Semtech Corp. recently completed a strong second quarter as its long range, low power technology, or LoRa, continues to gain traction in the market.
Mohan Maheswaran, chief executive of the Camarillo semiconductor and Internet-of-Things product manufacturer, said in a conference call this month to discuss fiscal second quarter results that he was pleased with the first half of the 2022 fiscal year as the company experienced increased adoption of its growth engines in the infrastructure, smarter planet and mobility markets.
Also, the company has managed to navigate the challenging supply chain environment while also expanding sustainability efforts and investing in employees, he added.
“Given our diverse and growing product offering, balanced markets and strong customer relationships, we expect to deliver a stronger second half and record financial performance in FY22,” Maheswaran said.
Semtech reported on Sept. 1 adjusted net income of $42.4 million (65 cents a share) for the second quarter ending Aug. 1, compared with adjusted net income of $28.2 million (43 cents) in the same period a year earlier. Revenue increased by 29 percent to $185 million.
The earnings and revenue beat Wall Street estimates as analysts on average expected earnings of 62 cents on revenue of $183 million, according to Thomson Financial Network.
Shares in Semtech closed at $75.99 on Sept. 8.
Among the analysts taking part in the conference call with the Semtech executives was Tore Sandberg at Stifel Financial Corp. in St. Louis and Rick Schafer of Oppenheimer & Co. Inc. in New York. In research notes put out after the call, both analysts credited LoRa with helping the company’s finances. LoRa is used in Internet-of-Things applications.
IoT growth potential
The Internet of Things, or IoT, refers to systems in which machines rather than people interact and exchange data online. Semtech’s chips help power sensors used in smart lighting systems, smart buildings and smart agriculture, including monitoring the health of cattle.
In his research note, Sandberg wrote that Semtech’s LoRa technology is compelling with strong growth potential over the long term. Management has reiterated its 40 percent compound annual growth rate for the technology over the next three to five years, he added.
In fact, that 40 percent growth figure will likely be achieved in the current fiscal year.
“Indeed, having achieved $88 million in FY21, we believe that LoRa revenues are tracking towards 40 percent (year over year) growth in FY22, with continued momentum based on a growing lifetime design win pipeline estimated at $850 million (versus $800 million in the first quarter),” Sandberg said in the note.
In his note, Schafer said he was encouraged by the pipeline split of 25 percent sales in China and 75 percent in the rest of the world, compared to the 50 percent sales in China today.
“LoRa metrics continue to progress with end nodes expected at (greater than) 236 million and gateways raised to 2.5 million (from 2 million) by (end of year),” Schafer said.
Concerning the gateways, considering how much they increased over the past two quarters – there were 1.3 million gateways at the end of fiscal year 2021 on Jan. 31 – Sandberg asked Maheswaran during the conference call if that was an indication that LoRa was becoming more of a consumer technology.
In response, Maheswaran said that it was not so much consumer applications although there have been some deployments in smart home uses of the technology. These include Amazon.com Inc.’s Echo smart speakers and Helium, a global, distributed network of hotspots that create public, long-range wireless coverage for LoRaWAN (wide area network)-enabled IoT devices, according to its website.
“But yes, you’re right, even for us, it’s a surprise to see quite aggressive growth there,” Maheswaran said. “We had as you mentioned the target for the year was 2 million gateways, and we’re already at 2.2 million gateways. So we’ve raised that to 2.5 million.”
But for Maheswaran, the beauty of the gateway deployments is that they drive the capacity to support billions of sensors, he added.
If the infrastructure is out there, then it’s just a question of time before the use cases catch up. However, Maheswaran continued, there are bottlenecks, particularly when it comes to software.
“But as those bottlenecks get removed, then there’s no reason to question the growth in the opportunity there,” he said.
In addition to LoRa, Semtech’s chips are used in the automotive, consumer electronics, broadcast video, enterprise computing, military and space markets.