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Recapping Lattice Semiconductor’s Investor Day with Esam Elashmawi – Futurum Tech Webcast Interview Series
by Daniel Newman | June 10, 2021

On this episode of the Futurum Tech Webcast – Interview Series I am joined by Esam Elashmawi, Chief Marketing and Strategy Officer for Lattice Semiconductor. Lattice is a leader in building small, powerful, efficient FPGAs that are used across all end markets and critical infrastructure.

Our discussion centered on their recent Investor Day and the impressive announcements that are defining the future of the company.

Lattice Semiconductor’s Investor Day

My conversation with Esam also revolved around the following:

  • The promises Lattice made in 2019 and everything that the accomplished in that two year span
  • A quick look into the quarterly growth the company is seeing
  • A teaser of a new product launch coming this June
  • A recap of the announcements that were made including Avant

Lattice Semiconductor has had an impressive growth in the last two years and after their Investor Day it’s clear they have no signs of slowing down. If you’d like to learn more about their products or more about the company, be sure to check out their website. And while you’re at it be sure to hit the subscribe button so you never miss an episode of the podcast.

Watch my interview with Esam here:

Or listen to my interview with Esam on your favorite streaming platform here:

Disclaimer: The Futurum Tech Webcast is for information and entertainment purposes only. Over the course of this podcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we do not ask that you treat us as such.

Other insights from Futurum Research:

Lattice Semi Outpaces Expectations For The Fourth Consecutive Quarter

Lattice Semiconductor Defense Event: The Best Defense Is A Clearly Differentiated FPGA Portfolio

All Eyes Are On Semiconductor Companies Amid Chip Shortage — Investors Should Be Looking At These Four Lesser-Known Names

Transcript: 

Daniel Newman: Welcome to the Futurum Tech podcast and Futurum Tech TV. I’m your host, Daniel Newman, principal analyst and founding partner at Futurum Research. Excited about today’s podcast. I’m going to be joined by Lattice Semiconductor Executive Vice President, Esam Elashmawi. And we’re going to be talking a little bit about Lattice, its business and its recent Investor Day. Because the company put out a super interesting presentation, really enjoyed participating in it. And in fact, wrote about it in a recent Market Watch piece, where I named Lattice as one of the four semiconductor companies that people should be paying attention to if they’re not already. But before I start telling all my stories and singing all my praise and providing all my analysis on the company, let me just have Esam go ahead and say hello and introduce himself. Esam, welcome to the show. How are you doing today?

Esam Elashmawi: Great to be here, Daniel. I really appreciate it. I watched your podcast, really interesting stuff. Finally, I get invited. So I’m really happy. I put a board behind me because I see your board behind you all the time. I figured I needed some clip art behind me as well.

Daniel Newman: I actually think your board is better than my board. Mine’s a monitor. And my camera did not like that I moved that fast, by the way. Mine’s a monitor and it does all kinds of weird things with light. Yours is perfect. It looks great. And you’ve got that perfect brand strip right over your head. I need you to make one of those for me for next time I go on CNBC, but I need it to say Futurum Research. So send that over. And by the way, the flowers you sent guaranteed your spot on the show. So thank you so much for sending those. We’ve been enjoying those for the past few weeks. All seriousness though, really been interesting spending some time together, working in advising Lattice, learning more about the company, spending some time at your Investor Day. And I have a lot of interesting questions. I want to run through some of the things you talked about a little bit. But first and foremost, Lattice is growing really quickly, doing some really good things in the space, works with a lot of brands that everybody out there listening to show knows and love, but not everybody knows Lattice. So give a quick one minute elevator pitch just on Lattice, because that way, it’ll help shape the rest of this conversation.

