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Broadcom’s Internet of things business grew out of a pet project started a few years ago by a group of engineers interested in seeing what they could do with the company’s WiFi and Bluetooth technologies to connect devices to the Internet and cloud that had never been connected before.
They later would add a software development kit to enable developers to more easily create products and connectivity solutions using the Broadcom technologies. Soon they realized that the effort had become more than a project, according to Stephen DiFranco, who headed up Broadcom’s Internet of things (IoT) business.
“It grew into what became a real business,” DiFranco told eWEEK, noting that in a recent 12-month period, the IoT business generated $189 million in revenue.
However, the unit never fit comfortably within Broadcom, which had a business model of selling chips and wireless technologies into large enterprises. Conversely, dealing in the IoT—particularly in these early days, when the bulk of the IoT devices are consumer products—means selling to large numbers of customers, some no more than a single developer.
The awkwardness was heightened last year when Avago Technologies bought Broadcom for $37 billion. Like Broadcom, Avago sold its products to relatively small numbers of very large customers, DiFranco said. The technology the IoT unit had created was good; it was just that the business model didn’t mesh with what the parent company was doing.
“For their business, [having small numbers of large customers] was great,” he said. “But the IoT business is different from that [business] model. There are a lot of small customers and lots of developers.”
He and Broadcom President and CEO Hock Tan (after the acquisition by Avago, the new combined company took the Broadcom name) eventually decided the best move would be for the IoT businesses to find a buyer. DiFranco looked at a number of potential buyers and partners, and eventually agreed to be bought by Cypress Semiconductor, a company with a lot of customers—about 30,000—and products that included microcontroller units (MCUs), low-power programmable systems-on-a-chip (PSoCs) and memory technologies. Cypress also had a strong presence in such areas as embedded systems and connected cars.
What the company lacked was the wireless connectivity technologies—like WiFi, Bluetooth/Bluetooth Low Energy (LE) and ZigBee—that Broadcom had. Cypress in April announced it was buying Broadcom’s IoT business for $550 million, a deal that the company closed this week. DiFranco—who will hold the same position at Cypress as vice president of the IoT division—said the deal will be a good fit for both companies.
Broadcom’s IoT unit “started as a passion of a few people … and now it’s fully funded,” he said.
The 450 or so employees in Broadcom’s IoT division have moved over to Cypress to create the IoT business there, DiFranco said. While the IoT unit brought the WiFi, Bluetooth and ZigBee IoT technologies to Cypress, Broadcom will keep the WiFi and Bluetooth products that are sold into mobile phones and set-top boxes, he said.
Broadcom’s IoT Unit Gets a New Life with Cypress
The deal brings together a number of complementary products, he said. The connectivity technologies from Broadcom are important, but to serve an IoT market that is expected to grow rapidly over the next few years—the numbers vary, but industry analysts and vendors are predicting anywhere from 20 billion to 50 billion connected devices worldwide by 2020—and to create a complete IoT platform, there needs to be the MCUs, memory and PSoCs for compute. Eventually the wireless technologies will be integrated with the Cypress products.
DiFranco shared a diagram showing the technologies that the combined companies can bring to a connected car. Those include products from Cypress for such applications like infotainment consoles, heating and air conditioning units, diagnostics and performance monitoring, event data recorders and body electronics, and Broadcom offerings for cloud and smartphone connectivity, smart sensors, car-to-car and car-to-infrastructure communication, and media streaming.
A key differentiator for the company over its competitors is the WICED (Wireless Internet Connectivity for Embedded Devices) development kit that developers and makers can use to more easily and quickly integrate wireless technologies into their IoT devices. It also makes it easier to add cloud services from places like Amazon Web Services and IBM BlueMix, Cypress officials said.
It also brings to Cypress a growing ecosystem of IoT developers and products to help support the growing business. DiFranco said developers hit up the WICED site with about 15,000 downloads a month.
“That shows that you have the tools they need,” he said.
Another advantage that the Broadcom IoT group brought to Cypress was a fast turnaround, almost immediately sending out its first invoice after the deal closed.
“They bought a company that was shipping its first products [after the Cypress acquisition] in just two days,” DiFranco said.