Lattice Semiconductor Enters New Growth Phase, Higher Margins

Lattice Semiconductor, under the leadership of President & CEO Jim Anderson, has been executing with reliable, consistent predictability. The company has been on such a linear trajectory that even the financial analysts at a recent investor day event had a hard time finding any controversy in its execution. The company has been on a five-year transition and is now entering its next phase of growth. In particular, the industrial and auto segments which have had three years of continual growth.

Lattice’s CEO Anderson also has a strong team supporting him. At the Investor Day, flanking Anderson was Chief Strategy and Marketing Officer and FPGA veteran Esam Elashmawi and Chief Financial Officer Sherri Luther. Both are helping to drive the product line expansion while keeping operational expenses (OpEx) in check. The improved product mix and some pricing optimizations have allowed revenue to outgrow expenses with a gross margin of >70% and OpEx target of <30%, while still increasing R&D spending. This leaves the company with a strong cash generation position and reduced debt.

The company’s key growth markets are: automation and robotics, automotive (its fastest growing market segment), and hardware platform security, such as in servers. Lattice FPGAs are present in most datacenter server motherboards. While the slowdown in the server business has hurt this segment, the company expects this situation will turn around soon. The company anticipates sales benefits from AI growth at the edge and Generative AI, both of which are set to drive more server growth in the near future.

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When pressed during the investor event for the number one take-aways from the meeting, Anderson as most excited about product portfolio build out.

Lattice Avant Drive A Richer Product Mix

The company’s new Avant FPGA family, introduced in December (reference link), is growing the company’s Serviceable Available Market (SAM) by moving the company from just selling small Field Programmable Gate Arrays (FPGAs) to now adding mid-sized FPGAs to the mix. (See “Lattice Strides Into the Mid-Range FPGA Arena With Avant”) With the new products, Lattice expects its SAM to reach $10B in 2028. In the process, the new products increase the Average Sales Price (ASP) of the company’s products because Lattice’s Avant FPGAs have ASPs that are 10-20x higher than its smaller FPGAs.

The Avant product has proved to be well received by existing customers and is being adopted by 90% of the company’s existing customers.

The company will continue to invest not just in the Avant line, Lattice will also release a seventh product in its existing Nexus (small FPGA) product line in Q3 to be called the CrossLinkU-NX. According to the company, Nexus product number eight is in development. Product line extension seems to be key to Lattice’s organic growth strategy.

Lattice also revealed its next two mid-sized FPGA product series: Avant-G and Avant-X. Both series are scheduled for release in 2H23. The Avant-G FPGA is general-purpose and Avant-X FPGA is designed for connectivity products. And, to help it push further into the automotive segment, the company has new software coming in 3Q23, Lattice Drive SW, which focuses on ADAS sensor bridging and processing. Lattice FPGAs are used by automotive OEMs and multiple tier suppliers for electronic-mirrors, digital dash, parking camera, infotainment/navigation systems and can handle multiple displays and resolutions.

The industrial market applications for the company’s FPGAs are intelligent robots, which have multiple motors, sensors, and cameras. because FPGAs are ideal for robotics because they offer intelligent, adaptable motor controls and faster inference rates than microcontrollers.

In datacenter server applications, the Lattice parts support AMD, Arm, and Intel-based systems. Putting FPGAs on the motherboard provides adaptive security and can support post-quantum cryptography, making future-proofing Lattice-based designs with field-upgradable support for new algorithms. The parts also provides industry standard power management and I/O support with a small footprint and low power. The most recent server platform providers to announce incorporation of Lattice FPGAs are ASUS, Lenovo, and LG.

These new FPGA products represent the company’s biggest product expansion in the company’s history, driven by the need for greater power efficiency. To support all these new products, the company is heavily investing in product support by doubling the size of customer engineering and support personnel. It will also host a developer conference in 2H23 where more details of the new products will be revealed.

_{The author and members of the Tirias Research staff do not hold equity positions in any of the companies mentioned. Tirias Research tracks and consults for companies throughout the electronics ecosystem from semiconductors to systems and sensors to the cloud. Members of the Tirias Research team have consulted for companies throughout the FPGA ecosystem.}