Esam Elashmawi: Yeah, sure. Lattice has been around for 38 years. We’re a semiconductor company that’s been around for a really, really long time. Not many people can claim that. But we are the innovators and we specialize in building very small power efficient FPGAs. And FPGA stands for Field Programmable Gate Arrays. And in the old days, people used to build custom ASICs, they still do. But what you can do with an FPGA is you buy a standard, off the shelf product. It’s called an FPGA. We’ve got variety of different sizes. We specialize in the small, low power, power efficient ones. And then you, with our software tool, can actually download your ASIC design in there. So it almost becomes an ASIC that you can turn around in hours and program it within milliseconds. And so it’s very unique. It’s used across all end markets and critical infrastructure. So if you look at, for example, communication systems, we are in 4G or 5G wireless, both wireline and wireless communications infrastructure.

We talked at our last Investor Day, how we’ve been increasing our content in servers in a data center. And we went from what used to be about, roughly three generations ago, a 25% attach rate. So we talked about we’re now above one attach rate in servers. So think about every data center enterprise that has a server, you’re going to find Lattice devices there. We’re using industrial equipment. You think about robotics, motor control, embedded vision, AI applications. We’re used in the automotive industry, quite a bit of vehicles. We’re in consumer goods. So most of your audience may not realize it, they’re probably using something or leveraging something that’s going through Lattice devices today.

Daniel Newman: Yeah. It could be your computer. It could be your server, that’s running your cloud applications. It could be your vehicle. It could be the machine in your factory. It was really interesting, like I said, because I’ll be the first to say, even as an industry insider, I did not realize how pervasive your products were. Because FPGAs are in this interesting inflection point, where some people had said, “No, it’s going to be the ASIC is the future.” And you guys, especially in the areas you’re competing, which I would say is at that very low power, low cost entry, and now we’ll talk more about where you’re moving. But you’ve really focused and said, “There is a very specific set of places in the market for FPGAs, where they make the most sense, best dollar value, best for power. And you guys are proving that and your growth seems to be aligning very well with that sentiment.

So let’s start out. Jim Anderson, your CEO, kicked off, you were part of the Investor Day. I saw you sitting up there on stage, hopefully even in the future, you’ll be able to do this live with all your investor relations folks there, I’ll be sure to be there. But I have to say, one thing that caught my attention straight away, Jim flashed a slide and it was Nexus sitting at the top. It said, Executing Our Strategy. But it said, “What we said in May 9th, 2019.” And then said, “What we did.” And what was most impressive about the slides, they had about 10 bullet points on it. They talked about product leadership and shareholder value. And it had green check marks next to everything. And wow, I mean, what a crazy premise. But talking to your shareholders, your community, your investor relations folks, your analysts, and doing what you said. I mean, what a great way to start.

Esam Elashmawi: Yeah, it is. And actually, you’re so into execution and the fact that we’re all working really hard. It’s opportunities like that we can sit back, reflect on everything that we’ve accomplished and realize, “Wow, we really did accomplish quite a bit over the last couple of years.” And it started with a faster product cadence. We are a product company, we’re a technology company. And having the right product roadmap and portfolio is key. And what we’ve done is we’ve tripled the new product introductions. And that was one of the things that we set out to do in the very beginning. Our market leading products, very differentiated. We had our Nexus platform that we launched late in 2019. We said, “Here are the dates of which we’re going to launch these products.” And we talked about additional products that will come out of the platform. We met all of those dates.

We also talked early in 2019 about how important it is to invest in software and solution stacks to make it easier for our customers to implement their designs and make it more sticky, help them get to revenue much faster. We did what we said we were going to go do there as well. And so the execution fidelity that V-Ray, all of that, has just been… The team’s done a fabulous job within the company. And the kudos goes to engineering, operations, finance. Everyone’s done a really good job. Sales, marketing. And on the financial side of that also, we set out with some goals and metrics in 2019, and we talked about that in the 21/22 time period, we’re going to get to double digit growth. And on the earlier part of that, if you look at our Q1 results year over year, it was 20% growth. And if you look at the mid point of our guide for Q2 was 19%. So we’re on track for that double digit growth that we had talked about.

