Broadcom Limited designs, develops, and supplies a range of semiconductor devices worldwide. It focuses on complex digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products worldwide. The company operates through four segments: Wired Infrastructure, Wireless Communications, Enterprise Storage, and Industrial & Other. The Wired Infrastructure segment provides set-top box system-on-chips (SoCs); cable, digital subscriber line, and passive optical networking central office/consumer premise equipment SoCs; Ethernet switching and routing application specific standard products; embedded processors and controllers; serializer/deserializer application specific integrated circuits; optical and copper physical layers; and fiber optic laser and receiver components. The Wireless Communications segment offers RF front end modules, filters, and power amplifiers; Wi-Fi, Bluetooth, and global positioning system/global navigation satellite system SoCs; and custom touch controllers. The Enterprise Storage segment provides serial attached small computer system interface, and redundant array of independent disks controllers and adapters; peripheral component interconnect express switches; fiber channel host bus adapters; read channel based SoCs; and preamplifiers. The Industrial & Other segment optocouplers; industrial fiber optics motion control encoders and subsystems; and light emitting diodes. Its products are used in various applications, including enterprise and data center networking, home connectivity, set-top boxes, broadband access, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. The company was formerly known as Avago Technologies Limited and changed its name to Broadcom Limited in February 2016. Broadcom Limited was founded in 2005 and is headquartered in Singapore.
Business Analysis of Broadcom
The Technology Sector is witnessing a major shakeup, new age business models in the industry are transforming both customers and businesses. Faced with this uncertainity, companies are investing resources to transform their business. An in-depth business analysis is a valuable resource to identify and articulate the need for a business model change. At R&P Research we believe, the starting point for a business analysis is Benchmarking. Business benchmarking can be done at various levels: 1) Industry Benchmarking 2) Peer Benchmarking 3) Disruptors Benchmarking. In this report, we share the snapshot of how Broadcom compares against the industry on the major performance indicators. This analysis, along with peer group/disruptors benchmarking and revenue model understanding can help identify growth and cost optimization opportunities to maximize the value delivered by Broadcom to its stakeholders. R&P Research Industry Intelligence Platform provides historical data for last 15 years with an easy to use benchmarking interface for an in-depth comparative business analysis.
Here is the performance snapshot of Broadcom with an interactive chart.
- Revenue Growth: Broadcom reported a revenue growth of 94.0% year-on-year during 2016. Semiconductor Industry grew at 5.9% in the same period
- COGS share of Revenues: As a percentage of revenue, Broadcom spent 55.1% of its total revenues on COGS. Semiconductor industry average (COGS share of revenue) in the same period was 49.2%
- R&D share of Revenues: As a percentage of revenue, Broadcom spent 20.2% of its total revenues on R&D. Semiconductor industry average R&D spending in the same period was 18.4%
- SG&A share of Revenues: As a percentage of revenue, Broadcom spent 6.1% of its total revenues on Sales, Marketing, and General Administration (SG&A). Semiconductor industry average SG&A spending in the same period was 12.4%
- Inventory share of Revenues: As a percentage of revenue, Broadcom spent 10.6% of its total revenues on Inventories. Semiconductor industry average Inventory spending in the same period was 12.5%
- Accounts Payable share of Revenues: As a percentage of revenue, Broadcom invested 9.5% of its total revenues on Accounts Payable (A/P) Semiconductor industry average Accounts Payable investment in the same period was 8.8%
- Accounts Receivable share of Revenues: As a percentage of revenue, Broadcom invested 16.5% of its total revenues on Accounts Receivable (A/R). Semiconductor industry average Accounts Receivable investment in the same period was 12.3%
- PP&E share of Revenues: As a percentage of revenue, Broadcom invested 19.0% of its total revenues on Property, Plants, and Equipments (PP&E). Semiconductor industry average PPE investment in the same period was 36.5%
- Intangibles share of Revenues: As a percentage of revenue, Broadcom invested 300.6% of its total revenues on Intangibles. Semiconductor industry average Intangibles investment in the same period was 56.1%
- Net Margins: Broadcom Net Margins in the year 2016 were -13.1%. Semiconductor industry average Net Margins in the same period were 11.6%
Sector and Industry Association of Broadcom
For the purpose of performance benchmarking of a company with a sector or industry average, R&P Research associates every company with one sector and one industry. An industry consists of companies with related/similar business models. A sector comprises of a group of related/similar industries.
Broadcom is associated with Technology Sector and Semiconductor Industry.
Technology sector is comprised of the following industries: Computers Systems and Peripherals; Software; Semiconductor; IT Consulting and Outsourcing Services; Networking Equipment and Services; Internet; Other. The definitions for each of the industries is as follows:
- Computers Systems and Peripherals industry includes companies primarily engaged in manufacturing of personal computers, servers, mainframes, workstations, and other computer accessories and peripherals such as storage drives, mice, keyboards and printers. It also includes manufacturers of mobile phones and tablets.
- Software industry includes businesses providing software products such as operating systems, productivity suites, enterprise software, data and analysis software, advertising and marketing software, engineering and manufacturing software, networking software, and IT management software. It also includes companies providing industry-specific software focused on different sectors such as Financials, Automotive, Telecom, Utilities, Travel, Real Estate, Media, and Publishing.
- Semiconductor industry includes companies primarily engaged in manufacturing and distribution of semiconductor products such as microprocessors, chipsets, motherboards, flash memory, and wired and wireless connectivity products. It also includes companies that provide semiconductor equipment and services to the semiconductor industry.
- IT Consulting and Outsourcing Services industry includes companies primarily engaged in providing information technology consulting and outsourcing services to other businesses. The services include IT consulting, systems integration, application development and management, IT infrastructure management, and network operations management.
- Networking Equipment and Services industry includes companies primarily engaged in manufacturing and distribution of networking and communications equipment for transporting data, voice, and video traffic across intranets, extranets, and the Internet. The key products include routers and switches for local and wide-area networks, cable modems, teleconferencing equipment, and wireless access points.
- Internet industry includes Internet-based businesses providing products and services such as search engines, social networking, web hosting, email, domain name registration, and eCommerce. It also includes industry information/services portals focused on different sectors such as Financials, Automotive, Travel, Health, Real Estate, Media, and Publishing.
- Other industry includes companies providing products such as photocopiers, fax machines, point of sale machines, audio/video technologies, and video games. It also includes technology companies that are not part of other six technology industries.
Industry Ranking of Broadcom
With $13.2 billion revenues, Broadcom ranked number 4 of all the companies in the US Semiconductor industry. There were a total of 70 public companies in the US Semiconductor industry that had revenues greater than $50 million during 2016.
The top-10 companies in the US Semiconductor industry by revenues during 2016 were:
Business Model Analysis (BMA) Framework
We use the following framework to assess the business model of a company. Business Model Analysis framework can be used by organizations to articulate growth strategies and identify cost optimization opportunities. Technology and consulting companies can use this framework to identify the value drivers and pain points of their targeted customers. Entrepreneurs can use this framework to understand the language of business and identify promising business opportunities. This framework can be used by any professional aspiring to take up a leadership role to better understand the businesses challenges, articulate growth strategy, and monitor the business improvement requirements for the organization.