Anna Bliokh
In our earlier evaluation of Lattice Semiconductor Company (NASDAQ:LSCC), we delved into the exceptional upsurge of the corporate’s progress in 2022, which surged at a formidable 28.1%, fuelled by strong performances within the Communications & Computing (26.1%) and Industrial & Automotive (41.2%) segments, the place Lattice expanded its product portfolio and elevated its competitiveness. We believed these elements enabled the corporate to edge out different opponents. Moreover, our evaluation indicated its progress was supported by the rising use of low-power FPGAs in EVs.
On this newest evaluation, we centered on Lattice’s newest FPGA developments that would drive progress past 2024. Firstly, we analyzed the growth of Lattice’s FPGA portfolio, increasing its low-power portfolio with Nexus and introducing mid-range FPGA options with the launch of Avant-G and Avant-X. We performed a comparative evaluation of their options towards opponents’ choices to gauge their aggressive edge. Moreover, we examined the potential for Lattice to capitalize on AI-driven purposes using its mid-range FPGAs. Lastly, we delved into the outlook for FPGA adoption throughout numerous finish markets, updating our income projections for Lattice.
Growth of FPGA Product Portfolio
Firstly, we examined Lattice’s FPGA portfolio and in contrast it with high opponents (excluding Renesas) within the desk for Low to Mid-Vary FPGAs, with low-range FPGAs of fewer than 100,000 logic cells and mid-range spanning 100,000 to 500,000 logic cells in line with Lattice.
|
Comparability of Low to Mid-Vary FPGAs |
Lattice |
AMD |
Microchip |
Intel |
|
Variety of Low-Vary FPGAs (<100K Logic) |
3,454 |
2,790 |
1,150 |
2,981 |
|
Variety of Mid-Vary FPGAs (100K – 500K Logic) |
199 |
854 |
301 |
3,573 |
|
Whole Low to Mid-range FPGAs |
3,653 |
3,644 |
1,451 |
6,554 |
Supply: DigiKey, Khaveen Investments
Based mostly on the desk, Lattice has the best variety of Low-Vary FPGAs (<100K Logic parts), highlighting its benefit on this section. In our earlier evaluation, we highlighted the corporate’s give attention to “small measurement and power-efficient FPGA as a distinction to its opponents within the FPGA market together with Xilinx and Intel.”
Lattice Nexus Platform
Inside the low-range FPGA portfolio, Lattice just lately expanded its portfolio with its CrossLinkU-NX FPGA household, claiming to be the trade’s first low-power FPGAs that includes built-in USB, to speed up USB-equipped system designs and embedded imaginative and prescient purposes. As well as, the corporate highlighted in its earnings briefing Nexus as a “main contributor” to Lattice’s progress and the introduction of latest FPGAs throughout the Nexus household.
A few examples of that’s on Nexus, we have launched seven system households based mostly on Nexus. 5 of these system households are already in manufacturing. However there’s two extra that go into manufacturing this yr.” – James Anderson, CEO
Avant FPGAs
We recognized that Lattice at present has solely 199 mid-range FPGAs, which is considerably decrease than opponents AMD, Microchip (MCHP), and Intel (INTC). Amongst these corporations, Intel leads the way in which with a complete of three,573 mid-range FPGAs. Nevertheless, from its earnings briefing, administration introduced its growth within the mid-power FPGAs with the launch of Avant-G and Avant-X just lately, following Avant-E. Moreover, Lattice expects the Avant portfolio to develop to between 15% to twenty% of its complete income in 3 to 4 years. From its Investor Presentation, administration claimed Avant offers 2.5x decrease energy consumption and 2x quicker efficiency than opponents.
Lattice
Therefore, we in contrast Lattice’s newest mid-range FPGA merchandise, Avant-G and Avant-X, with comparable mid-range FPGAs from opponents to find out their efficiency competitiveness based mostly on their reminiscence charges, reminiscence sort, transceivers information charges, and course of node.
