What's common in smart key-chains and jets

Ever wondered how routers, switches, modems, MRI scanners, gaming consoles, radar, sonar, and missile guidance systems work? Well, one of the jigsaw pieces that goes into those systems is the Field Programmable Gate Array (FPGA). Yeah, we are going to nerd out a little today. They are used in something as basic as a smart bulb or smart speaker to extremely complex fly-by-wire systems of a Boeing 787. It was invented in 1984 by Ross Freeman, Bernard Vonderschmitt, and James V Barnett II that is now a key component in all of these systems.

The FPGA is a type of Integrated Circuit (IC) that can be configured to perform specific functions: arithmetic operations, logical operations, and memory access. The routing resources can be used to connect the logical blocks together.

• In telecommunications, FPGAs are used to accelerate data processing and routing in routers and switches. They are also used to implement new communication protocols and standards.

• In the data center industry, they are used to accelerate machine learning algorithms and improve data encryption, compression performance.

• In the medical industry, FPGAs are used to improve the performance of MRI machines, CT scanners, and ultrasound machines. They are also used to develop new medical devices, such as implantable pacemakers and defibrillators.

• In the defense industry, FPGAs are used to develop radar, sonar, and missile guidance systems. They are also used to develop new weapons systems, such as drones and robots.

• In the consumer electronics industry, FPGAs are used to improve the performance of televisions, smartphones, and gaming consoles. They are also used to develop new consumer electronics devices, such as smart speakers and virtual reality headsets.

And there’s one company that has silently grown its market share in the FPGA domain, and that is Lattice Semiconductors. It is a fabless semiconductor company that both designs and manufactures FPGAs. We like this type of silent star performer, going at it without all that media hype. Reminds me of Nvidia until three weeks ago, when everyone started talking about it.

Lattice Semiconductor was founded in 1983 by Rahul Sud and Raymond Capece. Sud was a chip designer who had worked at Inmos and Intel, while Capece was a venture capitalist. The two men saw an opportunity to create a new type of semiconductor company that would focus on low power, field-programmable gate arrays (FPGAs). The company went public in 1989, trading on Nasdaq with the symbol LSCC and has since grown to become a global leader in designing and manufacturing low power consumption, small factor, high performance FPGAs. Currently headquartered in the Silicon Forest area of Hillsboro, Oregon, the company also has operations in Shanghai, Manila, Los Angeles, and Singapore.

Lattice Semiconductor's products are used in flat-panel televisions, laptops, networking equipment. The company's main products are the ECP and Certus-NX series of general purpose FPGAs, CrossLink FPGAs for video bridging and processing, iCE FPGAs for low-power applications, and MachXO FPGAs for control and security.

In recent years, Lattice Semiconductor has been expanding its product portfolio to meet the growing demand for low power FPGAs in the Internet of Things (IoT) market. The company has also been investing in new technologies, such as artificial intelligence (AI) and machine learning (ML), to help its customers develop innovative products.

Lattice Semiconductor is a well-positioned company to continue to grow in the years to come. The company has a strong product portfolio, a growing customer base, and a commitment to innovation. Lattice Semiconductor is a leader in the low power FPGA market, and the company is well positioned to benefit from the growth of the IoT market.

Here are some of the company's key achievements:

• In 2022, Lattice Semiconductor was named a "Leader" in the Gartner Magic Quadrant for FPGAs.

• In 2023, Lattice Semiconductor was awarded the Edison Award for Innovation in Services for its Lattice ORAN™ solution stack.

• Lattice Semiconductor has been named to the Forbes Cloud 100 list for four consecutive years.

Lattice semiconductor’s annual reports for the past four years look like this.

The stock is trading at $80.56 as of 23^rd May 2023 and at a PE ratio of 56.76. While it does appear overpriced at current levels, it is slightly down from its 52-week high of $96.82 and might be an interesting buy-and-hold stock for the next five years. The global FPGA market was valued at $7.06 billion, and it is expected to reach $22.10 billion by 2030, growing at a CAGR of 15.12%.

Jim Anderson is the CEO of Lattice Semiconductor. He joined the company in September 2018 and has been focused on its mission as the leader in low power programmable solutions. Since then, the company has accelerated its cadence of innovative product introductions and achieved record growth and profitability.

Anderson has over 25 years of experience in the semiconductor industry and has held senior leadership positions at companies such as AMD, Intel, and Altera. He is a Massachusetts Institute of Technology graduate and holds a Bachelor of Science degree in Electrical Engineering. His exemplary leadership should bode well for this company going forward.

The upside

• Consistent earnings growth: The company has consistently reported strong earnings over the past five years. In the most recent years, earnings per share (EPS) grew by 56% year-over-year. This growth is expected to continue in the future as the company benefits from strong demand for its products in several key markets, including 5G, artificial intelligence, and the Internet of Things.

• Expanding product portfolio: Lattice Semiconductor is constantly expanding its product portfolio to meet the needs of its customers. The company has introduced several new products in the past year, including the ECP5 FPGA family and the MachXO3 FPGA family. These new products are expected to help the company capture additional market share in the coming years.

• Strong financial position: Lattice Semiconductor has a strong financial position, with a healthy balance sheet and cash flow. This financial strength allows the company to invest in new products and markets and to return capital to shareholders through share repurchases and dividends.

• Positive analyst sentiment: Several analysts have recently upgraded their ratings on LSCC stock, citing the company's strong earnings. This positive analyst sentiment is a bullish sign for the stock.

Bearish Scenario:

• The slowdown in demand for semiconductor products: The global semiconductor market is cyclical, and there is always the risk of a slowdown in demand. If demand for semiconductor products slows, it could hurt LSCC's sales and earnings.

• Increased competition: LSCC faces competition from several other semiconductor companies, including Intel, Qualcomm, and Broadcom. If these companies start to offer more competitive products, it could hurt LSCC's sales and earnings.

• Macroeconomic conditions: The company can face severe earnings decline from a Fed induced US recession to tame inflation, and the medium-term risk of a US default can cause the stock to move down in line with other market indices and commodities.