No investor, technologist or individual who studies the way disruptive technologies reshape industries will argue about the impact mobile has had on consumers and businesses alike.
The early days of mobile were simple phones that could make calls and text, but the convergence of semiconductors, higher speed connectivity, the Internet and apps have led to smartphones and tablets that today can let people communicate, shop, bank, pay bills and share information. Not to mention what social media like Skype, Apple Pay, PayPal, Facebook (NASDAQ:FB), Twitter (NYSE:TWTR), Instagram, LinkedIn (NASDAQ:LNKD), Amazon.com (NASDAQ:AMZN) allows.
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We’re in the early innings of this sea change where mobile connectivity will soon be viewed like electricity -- something you need to have. As an investor, that means drilling down on key technologies and the companies that are enabling this mobile revolution.
Skyworks Solutions (NASDAQ:SWKS), a RF semiconductor solutions provider that counts the who’s who among its customer base, is one of these companies. As Skyworks has increased its dollar content in smartphones, tablets and other applications, its share price has soared 155% in 2014 to close last Friday at $72.70. With wearables, the Connected Car, Connected Home and the Internet of Everything poised to gain ground, analysts from Pacific Crest to JMP Securities have upped their price targets on SWKS shares to $90-$95 in recent days.
I recently had the chance to speak with Skyworks Chairman and CEO David Aldrich about navigating the mobile landscape. Here is what he said:
Chris Versace: Mobility has enabled one of the greatest transformations of our time. When you look at the world of smartphones and tablets is there much more to go?
David Aldrich: We believe the industry is in the early stages of the connectivity revolution. Consumer demand for wireless ubiquity and the trend towards linking people, places and things in ways previously not imagined is driving connectivity across a growing number of new markets and applications.
Versace: How do you see mobility moving above and beyond those types of devices?
Aldrich: In addition to smartphones and tablets, there is an entirely new generation of devices being developed spanning the connected home and car, medical and industrial applications, smart energy, and a variety of fitness and wellness products. While some of these are still in the early stages of deployment, they are gaining market traction quickly. In fact, a recent report by Morgan Stanley estimates that by 2020 the total number of connected devices could reach a staggering 75 billion units. General Electric, for example, has announced it will incorporate machine-to-machine communications across its entire industrial portfolio, including jet engines, locomotives, turbines and medical devices. This is just one example of how analog end markets are incorporating connectivity -- in many cases for the first time.
Versace: Where do you look to identify trends before they become obvious?
Aldrich: Our priority is providing custom solutions that help our broad customer base navigate increasingly complex analog design challenges. We partner with OEMs and listen closely to gain insight into their product challenges and needs. Having said that, we focus our efforts on high growth markets where we can leverage our comprehensive portfolio of technologies and leading-edge integration capabilities to deliver differentiated, best-in-class solutions.
Versace: What do you envision when it comes to the Connected Car or The Connected Home? Is there some other “connected” that you see out there that isn’t getting any attention yet?
Aldrich: The trend is very real. In the connected home, Skyworks is enabling everything from smart thermostats and smoke detectors, to home security systems, media gateways and lighting platforms. As a result, consumers can turn lights off and on, set household temperatures and secure their home from their smartphone or tablet. And this trend is just beginning. According to some estimates, the connected home market is expected to grow at a 67% compounded annual growth rate from 2014 to 2018 with well over a billion units shipped by 2017.
In the connected car, today we are enabling navigational assist solutions, delivering backlight drivers for in dash displays and analog control ICs for collision avoidance systems and keyless entry. And once again, this market has tremendous growth potential with some estimates expecting it to grow at a 39% compounded annual growth rate over the next four years.
Versace: There is much talk on the Internet of Things. Does Skyworks see it as the mobilization and sensorization of the industrial world or is it something more?
Aldrich: It’s more than connecting the industrial world. It’s about linking people, places and things and is being driven by consumers desire to always be connected. The global proliferation of wireless across a host of new markets and applications is proof that this not a singular event tied to one region. For example, in some countries we are seeing people being connected for the very first time. In others, it’s enabling mobile payments, streaming music/video and the connected home.
Versace: Do you see mobile connectivity transforming healthcare and payments, or any other industries specifically?
Aldrich: Mobile connectivity is enabling both healthcare, as well as payment options. Many patients’ medical records are now online and facilitating the sharing of information as well doctor patient communication. Mobile payment options are also beginning to soar. Suffice it to say we will see a whole host of new and previously unimagined applications enabled by mobile connectivity.
Versace: What do you think are the biggest risks the mobility trend will bring that wouldn’t be there without it? We hear a lot about privacy and the ability to intercept data going to and from mobile devices, but is there something else we should be thinking about?
Aldrich: Privacy is certainly a challenge, but an issue for which many are already seeking solutions. Most would agree, however, that the benefits of mobility and connectivity far outweigh some of the potential risks. There are likely to be other concerns, but these will be addressed as the Internet of Things market unfolds.
Versace: Who are the winners and losers in this new brave new world?
Aldrich: The winners are clearly those who have a broad product portfolio, can solve complex RF and analog design challenges, and have systems integration expertise as well as the scale to meet demand. Those companies selling discrete devices will find it difficult to succeed, even if they have the best performing single function device. Customers are looking for a company that can provide the best performing system solution at a competitive price.
Chris Versace owns no shares of any companies mentioned. All opinions expressed by Chris Versace are solely Versace’s opinions and do not reflect the opinions of FBN, Fox News Network, LLC or their parent companies or affiliates.