE: Do you think tech R&D may suffer in the economic climate that’s emerging?
Hurlston: The number of semiconductors going to IoT is exploding and that trend is not changing. Our spending on R&D has gone up the last few quarters and we have to weigh the short-term headwinds on price and the long-term macroeconomics in play. We have to be careful we’re not trading off the long-term market with some short-term concerns. We have to balance that every single day. Our tendency is to continue our R&D and spend assuming the markets work out.
FE: What percentage do you devote to your R&D?
Hurlston: It’s 20%, about $100 million a quarter on $500 million in revenue.
FE: How do you determine the R&D value?
Hurlston: It’s a matter of definition. We have a set of metrics and we are in markets where we have to continue to iterate devices to keep pace and to reinvent, keep on the treadmill and we have to evolve the offering. For example, we provide touch in smartphones in one business, and are one of the leaders where we generate one or two new chips a year. We move the tech forward not by leaps or giant strides. It is evolutionary and that drives the vector for our R&D spend. There are some investments that are true bets that catalyze a market. The idea of intelligence at the edge of a network is more of an R than a D and while there’s not a big business there yet, we think it will be something rather big, so we see if we can invest in the market.
FE: With something like IoT, how do you set out a unique differentiator from others?
Hurls ton: It really depends on the market you are talking about. With touch on a phone, which icon is being touched? Are you able to do that when the phone is in the hand and when there’s moisture? Our customers test for that.
FE: How does the demand for lower power in chips affect you?
Hurlston: With almost everything we do, power is an issue and so having lower power makes a difference. With AI at the edge, we know that a big driver of the battery in a phone is the display, so we have a face-detect AI algorithm. So, when the phone is close to the face when someone’s in the act of talking on the phone, we shut down the display. It’s a simple AI algorithm and we lock it in. Our phone manufacturing customers beat it up to death in testing, so they are not having fake shutdowns. They try to trick it a hundred different ways.
Here's another example of AI and machine learning… Today, we can do simple things like read license plates or read meters or count people. We can count people coming of a room. Instead of passing that task to a data center, you resolve it on a chip and the advantage is power savings where you don’t need to have a big engine, with passing back to the data center and the latency involved and ultimately the cost.
Take the example of a general purpose, low-power camera handed to a customer with tinyML to do something like identify sick chickens in a chicken coop that are sneezing. That’s a very specific use case, but a general purpose approach takes data and generates an ML model compiled onto a chip.
FE: With all we’ve discussed and the challenges, what’s it like being a CEO in your industry?
Hurlston: I love the job, no question. Dealing with different constituencies, customers, employees and shareholders all with a distinct point of view and trying to come up with an answer that is mostly right and trying to balance all that is becoming increasingly challenging. With ESG now, that’s more complex and having to worry about the environment and social issues—our workforce cares and our shareholders care. There’s a lot of pressure on our suppliers. We ask them about greenhouse gases and water usage and different contaminant levels. We’re certainly getting pressure to run environmental issues down the supply chain and its really a topic of conversation up and down.
FE: That brings me back to the supply chain and rising prices. Many times the price is much higher on some hard-to-find chips compared to two years ago.
Hurlston: TSMC said it was raising prices 20% on some chips and they are our largest supplier, so our costs were up 20% and we were able to pass 20% on to customers.
FE: Some chip customers are willing to pay a much higher price than 20% more for certain chips just because they are so vital. Without a certain chip, there’s no OEM product. It’s been rather a wake-up call, don’t you think?
Hurlston: These past months have taught us that they semiconductors are super, super important. I don’t believe we are going to see a reset in the price equation any time soon, if ever. These new prices have more staying power.
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