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Local Semiconductor Cos. Outpace Industry Concerns

Praise for Chip-Boosting Act; Latest Earning Strong

Despite global competition and uncertainty over supplies, Orange County semiconductor players are in growth mode, with more bright spots on the horizon.

Chipmaker Skyworks Solutions Inc. in Irvine and automobile tech maker Indie Semiconductor Inc. in Aliso Viejo both reported healthy quarterly revenue increases over the past month as did Broadcom Inc., which maintains a large local presence in Irvine.

A bipartisan bill signed­ earlier this month by President Joe Biden was lauded by the industry as a move that will only further those local gains.

The Chips and Science Act includes more than $52 billion for U.S. companies producing semiconductors to encourage manufacturing, and bolster the country against global competition.

Maryam Rofougaran, CEO of 5G equipment maker Movandi in Irvine, said the funding will boost jobs, the economy and national security. Currently, the U.S. is heavily dependent on foreign suppliers for semiconductors, including chips from Taiwan.

“Without these financial incentives, U.S. semiconductor giants will likely build and expand offshore,” Rofougaran said in a statement on Aug. 9 after the bill was signed into law.
Just 12% of global chips are made in the U.S., down from 37% in 1990, according to Semiconductor Industry Association figures cited by Rofougaran.

Irvine-based Menlo Microsystems Inc. CEO Russ Garcia said the legislation marks “a historic investment.”

It will “support production of American-made semiconductors, strengthen domestic supply chains, and revitalize American technological innovation,” according to Garcia, whose company got $150 million in Series C funds this March.

China Concerns

The Chips and Science Act funding comes amid strong earnings in the local sector.
Skyworks Solutions (Nasdaq: SWKS), the largest OC-headquartered chipmaker and Orange County’s fourth-largest public company by valuation, said Aug. 4 third-quarter revenue rose 10% on an annual basis to $1.2 billion, matching analysts’ estimates, though net income fell almost 21%.

Apple Inc. accounted for about 55% of Skyworks total revenue in the previous quarter, up from 53% in the year-ago period. Apple said in December it would set up its own chip team in Irvine, though the potential impact on Skyworks isn’t yet known.

Skyworks has its eye on China, a “bumpy” and “challenging” market, CEO Liam Griffin told analysts during the earnings call.

“But it’s still a market that consumes the technology and we do think that some of the manufacturing issues and supply chain problems are going to abate, and we see even more of a tailwind,” Griffin said.

The company has been moving further into 5G, or fifth-generation broadband cellular networks, to diversify its offerings.

Unprecedented Investment

Indie Semiconductor, meanwhile, has its eye on the burgeoning autotech sector, with its chips expected to be used in self-driving cars.

The company (Nasdaq: INDI), which went public last year, posted second-quarter revenue of $25.8 million, up 181% from the year-ago period, and expects to achieve profitability by the second half of next year.

The firm last month notched up another milestone in its push to expand outside of the U.S. despite global challenges with the opening of its Center of Excellence in the eastern German city of Dresden.

Co-founder and CEO Donald McClymont joined the ranks of local firms lauding the legislation as a move that will bolster the chip industry.

“The unprecedented strategic investments contemplated at the federal and state levels would bolster Indie’s hiring plans to support strong autotech customer demand and improve our supply chain flexibility,” McClymont said last month before the bill was signed into law.

Critics of the bill claim “subsidies are the wrong approach,” according to an opinion piece published in The Wall Street Journal on Aug. 15.

Europe Move

In its most recent earnings release, Broadcom (Nasdaq: AVGO), the largest chipmaker in Orange County by employee count and with headquarters in San Jose, said revenue for the quarter ended May 1 rose 23% year-over-year to $8.1 billion. Net income increased 73% to $2.6 billion in the same period.

Broadcom, which counts an estimated 1,300 employees in Irvine, said in May it was expanding its reach by agreeing to buy enterprise software company VMware for about $61 billion.

Tower Semiconductor, with headquarters in Israel and No. 2 among local chipmakers based on the number of OC employees, said second-quarter revenue was $426 million, up from $362 million in the same period a year ago.

The company, which has 880 local employees, has a local foundry in Newport Beach. It’s expected to be sold to Intel for $5.4 billion.

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Kevin Costelloe
Kevin Costelloe
Tech reporter at Orange County Business Journal

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