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Skyworks, Panasonic forming RF filter JV; Avago moves lower

  • Skyworks (SWKS - unchanged) and Panasonic (PCRFY) are forming a JV to develop SAW filters for mobile devices and other products.
  • Skyworks will pay $148.5M in cash for a 66% stake in the JV, which will be have 590 employees and facilities in Japan and Singapore. The deal is expected to close by the end of calendar Q3, and be immediately accretive to margins and EPS.
  • Rival Avago (AVGO -1.4%) is trading lower. Avago has differentiated its RF modules (particularly for 4G designs) partly through the use of FBAR filters (a type of BAW filter) offering better performance than SAW alternatives
  • Morgan Stanley estimated last fall Avago has a ~70% share of the premium filter market, and predicted the market will grow to $1.75B in 2015 from slightly over $800M in 2013. TriQuint (TQNT -0.2%), about to merge with RF Micro (RFMD +0.8%), was estimated to have the remaining 30%.
  • Skyworks asserts the JV is complementary to its ongoing BAW filter investments, and that Panasonic is the leader in the growing market for high-performance TC SAW filters - typically more expensive than traditional SAW filters, but cheaper than BAW filters. The company predicts the deal will allow it to "develop customized solutions for any band configuration where filter technology is applicable."
Comments (3)
  • Philip Marlowe
    , contributor
    Comments (1202) | Send Message
     
    It seems that SWKS is taking over Panasonic's hi performance filter division, with Panasonic keeping a minority share. This should be good for SWKS. They are already an operational business group with revenues and profits. It is good to hear the deal will be accretive to margins. This would mean that this filter division has higher gross margins than SWKS, which is impressive since SWKS gross margins are already pretty good.

     

    This should also be good strategically. Every conference call SWKS management have to defend accusations that they are not as well positioned because they do not make their own filters like AVGO. Well now that is no longer an issue.
    28 Apr 2014, 03:06 PM Reply Like
  • s_seawright
    , contributor
    Comments (2) | Send Message
     
    It is clearly a move to counter the RFMD/TQNT merger. However, neither Avago, TQNT or PANA are leaders in the mainstream SAW filter business which is dominated by Murata and TDK. I think it would be worth asking how these two large Japanese multinationals will react. Do they need to look for a PA acquisition? If so, ANAD would be worthy of consideration.
    29 Apr 2014, 07:01 AM Reply Like
  • Joe Madden
    , contributor
    Comment (1) | Send Message
     
    Even with this JV, Skyworks doesn't have the technology to compete in many of the new 4G frequency bands. Avago and TriQuint have filter performance that Panasonic cannot match.

     

    Mobile Experts has a detailed market study which goes into deep detail on this topic

     

    http://bit.ly/RcqLRN
    3 May 2014, 08:59 PM Reply Like
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