And then we set a target on gross margins. When I started in 2018, the company had 57% gross margins and we closed our last quarter at 61.7%. And our target was 62%. So we’re on track for that. And the midpoint of our guidance for Q2 was 62%. So we’ve achieved that as well. And then if you look at the operating spend, the op expend discipline, we’re on track to what we set at 35%. Our growth is within the range we set for ourselves between 25 to 30%. So there’s a lot to be proud of. So you don’t always think about this every day, but having an event like this to go through that, you realize, “Wow, the team collectively, everyone’s done a really, really good job.”

And that set out for us new targets moving forward. We’ve upped our financial targets, we’re going to continue with the beat rate of new products that we’ve talked about and we’re going to be creating. And we talked about a product called Avant, actually, that’s going to take us, not just we’re going to deliver a and solution for the small portion of the FPGA market, but actually we’re going to be going into the mid range with our Avant platform, which is the next generation after our Nexus platform. And that’ll come the second half of 22.

Daniel Newman: So hold on, there. Before you get to that. Because that’s something I want to talk to you about. I don’t want that to be glossed over. As a quick recap though, doing what you say sometimes is a little bit underrated in a company, but it shouldn’t be. And that’s something I want to make very clear. As an analyst, I prognosticate a lot. When I get it right, I’m extremely ready and willing and going to make time to tell my successful prognostications. Although a lot of times, we’re not as willing to go back and say, “Hey, I got that one wrong.” And in this case, it was nice to say everything we said we would do. And by the way, if you really look across the market and in semiconductor space, some of the companies that have been punished the most harshly in the past few years, it has not been because of poor performance. It’s been because of failure to do what they said they would do.

And so that is one of the things investors are looking for. And I would certainly say your customers, as well, want that dependability of saying, “If Lattice says they’re going to build this product in a year, we can design around this. We can count on this.” That’s important. And I just hope people out there really put some weight to this. And then next year, we hold you equally as accountable to come back with another 10 green checkboxes.

Okay, I know I don’t get a ton of time with you here. So I want to move on. You started teasing a new product. It wouldn’t be a good financial or an investor day if you didn’t at least maybe make a few product drops or hints. You guys made several. Run me through some of the big announcements, new products and where you see this in terms of Lattice’s future.

Esam Elashmawi: Yeah, so we did. We announced quite a few products. We gave a roadmap of what’s to come. If you look at our Nexus platform, that’s really differentiated platform. We’re bringing in products with four times lower power than competitive products. Really good reliability to soft air rates, which is a known phenomenon issue with FPGAs, but a hundred times better performance there. And then we did a lot of stuff around AI and security and embedded vision. So we’ve introduced three products from that thus far. We’ve got the fourth product service that we talked about at the Investor Day, having a launch on that on June 23rd. So people can go to our website, sign up and be part of that launch event that we’re going to have on June 23rd, this month. But we also talked about additional Nexus devices coming out from the platform.

Then we talked also that we’re creating our new platform, which is the Avant platform. And this is where we’re increasing the LUT capacity. You think of that as the size or how much logic an FPGA can hold. We’re increasing that by quite a bit. And we’re adding a lot more differentiation to go after the mid range of the FPGA market. But it isn’t just about the hardware. We also gave a roadmap around our solution stacks, and these are really important for our customers and the industry. It allows our customers to use our products easier by giving them the tools and the IPs and some of the software kernels that they would need to embed in their systems themselves. And we’ve launched, prior to this Investor Day, we had three, our Sense AI, focused around AI applications, our embedded visions around sensor aggregation and how do you do computer vision or envision. And also our century solution stack around security.

