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Synaptics Incorporated (NASDAQ: SYNA) is among the top players in the technology industry. The company is working on an extensive product portfolio related to human interface solutions, solutions for smart devices, and modern mobility solutions. Synaptics is among the preferred partners for tech companies capitalizing on its advanced solutions to provide high-performance products that provide real value to end-users. Due to the wider application of Synaptics’ products, they can be found in almost every device consumers use, from desktop computers to mobile devices to cars.
In this article, I will discuss the imminent long-term growth of the company due to the wide application of its products which set it up for strong future growth.
Market Analysis And Synaptics’ Position
Earlier this month, Synaptics completed the acquisition process of the (DSP) group, the leading developer of voice processing and wireless chipset solutions having a global footprint. The acquisition has cost the company approximately $549 million in cash. This acquisition will enable the company to utilize the (AI) solutions, voice processing, and the wireless technologies held by DSP to create the opportunity of cross-selling to existing customers and widen the customer base. The company’s leadership sees this acquisition in line with the long-term vision of the company to make connected devices more intelligent. DSP’s competitive edge in SmartVoice and low power AI will help the company achieve its long-term goals. The financing for the acquisition was arranged through a $600 million credit facility to be paid in 7 years.
By employing DSP’s low-power SmartVoice technology, Synaptics will be offering its customers a full range of advanced wireless connectivity solutions that are cost-effective. This will help the company strengthen its wireless connectivity portfolio and also diversify its (IoT) (internet of things, an acronym used to describe all sensors and computing devices embedded in everyday objects) product portfolio.
Figure 1: By strengthening its IoT portfolio, Synaptics is further diversifying its product portfolio to ensure that it can capitalize on growth across the major sectors of the consumer technology industry. (Source: Synaptics)
In September, the company announced a partnership with Edge Impulse, a machine learning development platform for edge devices that is making IoT devices smarter and more efficient. These edge devices are being used to provide connectivity between the local area and wide area network. The partnership aims to integrate Synaptics’ Katana Ultra-Low-Power platform with Edge Impulse. The combination of two will yield a complete solution for the customers to create, train, and deploy customized models of AI solutions for a wide range of applications. The Edge Impulse platform also offers the flexibility of creating production-ready models at a much faster rate coupled with greater efficiency. It also has a module for testing, training, and model optimization for developers to provide seamless solutions. The innovative cloud-based platform of Edge Impulse enables the developer to deploy models in as little as five minutes without writing a single line of code.
In June, the company announced that its touch controllers from the (RIO) family that are designed for (OLED) display devices will be used by leading mobile brands One Plus and OPPO. These touch controllers are crucial to supporting the LTPO-enabled OLED displays in the upcoming flagship models of these brands. The low-temperature polycrystalline oxide (LTPO) is a thin film transistor technology that is gaining popularity as it allows OLED display devices to offer a dynamic screen refresh rate according to usability – this technology is enabling devices to become vastly more energy efficient.
The downside of impacting the touch performance associated with the use of LTPO-enabled OLED displays has impacted its adoption among mobile manufacturers for a long time. Synaptics’ touch controllers are addressing the issue of touch performance by dynamically adapting to the display refresh rates of the display to provide the optimum touch experience every time. The feedback received so far is promising and would provide a bigger exposure to the company’s touch controllers. The successful results of Synaptics’ touch controllers with LTPO-enable OLED devices will create more demand for its products creating an opportunity for the company to further widen its customer base.
According to the financial results for the third quarter of 2021, the company posted revenue of $372.2 million translating to a growth of 13% compared to the same quarter last year. The gross margin is at 53.3% which is the highest margin level ever recorded. Gross margins have also grown by an incredible 47.2% as compared to the third quarter of last year. This further demonstrates Synaptics’ ability to boost profitability across its suite of products.
The net income for the third quarter was $40.2 million with an (EPS) of $0.99 per share. The recent diversification strategy of the company has so far brought great results and is expected to continue to do so in the future.
Figure 2: The revenue growth over the previous quarters has shown a steady increase. This can be partially attributed to growth in IoT revenue and is expected to increase further in the future with their Edge Impulse partnership. (Source: Synaptics)
The IoT portfolio of the company has performed significantly well as it contributes 55% of the total revenue earned by the company. The leadership of the company has expressed confidence that they will be able to translate similar results in the last quarter to the current year owing to the greater demand for the products, especially for the IoT product line.
Continuous strong financial results posted by the company reaffirm the position of its leadership to make Synaptics a preferred technological partner for its customers. The company’s IoT portfolio is expected to fetch great results due to the high demand and competitive products. The company’s recent acquisitions of the DSP group have provided a competitive edge over other manufacturers. With this acquisition, the company has secured a leadership position in the market of wireless connectivity solutions, further expanding growth opportunities in a new sector.
The long-term future outlook for the company is great for investors looking to capitalize on growth across the wider technological industry. With a variety of product applications and a wide customer base, the company has secured stable revenue sources for long-term stability and growth. As Synaptics continues to innovate and provide cost-effective and reliable solutions to its customers, it should provide ample opportunity for investors seeking long-term gains.