Broadcom: The Story of a Semiconductor Giant

Introduction

• Broadcom is the second largest AI chip company globally, valued over $600 billion.
• Grew from $4 billion in 2009 to becoming the 11th largest company worldwide.
• Originated as a spinoff from Hewlett-Packard, through Agilent Technologies.

Origins and Early Years

• March 1999: HP splits, creating Agilent Technologies, including semiconductors.
• Agilent struggled post-dot-com bubble and sold its Semiconductor Products Group in 2005.
• 2005: KKR & Silver Lake acquired it for $2.65 billion; creation of Avago Technologies.

Growth and Strategy

• Hock Tan: CEO known for focusing on core franchises, cutting-edge products, and strategic acquisitions.
  • Previous roles in finance at Pepsi, GM, and Commodore International.
• Emphasizes building strong technology "franchises," focusing resources to dominate specific sectors.

Key Acquisitions and Changes

• 2006-2008: Avago sold non-core divisions, reduced debt, and went public.
• 2008: Benefited from smartphone boom and RF filters for mobile devices.
• 2013: Acquired LSI Logic for $6.6 billion, expanding into enterprise storage and networking.

Major Deals

• 2016: Acquired Broadcom for $37 billion, renamed company to Broadcom Inc.
• 2017: Attempted (but blocked) acquisition of Qualcomm for potential expansion into 5G markets.
• Software Acquisitions: Shifted focus to software by acquiring CA Technologies, Symantec, and VMware.

AI and Future Developments

• Custom Silicon (TPU): Partnered with Google on TPUs, leading to significant revenue growth in AI chips.
• 2024 Projections: Expected to earn $8.5 billion from Google for TPU production.
• Competition from NVIDIA in AI chip design, with potential for market rivalry.

Business Model and Conclusion

• Broadcom operates like a private equity firm, acquiring and optimizing technology franchises.
• Successfully navigates through strategic acquisitions to maintain growth and market dominance.
• Positioned well within the AI boom, with potential investment in AI technologies to sustain its status.

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References:

• Inspired by insights from industry analysts and historical company developments.