Cypress Semiconductor Corp. yesterday announced that its CEO, T.J. Rodgers, will step down and that a search—both internal and external—would be launched to replace him.
Cypress also announced the signing of a definitive agreement with Broadcom Ltd. (which was formed when Avago bought Broadcom last year) under which Cypress will acquire Broadcom’s wireless Internet of Things business and related assets. In addition, ASE announced an investment in Cypress subsidiary Deca Technologies related to fan-out wafer-level packaging (FOWLP) technologies.
The 68-year-old Rodgers said in a press release, “Upon reflection, while I am still passionately interested in Element 14, silicon, I have always planned not to be spending most of my time in the last decade of my career immersed in the details of the operations, including those of the 7,000-person company that Cypress has become. And, to be completely candid, the board and even the executive staff have urged me to bring new blood into operations. Thus, the first-quarter 2016 report, my 120th as Cypress’s CEO, will be my last. More importantly to me, I will now be able to work full time on the technology that has fascinated me since my mother first kindled my interest in electronics when I was a fifth-grader.”
Rodgers continued, “I have always reserved about 30% of my time to work on technology and one key project. This activity adds value to the company and remains of high interest to me at this stage of my career. In the future Cypress management will be able to assign a key project to me and count on it getting done right.”
With Rodger’s departure as CEO, daily operational activities will be taken over by an office of the CEO comprising four current Cypress executive vice presidents: Hassane El-Khoury (EVP, Programmable Systems Division), Dana Nazarian (EVP, Memory Products Division), Joe Rauschmayer (EVP, Manufacturing), and Thad Trent (CFO).
Broadcom’s IoT business
The purchase of Broadcom Ltd.’s IoT business is an all-cash transaction valued at $550 million. Under the terms of the deal, Cypress will acquire Broadcom’s Wi-Fi, Bluetooth, and Zigbee IoT product lines and intellectual property, along with its WICED brand and developer ecosystem.
Regarding the acquisition of the Broadcom business, Rodgers said, “Cypress is a significant player in the IoT today because of our ultra-low-power PSoC programmable system-on-chip technology, but we’ve only been able to pair it with generic radios so far. Now we have the highly regarded Broadcom IoT business—state-of-the-art Wi-Fi, Bluetooth, and Zigbee RF technologies—that will transform us into a force in IoT and provide us with new market opportunities as well. What we bring to the party is over 30,000 customers worldwide who need advanced, ultra-low-power wireless communication but only can absorb it in the form of an easy-to-use programmable embedded system solution.”
“We are thrilled to be joining forces with Cypress to address the fast growing IoT market,” Broadcom IoT general manager Stephen DiFranco added. “With our IoT connectivity products, Cypress will be able to provide the connectivity; the MCU, system-on-chip, module, and memory technologies; and the mature developer ecosystem that IoT designers require, creating an end-to-end portfolio of embedded solutions and a single IoT design platform.”
Under the terms of the deal, Broadcom will continue to focus on its wireless connectivity solutions for the access and mobility segments that are not IoT related, including serving set-top box, wireless access, smartphone, laptop, and notebook customers. Cypress will capitalize on the rapidly growing Wi-Fi and Bluetooth connectivity markets (17% per year, according to IHS) in consumer, industrial, and automotive IoT segments.
“The robust, ready-to-scale WICED brand and developer network of module makers, value-added resellers (VARs), technology partners, and ODMs who are already working with its technology will give us immediate revenue growth capability in new channels,” Rodgers said. “Cypress will continue to support and grow this network and to provide it with future generations of innovative, disruptive connected products. Cypress will also bring these new technologies to the automotive market, where we are already No. 3 worldwide in microcontrollers and memories, and where the connected car boom has just started.”
Cypress earlier this year emphasized how its 2015 merger with Spansion had strengthened its position in SoCs and MCUs for IoT and other applications.
ASE makes FOWLP investment
In addition, Advanced Semiconductor Engineering Inc. and Cypress subsidiary Deca Technologies announced the signing of an agreement whereby ASE will invest $60 million in Deca and will license Deca’s M-Series fan-out wafer-level packaging (FOWLP) technologies and processes. With the FOWLP approach, small silicon chips are embedded into a larger plastic chip, and the CSP balls are redistributed onto both the native silicon chip and the expanded plastic chip. M-Series enables manufacturability for FOWLP using Deca’s proprietary Adaptive Patterning technology, which tracks the alignment of each silicon IC in the redistributed plastic package.
As part of the agreement, ASE and Deca will jointly develop the M-Series fan-out manufacturing process and will expand production of chip-scale packages using this technology. The technology can offer the reduced size and power consumption needed for portable IoT applications and smartphones. Deca’s version of it uses autoline technology developed by SunPower to decrease cost and manufacturing cycle time.
“At Cypress we have experienced the efficiency of Deca’s M-Series technology with our own chips and brought its benefits to our customers,” said Rodgers. “With this investment from ASE, Deca now has strong validation of M-Series as a technology that will bring fan-out wafer-level packaging to mass production. This deal is a significant proof point for Deca and for Cypress’s ongoing strategy of investing in startups as part of our Emerging Technologies Division.”
“With the increasing demands to improve performance and reduce package size from the smartphone market and the emerging demand for IoT, the industry has been looking for a FOWLP technology with true manufacturability,” said Chris Seams, CEO of Deca Technologies. “Deca is excited to have ASE select our patented M-Series technology to meet this challenge. By leveraging ASE’s large customer base and world-class manufacturing expertise, we can bring FOWLP processing to high-volume reality.”
First quarter results
Cypress also announced its first quarter 2016 results. Highlights for the quarter included (all financial comments are based on non-GAAP results, unless otherwise noted):
- revenue of $425.2 million, in line with guidance;
- 9% gross margin and $0.07 earnings per share, above the midpoint of guidance;
- $150.4 million in realized annualized synergies, remaining ahead of plan;
- $182.5 million common stock repurchase, part of a $450 million repurchase program; and
- a dividend payment of $36.6 million ($0.11 per share, equal to a 5.0% annualized yield as of April 1, 2016).
