Lattice Semiconductor (LSCC, Financial) has been on a good run. New product introductions and new design wins, along with strong ramps of its products in high volumes have led the company grow at a good pace. Also, efficient inventory management and sustained cost structure model have helped the company to control its margins, while executing high volume production in the consumer market.
The future looks bright
Lattice’s growth is quite impressive as the company continue to produce innovative low power products and low cost field-programmable gate array (FPGAs) that are gaining enough traction in the market. Also the semiconductor chip maker has recently built successful relationship with Google, who will use Lattice’s FPGAs solutions for its Project Ara initiatives to manufacture world’s first modular smartphones for consumer to configure from variety of modules.
FPGAs are integrated in a way that will allow the developers to ramp up its production while moving from prototype to production. It will also eliminate product development efforts and time-to-market the product and end up earning great market share for the company.
Lattice also shares a relationship with China Mobile and Cisco and many more in its list that are also looking for such a design wins to benefit from the market that is cost efficient. This certainly displays tremendous growth opportunities for the company as these solutions are continuously on high demand in various markets such as mobile communication, automobile and industrial.
New products
In addition to this, the company has recently launched “ECP5 Family” which are ideal for small-cell, micro server, broadband access, industrial video and other high-volume applications. Lattice has received tremendous response with the initial roll out in the market with respect to these products which are available in the market with low cost, low power and in the smallest possible form factor, will certainly pick the momentum in the upcoming quarters. The company is planning for second roll out of the product in the second-half of the year as the demand is continuously rising for the products in the end market.
Apart from this, Lattice is focused on maximizing the growth opportunity it anticipates with the advent of Internet of Things (IoT). Also, as per the recent report from Morgan Stanley that puts the Internet of Things as potential could approximately touch tens of billions of unit in 2013. Thus unveiling another great opportunity for the semiconductor company to tap this market that has supposed to have nearly 1 million units, where PC accounts for about 100 million units and the mobile internet is expected to touch approximately a billion units. Therefore the company is engaged in making various strategic investments in such as ECP5- programmability that will probably help many developers in a big way as it enable wide range of devices to allow update, facilitate communication, create differentiation and enable last-minute feature addition.
Besides, Lattice’s FPGA-based camera design solutions are rising in the industrial and healthcare markets. Further to strengthen the base, Lattice it is working closely with its partner Helion GmbH and busy in producing several new FPGA-based camera designs that will enable HD camera solutions in the healthcare and industrial market.
Lattice has diversified operation across various regions that demonstrate potential market for the company in the future. It has realized 7% gain in revenue from Asia Pacific, including Japan that represents 75% of the total revenue. Also, Lattice was happy to notice significant improvement of 36% in revenue from Europe that accounted about $3.9 million in revenue, while its revenue in U.S declined 16% to $1.7 million during the quarter. All-in-all the company looks good and has a lot of potential also it registered a total growth of 28% in industrial, medical, and scientific segment and it is expected to grow even better in the coming years.
Conclusion
Lattice currently trades at trailing P/E of 29.30 and forward P/E of 19.77 and maintains decent operating margin of 11.38%. Besides its core fundamentals such as revenue and earnings have displayed robust growth and expected to grow at a decent rate in the future certainly makes it attractive investment window for the investors and shareholders. Moreover, the analysts have estimated CAGR of 20.00%, higher than that of industry CAGR of 15.36% for next five years, reflects robust growth and prospects of the company in the coming years.
