Demand Still Exceeds Supply, but It's Variable, Says Silicon Labs CFO

Demand remains “meaningfully stronger than our supply,” said Silicon Labs CEO Matt Johnson at a Monday investor conference, though some components of demand, especially on the consumer side, “are pushing out, changing.”

“It’s definitely a shift,” Johnson said, saying Silicon Labs has been “hyperaggressive” on design wins over the last year, helping to drive additional demand. Chief Financial Officer John Hollister referenced a recent period of “sustained, above-average bookings” lasting for “quarters” that has left bookings "robust,” but the company is having more “variability” in bookings now, including some weeks that are below and some above average.

On how much inventory cushion Silicon Labs has if demand softens, Hollister said orders with currently scheduled deliveries are well above what the company can supply, but it’s more of a “challenge” now to match demand and supply. Johnson said it varies by line. “There are some process technology lines that we don’t see demand and supply coming into alignment for a very long time.” Johnson estimates Silicon Labs’ opportunity pipeline at $15.5 billion based on lifetime revenue potential.

Commenting on the broader market, where some semiconductor companies have said they want to decommit some long-term wafer purchases due to slowing consumer demand, Johnson said it’s “not as much as we need.” Changes in PC and handset demand “aren’t closing the gap overall,” he said, because “the industry’s not investing in some of these mature technologies" for growth segments such as industrial, automotive and IoT.

Johnson discussed the electronic shelf label (ESL) market that’s bringing “really good returns” for Silicon Labs customers. ESLs, which are wirelessly connected to servers, have about 5% market penetration at retail. They offer retailers a way to update prices dynamically in response to changing inventory situations without requiring employees to have to make manual changes on the floor, he said.

ESLs synchronize pricing for consumers, matching in-store and online prices, and they allow retailers to manage inventory by updating prices on the fly. “Imagine having perishable inventory and being able to real-time update pricing as the day goes on to move that perishable inventory off the shelf?” Johnson said. Silicon Labs is seeing “tremendous interest” in ESL technology across industries, Johnson said. Most retailers want a proprietary solution for their stores and networks: “That may change over time,” he said. Stores install “thousands and thousands” of the displays at an average selling price of about $1, he said.

On protocols, Johnson cited sub-GHz, for Amazon Sidewalk, Wi-Sun and Z-Wave, and 802.15.4, used for Zigbee and Thread. Amazon is pulling interest in sub-GHz with Sidewalk, “which is only good news for us,” Johnson said, and Matter is bringing Zigbee and Thread, which had been niche protocols, into the mainstream, he said. “Now you have Apple, Google, Amazon, Samsung pulling that into all their applications via Matter.” Silicon Labs expects both protocols to become “more relevant” over time, he said.