Broadcom: The transformers

Almost 25 years have passed since Henry Nicholas III co-founded Broadcom in Santa Monica, California, with Henri Samueli, his doctoral advisor at the University of California, Los Angeles. This was the beginning of broadband as we know it, and Broadcom has since evolved into a manufacturer of integrated circuits for data, voice, and video applications. In May 2015, rival chipmaker Avago Technologies announced it is buying out Broadcom in a cash-and-stock deal worth $37 billion (Rs 2.3 lakh crore), pending regulatory approvals. While Nicholas has retired from the company where he was CEO until 2002, Samueli is chairman of the board and chief technical officer. During his recent visit to Bengaluru, Samueli recalled the company’s beginnings.

In 1991, there was no broadband service to homes even in the U.S. and Europe. People used voice-band modems that ran at a maximum speed of 56 Kbps. So the mission of our company, then named Broadcom Telecom, was to deliver broadband over the cable network before expanding to other segments—digital subscriber line (DSL), optical, and wireless.

The ecosystem was nascent. The fabless semiconductor industry was in its infancy. Taiwan Semiconductor Manufacturing Company (TSMC) was founded only four years before Broadcom. As a contract manufacturer, it needed partners because it was the world’s first dedicated semiconductor foundry [Intel and Texas Instruments had their own foundries].

In those days, the TSMC president was a Broadcom board member. That was the key partnership because we needed each other and the relationship expanded dramatically. The industry was new, and there was an opportunity for startups, with venture capital investors pitching in.

In 1993, Scientific Atlanta, a Georgia-based equipment manufacturer for cable television, telecommunications, and broadband, selected us to design digital TV set-top boxes for Time Warner. It involved making a three-chip unit into a single-chip one. We did it in just 10 months, and our revenues crossed $1 million.
Three years later, we developed the industry’s first integrated cable-modem architecture, VLSI (very-large-scale integration). It paved the way for taking high-speed cable modems to homes and made the dial-up service obsolete.

The same year, Broadcom and Nortel jointly developed a low-cost, single-chip ADSL (advanced digital subscriber line) technology, which gave us access to cable operators and telephone companies at a time when both were competing to provide high-speed Internet access.

In 1998, we introduced the first single-chip cable-modem component, which paved the way for faster broadband in homes. By this time, Broadcom had 400 employees and shifted to a new headquarters in Irvine, California. In April that year, we listed on the Nasdaq. The following year, we had a joint development programme with Cisco Systems to deliver high-speed wireless Internet service.

The key objective for us always was to carve out our niche, which was broadband, and we focussed on that from day one. We were the first broadband semiconductor company in the world, so we had a lead in the market. We have continued to invest and diversify into segments such as DSL and wireless. We didn’t have large research budgets, so we had to be selective about the segments we would enter. Getting the timing right was critical too. We entered the Wi-Fi segment fairly early, and now we are the leader there. But businesses shouldn’t be too early because they need customers also.

We foresee the Internet of Everything (IoE) market to become huge, especially in the industrial and commercial segments. There are a lot of opportunities, such as automating factories and keeping track of inventory. If factories can put wireless connectivity into every box that is shipped, they will be able to pinpoint the location of the shipment. It is difficult to predict how this will play out, but the potential is huge. We need to grow the market to a size that can drive prices down so that Wi-Fi sensors can be used in every consignment.

India is the largest Broadcom site outside the U.S., with 15% of our workforce. The amount of intellectual property created here is equivalent to what we do in the U.S. There is engineering talent to create, design, and test chips, and even deploy them in local markets.

The team is highly integrated. In the set-top box market, it has worked with operators who had unique requirements, which were different from the chips we make for the U.S. and European markets. Working with local partners, our engineers in India define custom products, design them, and bring them to the market.

Being leaders in the broadband and set-top box markets, we have a headstart in consumer opportunities too, like digital homes. It is natural to expand into this field, where everything at home is going to be connected. The opportunities will be in IoE, wireless server stacks, and appliances. While wearable technologies in medical and fitness categories are getting a lot of attention, I feel digital homes and factories are much bigger opportunities.

(As told to Kunal N. Talgeri)