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Broadcom: Resilient Core

Posted on Wednesday, Feb 13th 2008

By Vijay Nagarajan, Guest Author

I follow Broadcom for at least three reasons. The first factor is its aggressive campaign to be right behind Qualcomm and TI in the mobile chipset business. Second is the spate of legal battles it has been involved in with Qualcomm. Of course, my final interest is its ‘big-brother’ competitor status to my company, Atheros Communications.

In my previous piece on Broadcom, I had discussed its strengths and weaknesses. There is one more factor that amazes me about this Irvine-based company: its truly broad portfolio of communication products. Broadcom’s product offering spans Ethernet, DSL, WLAN, Bluetooth, GPS and 3G mobile phones among others. The target markets range from carriers, networking, retail, to cellular mobile communications covering both wired and wireless telecommunications.

What does this mean? This diversification brings in resilience. It can sustain a big hit in any one of its product segments and still retain a substantial portion of its value. Also, it can take a radical technology decision with a long-term vision and afford losing market share. A good example is its latest transition to 65 nm technology. The company incurred substantial losses last year primarily due to its migration to this new process technology. Besides, the associated logistical issues involve inherent product delay risks. But the diversity of its product line and its market penetration should help it wade through such periods.

A wide portfolio also helps ‘bundle’ products. Laptop manufacturers, for example, are happy if Broadcom offers a ‘bundle’ of Bluetooth and WLAN chipsets at a discounted price. Of course, this strategy reduces margins but the volumes and the increased market share will offset it. In fact, Broadcom has married this concept with its integration and system-on-chip expertise to come up with a single chip Bluetooth-WLAN chipset. It is easy to see this being taken further by integrating GPS solutions as well.

The positives of a broad portfolio work well for Broadcom. Not even Qualcomm, its prime adversary, can challenge its breadth. I will complete the picture in the sequel by looking at the drawbacks of its broad portfolio.

This segment is a part in the series : Broadcom

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