But at the day of the investor, we also announced our Automate solution stack, which is really around robotics and motor control. Things that happen in an industrial type application. And we also announced a roadmap where we’re going to have an O-RAN solution stack, coming out first part of 2022. With another one coming out after that as well. So we’re excited about what we’re doing, the beat rate and the cadence of new products, both on the software and hardware side, isn’t slowing down. And the customer interaction and intimacy has been really good. I mean, our customers helped us define these as well. This is-

Daniel Newman: Yeah. I saw a lot of things. In the factory, I saw the incorporation of AI into the automate platform, predictive maintenance. I think it was more than a dozen, maybe 14, times lower power consumption. With two times the capability, in terms of how many controls. You’re doubling the amount of power. But when you’re hearing industry standard, this is the meat and potatoes of being able to provide that level of control. And then obviously, you mentioned the Nexus side. Big increases in system bandwidth. Increases or improvements, I’m sorry, not increases. Improvements in power efficiency and a broader range of support for different apps. And you guys map this out across… And the other thing, by the way, you guys gave a sneak peek and that was your 5G O-RAN solution stack.

Probably not something most people think about with FPGAs or Lattice, but you guys are getting and squarely inserting yourself in the conversation to play in the 5G space. So, I mean, a whole lot. And then of course, you mentioned Avant, which was maybe the biggest… And maybe the reason I’d want to just take an extra second to point to that one is, I think you’ve doubled your TAM, right? The Avant basically took you from about a $3 billion market opportunity to six, with the inclusion of this. And this basically was, as you mentioned earlier in the conversation, you are essentially going upmarket. Not to the high end of the FPGA stack. I think you guys have recognized where the biggest opportunity and fastest market adoption is, but right above where you’ve been hanging in this lowest cost, low power devices, there’s a little bit of an upstream opportunity that you said, “We’re going to be there.” Avant is going to be the solution for this along with your software. And it’s going to double the TAM.

Esam Elashmawi: Yeah, that’s the unique thing about us. We look at our traditional competitors, which is really the Zions that builds FPGS and Intel. They’re really focused on the large FPGAs. These are the largest FPGAs for data center acceleration, communication radio processing, as examples. We’re really in the area invading the products that aren’t getting the attention or the innovation from other the competitors. And by the way, that $6 billion consists of two things. It consists of traditional FPGS that we go after. But because we’re adding more capabilities into our FPGAs today that didn’t exist before, like AI, like security capabilities or things that we’re doing around computer vision or Envision, that opens up more [inaudible] and more TAM for us as well.

And what we’re seeing, even with the Nexus, is we’re displacing MCUs in a lot of applications as well. When you think about an AI application with an MCU or an FPGA, an FPGA is going to do it a lot more efficiently because it’s parallel processing, and at a lower power. And the same applies to motor controls. And you alluded to that. We can control more motors simultaneously, with more precision in an FPGA because of the parallelism that can occur in a FPGA than an MCU. So we’re actually not just competing and taking share, and growing within what I call the traditional FPGA market, but we’re actually identifying new applications for FPGAs that didn’t exist before.

Daniel Newman: Yeah. It’s a true example of where automation through technology and software, in this case an FPGA, can displace legacy, route to solution. Which would typically be with an MCU. So I want to take this home and talk a little bit about the future, the guidance. We are not purely a financial, but I really like to live at that intersection of financials, technology. I think the ultimate truth of any company lives in the reporting and the numbers. Your products make for great marketecture, but when you can sit in front of us and say this… That’s why I love the same with you. When you say, “This is what we said, this is what we did.” Because I wouldn’t say marketing can lie, but let’s just say marketing leaves a lot of room for interpretation. Numbers do not.

So you guys, I had some key takeaways, you’re targeting significant growth. I believe you said you’re going to target double digit. You mentioned 62%, but you’re actually targeting to push that up to 65%. You’re trying to keep your OPEX status stable, and you’re really pushing a profit target to go above 30%. So this was primarily comments that your CFO, Sherry Luther, came up and gave. But you increased your guidance, you set a whole list of new say dues going forward and things that we are going to hold you accountable for. Talk about that. Talk about what’s ahead.

