Expansion of an agreement with Chinese e-commerce giant Alibaba Group has validated Semtech Corp.’s long-range, low-power technology for the Internet of Things. Chief Executive Mohan Maheswaran told the Business Joural that the Camarillo semiconductor company’s goal is to make the technology, known as LoRa, the standard in Internet of Things applications. “That is a big statement to make and if we succeed in that goal, Semtech is going to continue to be very successful,” Maheswaran said. Along with extending its collaboration on the Internet of Things with Alibaba Cloud, a Singapore-based subsidiary of Alibaba Group, Semtech in the past month has implemented its LoRa chips in smart utility metering products from a Chinese company and in a cattle health monitoring system developed by SK Telecom in South Korea. The Internet of Things refers to systems in which machines rather than people interact and exchange data online. Semtech’s LoRa chips, which uses long-range radio to communicate wirelessly, help power sensors used in smart lighting systems, smart buildings and agricultural monitoring systems. For Alibaba Cloud, the company can deploy the technology internally within its parent group’s e-commerce business with its large warehouses to monitor and manage its assets more effectively. “It is a technology that does not need line-of-sight,” Maheswaran said. “It can go through walls, it can go through basements, it can go through attics.” Global operations Semtech, a publicly traded company on the Nasdaq, has more than 1,200 employees at offices in 15 countries. For the fiscal second quarter ending July 29, it reported adjusted net income of $37.6 million (55 cents a share) on revenue of $163 million. Last year, the company brought in record revenue and is likely to repeat that this year, Maheswaran said. “If LoRa continues to succeed, my expectation over the next 10 years is that we should see more records,” he added. Already the LoRa chips are making an impact on the company’s financials. Semtech had record net sales of LoRa-related products in the first and second quarters of the current fiscal year. Craig Ellis, director of research for brokerage B. Riley FBR Inc. in Los Angeles even titled a research note on the company “LoRa-Led Results and Outlook Strength Exceed the Street.” “LoRa achieved a record, and we suspect sales are tracking toward $90 million in fiscal year 2019,” Ellis said in the note. For the current fiscal third quarter, all of the company’s business segments should grow consistent with seasonal norms, Ellis wrote. In addition to LoRa, Semtech’s chips are used in automotive, consumer electronics, broadcast video, enterprise computing and military and space markets. Cost of components The model followed by Semtech is to provide the chips and algorithms for making connections possible between devices in the Internet of Things. The company then partners with others, such as sensor manufacturers who use the chips in the sensor modules and with networking companies that make the gateways to connect the sensors to each other and the internet. Cloud computing companies power the networks and do analytics on the data. “We make our money making chips and algorithms, and most of the other members of the ecosystem fill in the other parts of the chain, from system integrators, software to hardware connectivity,” Maheswaran explained. The cost for creating an Internet of Things network varies from case to case. In an industrial environment where a company is spending tens of thousands of dollars on equipment to monitor a process, a sensor module can go from $10 to as high as $100, Maheswaran said. For high-volume applications where there are hundreds, if not thousands, of sensors to monitor moisture or heat, the cost per sensor may be $2 to $3, he added. On the network side, the gateways can cost $1,000 for a macro one that can cover up to 30 kilometers. A smaller picocell gateway that covers the floor of a building may cost $100, Maheswaran said. But because LoRa uses unlicensed spectrum of radio frequencies, users don’t have to pay for using it, he added. French acquisition Semtech came by its LoRa technology through a $5 million acquisition in 2012 of Cycleo SAS, a French company that had patented it. In 2015 it created the LoRa Alliance, a nonprofit with more than 500 member companies, including Alibaba Cloud, IBM Corp., Cisco Systems Inc. and Google. Two years later Semtech started the LoRaWAN Academy, with a college curriculum based on its long-range radio frequency technology to teach the next generation of engineers and computer scientists to develop and operate applications on the Internet of Things. “It is really becoming a game changing technology across the industry,” Maheswaran said. Mark Hung, an analyst who covers the Internet of Things for Gartner Inc., the information technology research company in Stamford, Conn., explained that in China there are two camps when it comes to using low-power, wide-area networking. One camp, led by state-owned telecommunications giant China Mobile Communications Corp., relies on cellular technology for its network, which includes narrowband Internet of Things (NB-IoT) connectivity. The other uses proprietary technology, such as Semtech’s LoRa. “Alibaba being a cloud provider when they get into the (Internet of Things) networking space, they decided to go with LoRa which is an alternative to NB-IoT and try to penetrate the market that way,” Hung said.