As a semiconductor supplier for the global wired and wireless communications industry, Broadcom's reach is far and wide. With sales and marketing offices and R&D centers around the globe, Broadcom manufactures about two billion chips annually and is one of the top 10 semiconductor companies by revenue. Its System-on-a-Chip (SoC) technologies and software products deliver voice, video, data, and multimedia in several major market segments: home and office (cable modems, DSL, and set-top boxes), mobile (Bluetooth and GPS), and infrastructure (controllers, embedded processors, and security). Broadcom's customer roster includes such elite technology names as Apple, Cisco, Dell, Samsung, and ZTE.
Headquartered in Southern California, Broadcom's major offices are located throughout North America. In total it has more than 40 offices in 15 countries across North America, Europe, and Asia.
Broadcom operates in three main business segments: Broadband Communications, Mobile & Wireless, and Infrastructure & Networking. Mobile & Wireless is its largest segment, generating about half of total revenue, while Broadband Communications and Infrastructure & Networking generate balanced portions of the remainder.
In order to cut down on the high cost of owning and operating semiconductor wafer fabrication facilities, Broadcom relies on several silicon foundry subcontractors in Asia to manufacture a majority of its products. Key foundries include Taiwan Semiconductor Manufacturing , GLOBALFOUNDRIES, Semiconductor Manufacturing International, and United Microelectronics. Meanwhile, it product testing and assembly is carried out by independent foundries, test subconbtractors, and assembly and packaging subconbtractors, including United Test and Assembly Center, Advanced Semiconductor Engineering, Siliconware Precision, and STATS ChipPAC.
Sales & Marketing
Broadcom markets and sells its products in the US through a direct sales force, distributors, and manufacturers' representatives. The majority of domestic sales occur through this direct sales force, which has offices in California and throughout the US. The company markets and sells its products internationally through regional offices in North America, Asia, and Europe and through a network of distributors and representatives in those same markets, as well as Australia.
The majority of Broadcom's products are distributed internationally through a distribution center in Singapore; a smaller portion is distributed domestically through an operations and distribution center in the US (Irvine, California).
Marketing is geared at leading technology manufacturers, who embed them into an array of home, mobile, and network infrastructure products. The company's five largest customers -- which include Apple and Samsung -- together accounted for more than 42% of sales in fiscal 2011.
The company's revenue rose more than 8% in fiscal 2011 over 2010, helping to keep Broadcom in the black for the eighth straight year. Year over year, top segment Mobile & Wireless rose about 21% in 2011 thanks to strong sales of wireless connectivity and cellular products. The Broadband Communications segment declined roughly 5%, owing to lower demand for digital television and Blu-ray disc products and set-top boxes. The Infrastructure & Networking segment increased 4% driven by demand for Ethernet switching and wireless infrastructure products.
Most of Broadcom's revenue is derived from sales of semiconductor products, while a much smaller portion is made from software licenses and royalties; development, support, and maintenance agreements; and data services. Licensing revenue and income is generated from an intellectual property agreement with QUALCOMM. That agreement is scheduled to end in 2013.
For fiscal 2011, Broadcom's net income declined to $927 million from about $1.1 billion in 2010. This decrease was primarily related to lower gross margins and an increase in R&D expenses.
Increased investment in R&D -- in this case salary increases for its R&D engineering staff -- is no surprise given that Broadcom operates in a highly competitive industry, in which new product development is always evolving and often complex. Churning out new and improved semiconductor products enables Broadcom's sales and marketing team to continue to achieve design wins with top technology companies like Apple and Samsung.
Another key part of Broadcom's strategy involves expansion through acquisition of businesses, assets, products, and technologies. Over the past two decades, Broadcom has acquired about 50 companies, which have expanded its market reach, engineering staff, product portfolio, and technological capabilities in the areas of home broadband, enterprise and storage networking, and mobile and wireless communications.
Mergers & Acquisitions
Among Broadcom's key acquisitions are its 2012 $3.7 billion purchase of NetLogic Microsystems, which expanded the company's product line to include knowledge-based and multi-core embedded processors, as well as digital front-end processors used in wireless networking devices.
Prior to that in 2011, it paid $313 million in cash to buy mixed-signal wireless chip maker Provigent in a deal that added expertise in semiconductors for wireless network backhaul equipment.
Co-founders Henry Samueli and Henry Nicholas hold about 26% of Broadcom's voting power each. – less