Friday, October 23, 2020

Tech Firm Research: Xillinx

In its recent fiscal 2020 first-quarter earnings, Xilinx revealed that its revenue has been impacted by the Huawei ban. Xilinx can’t ship advanced chips to Huawei until it secures a license.

  • source: Motley Fool link
    • Xilinx had previously said about 6% to 8% of total revenues during the current fiscal year would come from the Chinese tech and telecom titan, but Peng said the management team has reduced its outlook on revenues from Huawei going forward down to ZERO as new trade licenses from federal regulators still haven’t come through.
      • WHY?
        • source: Market Realist link
        • The chipmaker’s technology is advanced and specific to the United States. This means that its components fall under the US ban of Huawei.
        •  In a recent interview with Yahoo Finance, Huawei CEO Ren Zhengfei stated that the Chinese giant is reducing its reliance on US technology, substituting US technology with domestic technology.
        • Peng explained that Xilinx has architected its chips specifically for 5G. He added that China lacks the advanced technology needed to make programmable chips for 5G basebands (in the short term but not necessarily in the long term if BAN continues).
  • source: Motley Fool link
    • sales were still up 12% from a year ago, and Xilinx’s field-programmable gate arrays (FPGAs) and other hardware and software platforms are still gaining in adoption.
    • Xilinx’s advanced products category was up 29% during Q2 and now makes up 74% of total sales — with automotive and data center end markets leading the charge.
    • What’s behind this chipmaker’s unlikely advance despite adversity?
      • Multiple industries continue to warm up to field-programmable gate array (FPGA) computer chips and the flexibility they provide versus other chip types.
      • The data center industry, automotive, and telecom specifically have been pushing revenues higher.
        • As for telecom, ongoing 4G mobile network enhancements and the early launch of 5G are still increasing demand for FPGAs
      • Data center buildout has been slow this year but is expected to pick up again in 2020, as is the automotive industry, where Xilinx CEO Victor Peng said advanced driver assist systems (ADAS) are utilizing his company’s flexible components.

Oct 24, 2019 · Xilinx, which has resumed some sales to Huawei since the ban in May, said the U.S. government has not approved its license applications to permit shipping more products to Huawei.

FUTURE:

a new unified software platform to help accelerate cloud and edge computing development, called Vitis

  • Xilinx believes its work in this area, as well as ongoing (and rising) demand for new computing needs, will foster further FPGA adoption in the years ahead.  

COMPETITION:

  • NVIDIA‘s announced that it is also entering the telecom industry. The company thinks its graphics processing units are particularly well suited to helping 5G-based computing reach its full potential, powering technology like artificial intelligence and industrial robotics.
  •  ALTERA (now Intel) is Xilinx’s strongest competitor with 34% of the market.
    • Xilinx customers represent just over half of the entire programmable logic market, at 51%.
  • OTHER COMPETITORS include Lattice Semiconductor, Microsemi, Semtech and Silicon Laboratories.
  • side by side comparison with competitors: https://craft.co/xilinx/competitors

STOCK OUTLOOK:

source: Market Realist link

Xilinx is well placed to grow in the long term with the advent of 5G and AI. However, the company’s short-term growth faces uncertainty around the Huawei ban. The chipmaker’s strong cash flows and profit margins should help it weather Huawei headwinds while delivering shareholder returns.

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