Esam Elashmawi: Yeah. And it’s probably worth noting that we met our financial targets and what we said. And this was in a tough year of COVID and trade wars as well. And we set what we felt were good targets for us to meet as well over the next three to four years. As you said, continue sustainable double digit growth, starting off on the low end of the double digit and then with the Avant clearly accelerating that double digit even more. And the margins, as you said, we were upping our target from 62 to 65% and the operating income 30 plus. What drives that are two key things. Number one is having the right products and roadmap of products coming out that can address the applications of our customers, but also the fact that we’re in a lot of growth drivers across different end markets.

So when you think about 5G, we’re well proliferated across the top OEMs in 5G, as 5G continues to deploy, and we’re still in the early stages of 5G, we benefit from that. We showed examples of how our attach rate is increasing from one generation to another in the server market. And the dollar per servers also increasing from generation to generation. That drives growth. We talked about the fact that we are now doing something that other FPGAs couldn’t do, which is we’re now in the client compute platforms. And we had two platforms that we talked about that launched in 2020. We’re going to see the full benefit of that in 2021. But hey, those aren’t the only two. We’re engaged with the top OEMs or more client compute platforms that will drive more growth for us as well. Our industrial and automotive has been a good growth segment for us, even in a tough year last year. That grew 12% year over year. In fact, if you take our two largest growth segments that account for 85% of our revenue, the comms and compute, and the industrial automotive, those two that account for 85% of revenue today, grew double digits over the last three years combined.

And so we’ve got some really good growth drivers for us with the products that we’re bringing out. We’re really excited about what the future holds and hence, the reason why we updated our target models.

Daniel Newman: Yeah, absolutely. If you put it all together, the summation I took was, the past was strong and that was reflected in what you said. You met the results and you were very specific, very prescriptive about how that happened. I was more optimistic, though, about the future. Anytime a company doubles its TAM, and doesn’t only do that arbitrarily, but through very specifically entering a new market, which by the way, thoroughly green field in nature, not overly crowded space, that you’re very well-prepared to enter and become a meaningful player.

Because this isn’t a lot of going to brand new companies, this is taking your offers, this is net revenue expansion within your current portfolio. You’re entering a few new spaces, but more than qualified, capable and you are well-known in those areas. So while Lattice may not have the same branding as some of the big home PC maker chips-

Esam Elashmawi: Not yet, not yet.

Daniel Newman: In the spaces you serve, you are becoming more of a household name. And that’s because you’ve executed extremely well. And then of course, like I said, the ambitious guidance that was underpinned by a path to resolve all had me feeling encouraged. Esam, we only have a minute or so to wrap up here, any other things you want the community to know before I set you free?

Esam Elashmawi: I really appreciate this time. We’re all in the company, everyone, just as excited as how you articulated as well. We’ve got a lot of good stuff ahead of us that we’re all excited about. And being part of that and how we contribute to the industry as a whole, and to society in what we’re doing, is just exciting for everyone. And hey, and I do appreciate finally being on this podcast, I’ve been waiting for this day for quite a while. I really do appreciate it.

Daniel Newman: Yeah. I was super excited to have you here. Thank you so much for joining. It was a great presentation and glad we were able to share a little more depth here with our community. This is why I included the Lattice Semiconductor as one of the semiconductor companies I really feel that everybody needs to be paying a little bit more attention to, or a lot more attention to. But definitely check out the show notes and the transcription of this. Please share this and put the word out there for everybody to see. There’s a lot of exciting things happening. I said this in January 2020, semiconductors will eat the world. It is going to be general purpose. It is going to be ASICS and it is going to be FPGA.

For this episode of the Futurum Tech Webcast and the Futurum Tech TV, I got to say goodbye. Esam, thanks for joining. We’re going to have you back soon. Thanks for bringing up the screen and upping my game. I can’t wait for mine to arrive. And thanks again for the flowers. All right, everybody.

Esam Elashmawi: Thank you so much.

Daniel Newman: We’ll see you later. Bye bye.

 

About the Author

Daniel Newman is the Principal Analyst of Futurum Research and the CEO of Broadsuite Media Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise. Read Full Bio