|
Comparability of Mid-Vary FPGA |
Avant-G (Lattice) |
Avant-X (Lattice) |
Spartan UltraScale+ (AMD) |
PolarFire (Microchip) |
Agilex 5 D-series (Intel) |
Agilex 5 E-series (Intel) |
|
Reminiscence Charges (RAM) |
2.4 Gbps |
2.1-2.4 Gbps |
2.4-4.3 Gbps |
1.6 Gbps |
3.2-4.3Gbps |
2.4-3.7Gbps |
|
Reminiscence Sort (RAM) |
LPDDR4/DDR4 |
DDR5/LPDDR 4/DDR4 |
LPDDR5/DDR4/LPDDR4 |
DDR4/DDR3/LPDDR3 |
DDR5/ LPDDR5/DDR4/LPDDR4 |
DDR5/ LPDDR5/DDR4/LPDDR4 |
|
Transceivers Information Charges |
10Gbps |
25Gbps |
16.3 Gbps |
12.7 Gbps |
28 Gbps |
28Gbps |
|
Course of |
16nm |
16nm |
16nm |
28nm |
10nm |
10nm |
Supply: Firm Information, Khaveen Investments
Based mostly on the desk, the 2 Avant FPGAs have a slower reminiscence pace (as much as 2.4 Gbps) in comparison with AMD (2.4 – 4.3 Gbps) and Intel (as much as 4.3 Gbps), quicker reminiscence permits for faster information entry and thus diminished latency. As well as, the reminiscence sort may have an effect on the facility consumption and bandwidth of the FPGAs, and essentially the most advanced varieties out there are DDR5 and LPDDR5. Therefore, Intel’s Agilex 5 sequence leads on this side, adopted by AMD and Lattice. In terms of transceivers’ information charges, Intel’s Agilex 5 sequence is the very best with 28 Gbps. Excessive transceiver charges allow for quicker information change and bandwidth-intensive purposes. Lattice’s Avant-X has a barely decrease charge of 25 Gbps, however the firm claims it additionally gives “energy effectivity, superior connectivity, and optimized compute”. Different FPGAs’ information charges are considerably decrease at a spread from 10 Gbps to 16.3 Gbps. Lastly, when it comes to course of node know-how used, Intel’s FPGAs are extra superior (10nm). Extra superior course of know-how can offer elevated logic density, decreased energy utilization and enhanced efficiency. Alternatively, Microchip falls behind compared to Lattice, AMD and Intel. We then ranked every of the elements and calculated the common rating of all elements.
|
Comparability of Mid-Vary FPGA |
Avant-G (Lattice) |
Avant-X (Lattice) |
Spartan UltraScale+ (AMD) |
PolarFire (Microchip) |
Agilex 5 D-series (Intel) |
Agilex 5 E-series (Intel) |
|
Reminiscence Charges (RAM) |
5 |
4 |
2 |
6 |
1 |
3 |
|
Reminiscence Sort (RAM) |
5 |
3 |
4 |
6 |
1 |
1 |
|
Transceivers Information Charges |
6 |
3 |
4 |
5 |
1 |
1 |
|
Course of |
3 |
3 |
3 |
6 |
1 |
1 |
|
Common |
4.75 |
3.25 |
3.25 |
5.75 |
1 |
1.5 |
Supply: Khaveen Investments
In keeping with the desk above, Intel’s Agilex 5 D-series has the very best rating in all points, main it to be ranked in first place, adopted by Intel’s, Agilex 5 E-series. Avant-X and Spartan Ultrascale+ even have the identical rank, however Avant X has a better reminiscence pace whereas Spartan has higher reminiscence sort and better transceivers information charges. Avant-G ranks fourth and Microchip’s PolarFire ranks final. Due to this fact, we consider that despite the fact that Intel’s FPGAs edge out different opponents, Lattice’s FPGAs nonetheless have some aggressive benefits in comparison with Microchip, contemplating the corporate has simply expanded its portfolio to mid-range FPGAs. Total, we decided our efficiency comparability outcomes contradict the administration’s declare from its presentation, and we as a substitute consider Intel continues to be the superior firm within the mid-range section.
Outlook
Total, we examined the low to mid-range FPGAs of Lattice and its opponents. The corporate dominates with the most important product breadth in low-range FPGA with nearly 3,500 merchandise. Moreover, the corporate launched a number of new merchandise on this vary which additional solidifies its product breadth. Nevertheless, the corporate has not stood out as a mid-range FPGA producer on account of its low variety of mid-range FPGAs as a brand new entrant competing towards bigger gamers like AMD, Intel and Microchip on this section. In our earlier evaluation of Lattice, we additionally highlighted that AMD and Intel stay the highest FPGA producers with 53% and 26.7% market share in 2022. Lattice’s newest mid-range FPGA, Avant-G and Avant-X, lack competitiveness because it lags behind Intel’s and AMD’s mid-range FPGAs. Nevertheless, we consider the corporate’s launch of Avant establishes its entry into the mid-range FPGA market and the roadmap beneath reveals the deliberate improvement of future Avant FPGAs which may result in the corporate enhancing a few of its product specs missing comparable to reminiscence charges, reminiscence sort, transceiver information charges and course of based mostly on our FPGA spec comparability evaluation above.
