Chip Crunch Giving ‘Method to This Booking Madness’: Broadcom CEO

Lead times in Broadcom’s supply chain “remain extended,” though “stable,” and inventory in its channels “remains very lean,” said CEO Hock Tan on an investor call Thursday for fiscal Q4 ended Oct. 31. Broadcom’s semiconductor solutions revenue grew 17% year on year to $5.6 billion, he said. The stock closed 8.3% higher Friday at $631.68.

Q4 revenue in Broadcom’s wireless segment was $1.8 billion, 32% of semiconductor revenue, and it was up 21% “against a softer Q4 quarter a year ago,” said Tan. Its wireless growth was “consistent with the launch of our customers’ next-generation phones during the quarter,” he said. “We expect continuing strong demand” into fiscal Q1 ending late January, driving wireless revenue to be up sequentially by single-digit percentages from Q4, and flat compared with “the peak of a year ago,” he said.

Wireless is a “great franchise” for Broadcom, “and it continues to chug along very well,” said Tan. Broadcom sees an opportunity to increase its content in smartphones, he said. “We never really plan for unit increases,” he said. He personally has stopped worrying “about whether the number of phones is going to decline” in the next one or two years, as long as the content keeps increasing, he said. He sidestepped an analyst’s question about when he thinks 5G smartphone demand will peak.

Broadcom’s broadband revenue grew 29% from a year earlier and generated 16% of its quarterly semiconductor sales, said Tan. “This was driven by the continued strong growth in deployment by service providers globally” of next-gen passive optical networks with Wi-Fi 6 and 6E “access gateways,” he said. Broadband expects double-digit broadband revenue growth to continue into Q1, he said.

The company has been delivering “as much as we can” to its quoted lead times, said Tan. “In some ways, I like to believe it's giving some method to this booking madness.” By keeping “lead times very stable and predictable as we're doing now, we're also clearly communicating to our end users the way they should be planning their business,” he said. “I like to think all this is working out” in preventing Broadcom from building excess “buffer inventory,” he said. “All that is being done purposefully.”

Amid the supply-chain chaos affecting all tech companies, “the day will come when things have to land,” and return to normal cycles, said Tan. “We'd like to make sure it lands very gently and softly.” Broadcom customers, “by and large,” are “planning better and better because they have practice at doing that,” he said.