Cirrus Logic NASDAQ: CRUS executives said the company sees a strong pipeline of opportunities across high-performance mixed-signal products, while continuing to manage supply-chain constraints and delayed platform ramps affecting portions of its smartphone and PC businesses.
Speaking at a KeyBanc Capital Markets event, Carl Alberty, Cirrus Logic’s executive vice president of mixed-signal products, said the company’s opportunity pipeline reflects execution on its longstanding strategy to expand beyond audio products. Rather than simply presenting prospective capabilities to customers, the company has focused on demonstrating intellectual property through working silicon, he said.
“That effort to prove out that IP in silicon is starting to become real,” Alberty said, describing opportunities for both incremental growth and next-generation content expansion.
Smartphone content opportunities
Alberty said Cirrus Logic does not expect to ramp brand-new custom silicon products during the current year. However, he said the company sees potential for incremental content gains through attachment rates and configurations of its existing audio and high-performance mixed-signal portfolio.
On a power integrated circuit being developed for 3D sensing, Alberty said it is reasonable to view the potential content value as roughly comparable to the power-conversion IC Cirrus Logic currently ships. The new product remains on track, he said, though the company must continue executing and supporting its customer.
He characterized the 3D-sensing IC as an enhancement within an existing subsystem, in contrast with the company’s power conversion and control IC, which represented a new function and the first chip of its kind for that application.
Cirrus Logic also expects further runway for its camera-controller products. Alberty said the company has deployed three generations of the products over the past five to six years, with each generation providing greater performance capabilities and value. A fourth generation is under development, he said.
The company has seen adoption of multiple camera-controller generations within the same product as new versions are introduced, as well as differing attachment rates across product portfolios, according to Alberty.
Supply chain, margins and capacity
Chief Financial Officer Jeff Woolard said supply-chain cost increases and capacity constraints extend beyond memory and include system-on-chip supply and back-end manufacturing. For Cirrus Logic, however, previously negotiated input-cost agreements had limited the immediate effect of higher costs.
Woolard said the company was nearing the end of an agreement with one foundry and preparing to enter another arrangement intended to provide capacity and pricing certainty. He said Cirrus Logic continues to work aggressively on supply-chain management and cost-reduction opportunities and could consider targeted price increases if necessary.
Despite the supply environment, Woolard said the company had guided for gross margin to increase somewhat during the quarter, primarily because of the timing of prior negotiated agreements. He added that management remained comfortable with its long-term gross-margin outlook.
While Woolard said Cirrus Logic was not constrained, he identified outsourced semiconductor assembly and test providers, or OSATs, as an especially tight area. The company has begun purchasing some test equipment that can be placed at OSAT facilities.
According to Woolard, owning the capital equipment can provide a better return on investment than having an OSAT buy it and incorporate the expense into pricing. It can also provide flexibility, including the ability to move test equipment between OSAT providers to manage capacity.
PC headwinds and voice-enabled devices
Alberty said Cirrus Logic’s PC business has faced headwinds from delayed new-platform ramps, supply allocation issues, memory shortages and expectations for lower unit demand in the second half of the year. Those delays have affected programs that would carry higher codec and amplifier content for the company.
He said the issues were not systemic and that Cirrus Logic continues to see strong customer engagement and design activity. The company has gained share in commercial PCs and more recently in mainstream, lower-priced tiers, though it is not yet fully penetrated in the mainstream market.
Cirrus Logic plans to increase adoption of higher-content amplifiers and codecs and to bring voice-enablement features into additional product tiers. Alberty said the voice opportunity is primarily centered on enhanced codecs that integrate digital signal processing and an analog signal chain for low-power voice activity detection and trigger phrases.
The company views this always-on, ultra-low-power voice interface as its principal contribution to AI PCs. Alberty said the ultimate AI functionality that could drive broader device upgrade cycles is outside Cirrus Logic’s direct control.
He also said the transition to SoundWire in PCs has been delayed, as ecosystem partners have pushed a harder requirement into next year amid platform challenges. Cirrus Logic’s win rate on SoundWire codec platforms has remained in the roughly 75% range, he said.
New markets, investment and M&A
Beyond smartphones and PCs, Alberty said Cirrus Logic is pursuing physical-AI-related applications spanning voice, force and touch sensing, output and actuation. Potential markets include edge devices, robotics, autonomous machines, wearables, augmented and virtual reality products, and industrial automation.
He said the company’s consumer-oriented design pipeline is particularly active in emerging form factors, while opportunities in robotics and industrial automation may have a longer development horizon. Alberty declined to discuss whether Cirrus Logic is developing or pursuing neural processing unit capabilities, but said the company is conducting development work around machine learning at the edge.
The company is also deploying a high-performance analog front-end product in smart utility meters, beginning with electricity metering. Alberty said the underlying technology could potentially be applied in electric-vehicle charging, solar, energy storage, metrology and data-center applications.
Woolard said Cirrus Logic intends to remain disciplined in operating expenses while investing in opportunities that it believes can create value. He said the company’s decades of existing intellectual property can often be applied efficiently to new product areas. After funding internal opportunities, mergers and acquisitions remain the company’s second capital-allocation priority, with management evaluating deals that could accelerate expansion beyond smartphones or create synergies with adjacent markets.
About Cirrus Logic (NASDAQ:CRUS)
Cirrus Logic, Inc, headquartered in Austin, Texas, is a fabless semiconductor company specializing in high-precision analog and mixed-signal processing solutions. The firm develops low-power, high-performance audio, voice, and power management integrated circuits, serving prominent consumer electronics OEMs. Its semiconductor devices are designed to enhance audio quality, battery life, and system integration in mobile phones, tablets, wireless headsets and other portable devices.
The company's product portfolio includes digital-to-analog converters (DACs), analog-to-digital converters (ADCs), audio codecs, power management ICs, voice processors and integrated amplifiers.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
Continue following MarketBeat
Add MarketBeat as your preferred source on Google to see our latest stories in your feed.
Before you consider Cirrus Logic, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Cirrus Logic wasn't on the list.
While Cirrus Logic currently has a Moderate Buy rating among analysts, top-rated analysts believe these five stocks are better buys.
View The Five Stocks Here
Click the link to see MarketBeat's list of seven stocks and why their long-term outlooks are very promising.
Get This Free Report