Lattice
AI Impression to FPGA Demand
Subsequent, we examined how AI advantages Lattice’s FPGAs. Moreover, as administration highlighted from its earnings briefing that AI-related income was round $100 mln in 2023, accounting for about 14% of Lattice’s complete income, we additionally regarded into what segments the corporate derives its AI-related income. In keeping with the corporate’s CEO from its earnings briefing, Lattice estimated AI-related income from a variety of AI-related purposes together with:
- “AI-optimized servers within the information middle…Lattice gadgets are used within the management, administration, and safety of the AI computing system”
- “AI-enabled PCs, the place Lattice options are used to run the AI inference algorithm that gives options comparable to consumer presence and gaze detection in PC techniques just like the Lenovo ThinkPad”
- “AI-enabled automotive ADAS techniques, the place Lattice options are used to combination and pre-process important information that’s used for AI processing”.
In keeping with Informa Tech, FPGAs can function {hardware} accelerators in information facilities, and they’re particularly helpful for AI inferencing duties as they’ve greater throughput and decrease latency in comparison with common processors or GPUs. As well as, Lattice highlighted that its FPGAs have a 2.5x decrease energy consumption than different FPGAs. In our earlier evaluation of Nvidia (NVDA), we derived a forecasted common progress charge for information middle chip progress of 39%, pushed by demand from cloud service suppliers ramping up infrastructure. Moreover, the corporate just lately introduced a partnership with Nvidia to make the most of its power-efficient FPGAs to facilitate sensor fusion and bridging in Nvidia’s Jetson Orin and IGX Orin platforms, which fall under Nvidia’s Information Heart section. In keeping with Nvidia, Jetson Orin is designed to speed up energy-efficient autonomous techniques, comparable to robotics, imaginative and prescient AI, and edge purposes, whereas the IGX Orin is good for AI-powered industrial and medical purposes.
Moreover that, Lattice has additionally developed SensAI, a software program stack that makes use of its FPGAs for inferencing, permitting prospects to “develop and deploy FPGA-based Machine Studying / Synthetic Intelligence options”. In PCs, Lattice’s SensAI may also help lengthen battery life by 28% or detect consumer presence and a spotlight utilizing its Face Framing Expertise. Furthermore, Lattice claimed that its software program may also improve safety and optimize techniques in PCs. In keeping with Counterpoint Analysis, the worldwide AI PCs market is predicted to develop at a CAGR of fifty% reflecting the sturdy demand for AI PCs’ superior safety and elevated effectivity.
Lattice additionally has mVision that helps deploy options comparable to “machine imaginative and prescient, robotics, ADAS, video surveillance, and drones”. Moreover, Lattice has highlighted that its FPGAs are additionally utilized in automotive ADAS and Infotainment techniques by enabling parallel sensor processing, low-power interfaces and “hardware-based safety” capabilities. For instance, Lattice’s FPGAs are additionally used to assist ADAS “aspect radar purposes” for Mazda’s (OTCPK:MZDAY) CX-60 and CX-90 SUV. We highlighted a powerful demand for ADAS purposes with a market CAGR of 18.7%.
Outlook
|
Finish Market |
Forecast CAGR |
|
Information Heart |
39% |
|
AI-enabled PC |
50% |
|
ADAS |
18.7% |
|
Common |
35.9% |
Supply: Counterpoint Analysis, Acumen Analysis, Khaveen Investments
The desk above consists of the market CAGR of AI purposes together with information facilities, AI-enabled PCs, and the ADAS market. Total, we calculated the common CAGR to be 35.9%. As well as, the corporate administration additionally expects greater AI-related income within the subsequent few years as highlighted by the quote beneath.
We count on our AI-related income to greater than double over the subsequent few years based mostly on the rising pipeline of AI-related design wins. – James Anderson, CEO.
Therefore, from the administration steerage of Lattice’s AI-related income to be $200 mln, we assumed the corporate to realize this within the subsequent three years and accordingly calculated the CAGR to be 26%. In contrast with our derived common market CAGR of 35.9%, it surpasses administration’s forecast and due to this fact we consider administration’s steerage of $200 mln in AI-related income may very well be cheap.
