Thread by @ditlevfriis

1/ Time for a thread on one of the companies that is most central in the ubiquitous mega-trend of connectivity. 👇👇👇

2/ Broadcom $AVGO was founded in 1961 and is headquartered in San Jose, CA, USA. Broadcom designs and develops digital and analog semiconductors. The company serves the wired infrastructure, wireless communications, enterprise storage, and industrial markets.

3/ Broadcom boasts a highly diverse product portfolio across an array of end markets including solutions for data-center networking, connectivity, smartphones, telecommunications equipment, and displays.

4/ Broadcom Inc. is the combined entity of the Broadcom and Avago merger back in 2016. Avago took the Broadcom name but retained the $AVGO tickr.

5/ Avago focused primarily on radio frequency filters and amplifiers used in high-end smartphones, such as the #Apple #iPhone and #Samsung #Galaxy devices, in addition to an assortment of solutions for wired infrastructure, enterprise storage, and industrial end markets.

6/ Legacy Broadcom targeted networking semiconductors, such as switch and physical layer chips, broadband products like television set-top box processors, and connectivity chips that handle standards such as Wi-Fi and Bluetooth.

7/ Broadcom has a market-leading position in semiconductor design. Broadcom's more than USD 20bn revenue base is supported by more than 23,000 patents, ranging from semiconductor solutions to infrastructure software.

8/ Broadcom focus on its core capabilities of semiconductor research and development.

9/ The company is outsourcing its chip manufacturing - its a Fabless semiconductor company - and this is a significant part of the company´s strategy and allow Broadcom to generate strong free cash flow while maintaining a lean capital structure.

10/ Broadcom main revenue source is semiconductor solutions where the company generates its sales in industrial applications, data-centre storage and 5G solutions.

11/ Meanwhile, the share of revenue from its recurring software and service business is growing, helping to diversify and stabilise its overall revenue base.

12/ The semiconductor industry is a huge industry with large players all contributing to the electrification and ever more connected world we live in. And this is a trend that is not likely to go away anytime soon. More on the trends in a bit.

13/ First, an overview of the Top 15 semiconductor companies in the world ranked by revenue in Q1´21.
h/t @StockMKTNewz for posting this

14/ There are especially three themes that will help Broadcom´s business:
•Moore´s law
•Electrification
•Connectivity
Let´s dive in!

Moore's Law is the doubling of transistors in a semiconductor chip roughly every two years.

15/ It is driven by fierce competition, where the most important competitive parameter is reduction of costs per unit of output and as a result the ability to price products competitively. Moore's Law requires innovation from skilled R&D departments.

16/ R&D is a cash-burner and the source of the semiconductor companies’ competitive advantage. Technology leadership is nearly always fleeing forcing the companies on to the next big idea.

17/ Semiconductor innovations has led to an increase in the addressable market for technology hardware companies. The graph below shows a semi-log plot of transistor counts for microprocessors against dates of introduction, nearly doubling every two years.

18/ The world is going electric and significant #EV penetration is expected in the short term, driven by policymaking and increasingly also consumer demand. UBS believes EV penetration in the US will be 12% by 2025, up from 1.8% in 2020. Global share by 2030 is est. to be 40%.

19/ #5G remains a key trend in the telecom equipment and semiconductor markets. Global 5G smartphone shipments soared by 458% year-on-year from 24 million units in the first quarter of 2020 to a record 133.9 million in Q1 2021.

20/ Gartner forecasts sales of 5G smartphones will total 539 million units worldwide in 2021, which will represent 35% of total smartphone sales for the year.

21/ The trend will continue and by 2025 it is expected that 5G smartphone unit shipments will hit 1.135 bn or 80% of the total smartphone market. Broadcom is well positioned to capitalise on this .

22/ If it is on the internet Broadcom is involved. Here is a crazy statistic: 99.9% of all internet traffic crosses at least one Broadcom chip 🤯

23/ The internet is obviously not new but still evolves and one of the most persistent trends of the internet is the need for speed. This is driven by consumer demand for gaming, remote work, remote education, video conferencing, streaming and IoT.

24/ Broadcom is led by a very seasoned leadership team with industry veteran Hock E. Tan as CEO. Few people have as much experience in this space as Tan. He was CEO of Integrated Circuit Systems Inc.

25/ When this was sold to Integrated Device Technology, he became the latter company's chairman. Avago was created following a US$2.66 billion buyout of Integrated Circuit Systems in 2005. Tan was hired to lead the company as chief executive.

26/ In 2015, Tan merged Avago with Broadcom Corporation following an acquisition, leading to the creation of today´s Broadcom Inc. He is surrounded by a diverse team of senior leaders.

27/ Diversity is a key #ESG metric and something that especially institutional investors are looking for.

28/ Broadcom is an M&A Machine and have in recent years acquired Brocade, CA Technologies, and Symantec´s enterprise security business to bolster its portfolio in infrastructure software.

29/ These software M&A´s could indicate that there are just more opportunities in the software space. Semiconductor assets are fewer and expensive. Hurdles for regulatory approval remain far higher in the semiconductor space.

30/ Broadcom already tried to acquire QUALCOMM $QCOM but this was blocked by the Trump administration citing national security concerns emanating from trade.

31/ Broadcom ranks #5 on the list of largest semiconductor companies by market cap
companiesmarketcap.com/semiconductors…

32/ From a dividend point of view Broadcom has a very strong track record. The company is converting around 50% of revenue into free cash flow which fuels its dividends.

33/ Broadcom is delivering on the Chowder rule of being a High Quality Stock + High Current Yield + High Growth of Yield = High Total Return.

34/ Analysts have a favourable view on Broadcom - mostly Buy recommendations and with a one year upside of about 12%.

35/ Here are some of the recent news that Broadcom have announced
Broadcom Announces Expert Advantage Partner Program to Accelerate Software Growth
investors.broadcom.com/news-releases/…

36/ Broadcom Introduces World’s First 64G Fibre Channel Emulex Host Bus Adapters
investors.broadcom.com/news-releases/…

37/ Broadcom and #Google Cloud Collaborate to Accelerate Digital Transformation for the Enterprise
investors.broadcom.com/news-releases/…

38/ Broadcom announces quarterly earnings tomorrow June 3rd.

This is by no means financial advice, but solely my view on Broadcom as a company. I have no position in Broadcom, but like the company.

Would love to learn what view @DividendGrowth has on $AVGO