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Broadcom: The $600 Billion AI Chip Giant

Asianometry・19 minutes read

Broadcom, the second-largest AI chip company globally, has seen significant growth, with an initial valuation of $4 billion in 2009 rising to over $600 billion. The company's strategic acquisitions, leadership under CEO Hock Tan, and focus on core products and market dominance in semiconductor businesses have been key to its success in the mobile smartphone and AI technology sectors.

Insights

  • Broadcom, the second-largest AI chip company globally, experienced exponential growth from a $4 billion valuation in 2009 to over $600 billion in 15 years, showcasing remarkable financial success and market dominance.
  • Hock Tan, Avago's CEO, strategically emphasized building and maintaining "franchises" within semiconductor businesses, focusing on core products like analog, mixed signal, and optoelectronics, leading to significant revenue growth and market success, especially in the mobile smartphone and LTE booms of the late 2000s and early 2010s.

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Recent questions

  • What is Broadcom's ranking in the AI chip industry?

    Second

  • How much was Broadcom valued at in 2009?

    $4 billion

  • What was Broadcom's origin and focus in 1999?

    Spinoff of Hewlett-Packard, test and measurement

  • Who acquired Broadcom's chip division in 2005?

    PE firms KKR and Silver Lake Partners

  • What was the focus of Avago post-acquisition streamlining?

    Analog, mixed signal, optoelectronics

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Summary

00:00

Broadcom: From Spinoff to Global AI Leader

  • Broadcom is the second largest AI chip company globally, ranking as the 11th largest company worldwide with over $600 billion in value.
  • In 2009, Broadcom was valued at $4 billion, showcasing a remarkable 150-fold growth in 15 years.
  • Broadcom originated as a spinoff of Hewlett-Packard in 1999, focusing on test and measurement, medical products, chemical analysis, and semiconductor businesses.
  • Agilent Technologies, the new company formed from Hewlett-Packard's split, faced challenges post-Dotcom bubble, leading to the sale of its chip division in 2005.
  • The chip division was acquired by PE firms KKR and Silver Lake Partners for $2.65 billion, with Singapore's government also investing.
  • Hock Tan, Avago's CEO, has a diverse background, including roles at Commodore International and Integrated Circuit Systems (ICS).
  • ICS, a semiconductor design house, saw success with a silicon timing device, leading to an IPO in 1991 and a leveraged buyout in 1999.
  • Tan's focus on building and maintaining "franchises" within semiconductor businesses emphasizes core products and market dominance.
  • Avago streamlined its operations post-acquisition, selling off non-core businesses to focus on analog, mixed signal, and optoelectronics franchises.
  • Avago's IPO in 2008 coincided with the smartphone boom, with their expertise in RF filters for mobile phones driving significant growth and market success.

14:13

Avago's Strategic Acquisitions in Tech Industry

  • Avago, led by Hock Tan, benefited from the mobile smartphone and LTE booms in the late 2000s and early 2010s, with mobile accounting for 50% of their revenue by 2013.
  • Avago acquired LSI Logic in December 2013 for $6.6 billion, expanding into data center technology and custom silicon for efficiency.
  • LSI Logic, founded by Wilf Corrigan, specialized in custom chips, hard drive controller chips, and enterprise storage systems.
  • Avago, with a revenue of $2.5 billion in 2013, acquired LSI Logic with $1 billion in cash and $4.6 billion borrowed, then sold off flash memory and network chip units to reduce debt.
  • Avago later acquired Broadcom in a $37 billion deal in April 2016, becoming a major player in high-speed communications equipment and enterprise switches.
  • Broadcom's acquisition of Brocade for $6 billion followed, focusing on storage networking and debt reduction strategies.
  • Broadcom attempted to acquire Qualcomm for $103 billion in 2017, facing opposition from CFIUS due to concerns about national security and competition in 5G technologies.
  • Avago/Broadcom shifted focus to acquiring software companies like CA Technologies and Symantec, leveraging custom silicon design capabilities for the AI boom, particularly with Google's TPU chips.
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