Finish Markets Progress Outlook for FPGAs
Lastly, we examined the top market outlook for FPGAs and subsequently forecasted the corporate’s income. Lattice’s Avant and Nexus are low and mid-range FPGAs, that focus on applications in Communications, Computing, Industrial & Automotive.
Lattice
Communications and Computing
In keeping with Lattice, the corporate offers options for “computing techniques comparable to servers and consumer gadgets, 5G wi-fi infrastructure, switches, routers, and different associated purposes” on this section. For Computing, FPGAs can speed up information facilities and their computing capabilities by releasing up processor assets and lowering energy consumption. In keeping with Intel, FPGAs can carry out higher than GPUs when “the applying calls for low latency and low batch sizes”. In our earlier evaluation of Microsoft (MSFT), we estimated that the cloud market can be rising by a ahead common of 23% pushed by information quantity progress. We consider information middle demand to be a superb gauge of FPGA demand in Computing, as FPGAs are utilized in information middle servers to offload “compute-intensive duties from the CPU and GPU” on account of their low latency and power effectivity. For Communications, given their low latency and the flexibility for parallel processing, FPGAs are suitable for processing huge information circulation required within the 5G RAN. We highlighted in our earlier evaluation of Qualcomm that the penetration charge of 5G gadgets is projected to “attain 83% by 2027 from 62% in 2023”, boding effectively for the demand for 5G companies.
Industrial and Automotive
For this section, the corporate gives options to “industrial Web of Issues (“IoT”) and “Business 4.0”, machine imaginative and prescient, robotics, manufacturing unit automation, superior driver help techniques (“ADAS”), and automotive infotainment.”
For Industrial, from our earlier evaluation of ADI (ADI), we highlighted sturdy progress within the semicon industrial market with a CAGR of seven.21%, pushed by sensible grid deployments and digitalization of factories. Intel’s case study explains how FPGAs may allow the transformation of sensible factories with their parallel computing capabilities. Furthermore, Lattice’s Automate 3.0 resolution stack can be used to speed up sensible automation system improvement, together with “robotics, embedded real-time networking, predictive upkeep, purposeful security (FuSa) and safety”.
Lattice
For Automotive, the ADAS market is predicted to develop at a CAGR of 18.7%. Furthermore, McKinsey expects the automotive software program market to develop at a CAGR of 9.4%, pushed by Software program-defined Autos as customers demand safer and extra superior automobiles. FPGAs may assist automobile producers improve numerous options and allow SDVs, comparable to zonal architectures, energy effectivity, real-time networking, and infotainment interfaces. Lattice claimed that its FPGA gives 2x quicker connectivity pace and 5x extra impartial sensor interfaces. The chart beneath summarizes how Lattice’s software program is utilized in numerous automotive purposes.
Lattice
Client
Within the Client section, the corporate’s merchandise are utilized in purposes together with “sensible house gadgets, prosumer gadgets, sound bars, high-end projectors, Augmented Actuality (“AR”) / Digital Actuality (“VR”), and wearables”, FPGAs can accelerate processing energy, allow real-time sensor fusion and object recognition for AR purposes, and optimize energy consumption. We highlighted that the AR/VR market CAGR is 42.24% in our earlier evaluation of Apple (AAPL), pushed by demand in client and enterprise purposes.
Outlook
|
Section Income ($’000s) |
Our Earlier Forecast (2023) |
Precise Income (2023) |
Distinction |
|
Communication and Computing |
326,092 |
257,536 |
-68,556 |
|
Progress % (YoY) |
18.7% |
-6.3% |
-25.0% |
|
Industrial and Automotive |
397,793 |
433,482 |
35,689 |
|
Progress % (YoY) |
24.5% |
35.7% |
11.2% |
|
Client |
49,064 |
46,136 |
-2,928 |
|
Progress % (YoY) |
0.0% |
-6.0% |
-6.0% |
|
Licensing and Companies |
15,730 |
-15,730 |
|
|
Progress % (YoY) |
-8.2% |
8.2% |
|
|
Whole Income |
788,678 |
737,154 |
-51,524 |
|
Progress % (YoY) |
19.4% |
11.6% |
-7.8% |
Supply: Firm Information, Khaveen Investments
In our earlier protection, we projected the corporate’s 2023 income based mostly on its historic 5-year common progress charge. Our forecast was greater in comparison with its precise 2023 income progress of 11.6%, attributed primarily to the unanticipated market headwinds highlighted by administration.
|
Finish Market Progress |
Market CAGR |
Lattice’s 5Y Common |
|
Computing and Communication |
14.6% |
16.6% |
|
Industrial and Automotive |
12.96% |
23.7% |
|
Client |
6.60% |
-9.3% (4Y common) |
Supply: Grand View Analysis, Khaveen Investments
Evaluating the market CAGR and the corporate’s 5-year historic common income progress, we noticed that these two are barely consistent with the Computing and Communication section (14.6% and 16.6%). Nevertheless, for the Industrial & Automotive and Client section, the market CAGR differs considerably from the corporate’s historic common progress. Due to this fact, we consider that basing our forecast on its historic progress is extra in line than utilizing market CAGR. Nevertheless, we additionally took into consideration the administration steerage for the corporate in 2024 the place administration expects Q1 income to be between $130 mln to $150 mln with Q2 surprising to rise considerably however H2 revenues to be greater than H1, reflecting enhancing market circumstances and its new Nexus and Avant product launches in that interval.
|
Lattice Income Forecasts ($’000s) |
2023 |
2024F |
2025F |
2026F |
|
Communications and Computing |
257,536 |
236,241 |
264,274 |
305,582 |
|
Progress % (YoY) |
-6.3% |
-8.3% |
16.6% |
15.6% |
|
Industrial and Automotive |
433,482 |
392,581 |
472,879 |
580,030 |
|
Progress % (YoY) |
35.7% |
-9.4% |
23.7% |
22.7% |
|
Client |
46,136 |
47,771 |
41,740 |
37,854 |
|
Progress % (YoY) |
-6.0% |
3.5% |
-9.3% |
-9.3% |
|
Whole Income |
737,154 |
676,592 |
778,893 |
923,466 |
|
Progress % (YoY) |
11.6% |
-8.2% |
18.9% |
18.6% |
Supply: Firm Information, Khaveen Investments
Total, we forecasted the corporate’s complete income to say no by 8.2% in 2024 based mostly on administration steerage reflecting the anticipated market headwinds highlighted within the first half and the potential restoration within the second half. In 2025 and past, we forecasted the income progress for every section based mostly on the up to date 5-year historic progress charge. Notably for the Client section, we used 4-year previous progress as the corporate restructured this section in 2019 by winding down its smartphone merchandise.
Threat: Competitors in FPGAs
AMD (Xilinx) just lately announced the event of low-cost Spartan UltraScale+ FPGAs highlighting their excessive I/O-to-logic-cell ratios and superior safety features, together with “NIST-approved post-quantum safety” and tamper-resistant circuits. This improvement is prone to pose challenges to Lattice’s low to mid-range FPGAs. As AMD is the main participant within the FPGA market by market share, we consider Lattice might face elevated competitors, prompting them to innovate additional to keep up their aggressive edge within the low-cost FPGA section. Moreover, we consider that Renesas, a brand new entrant into the FPGA market, might additional result in intensifying competitors.
Verdict
Khaveen Investments
All in all, regardless of anticipated market progress headwinds in 2024, our evaluation signifies a powerful potential for Lattice to maintain progress by increasing its product portfolio in low- and mid-power FPGAs. We anticipate vital strides from the corporate’s growth into the mid-range FPGA market. Nevertheless, we additionally take observe that whereas Lattice’s mid-range FPGAs outperform Microchip’s choices, they nonetheless lag behind trade leaders like AMD and Intel, although the corporate’s roadmaps indicated future product developments which may see enhancements in product efficiency to higher compete towards main gamers. Moreover, we consider that Lattice may benefit from the sturdy progress in AI-related purposes comparable to information facilities, AI-enabled PCs, and ADAS techniques as our market evaluation confirmed a mean CAGR of 35.9%, surpassing the administration’s forecasts. Delving deeper into end-market prospects for FPGAs, we recognized key progress drivers throughout numerous finish markets and the way Lattice is capitalizing on these drivers. Total, we consider that Lattice is poised to capitalize on the rising demand for AI purposes, additional strengthening the corporate’s place within the FPGA market.
Based mostly on a reduction charge of 13.4% (firm’s WACC), and terminal worth based mostly on its 5-year common EV/EBITDA of 49.77x, our mannequin reveals an upside of 25.95%. As well as, our up to date mannequin reveals a better upside as we beforehand used the trade’s EV/EBITDA ratio, which was solely 20.13x. We up to date the ratio as the corporate’s historic EV/EBITDA was considerably greater than the trade common (27.78x). Based mostly on our up to date DCF, we obtained a worth goal of $99.57 and improve the corporate to a Purchase ranking.
