Broadcom Inc. Presents at Deutsche Bank 2020 Virtual Technology Conference, Sep-15-2020 10:20 AM - NasdaqGS:AVGO

NasdaqGS:AVGO

- Operational Adjustments During COVID-19: Broadcom adjusted to the work-from-home environment by bringing back 50% of its workforce to the office in North America, ensuring safety measures. The company maintains productivity, especially in large product development and hardware validation, which require physical presence.

• Market Impact of COVID-19: Despite the initial downturn in 2019, Broadcom saw a recovery in the semiconductor market. However, the pandemic caused shifts in demand, with cloud, broadband, and telco sectors experiencing sharp increases, while enterprise demand softened. Wireless consumer demand was delayed due to product launches being postponed.

• Supply Chain Challenges: Initial lockdowns in Asia affected Broadcom's supply chain, particularly in testing and assembly. These issues have largely been resolved, but capacity constraints for leading-edge wafers and specific components remain a challenge.

• U.S.-China Trade Tensions: The semiconductor industry is tightly coupled globally, making it difficult to decouple quickly. Broadcom's exposure to China is 13% of its revenue, and its critical product franchises are less likely to be replaced. The company has seen market adjustments over the past 1.5 years.

• M&A Strategy and Regulatory Environment: The regulatory environment for M&A has become more challenging, especially with U.S.-China tensions and aggressive scrutiny from the European Commission. Broadcom is cautious about the size and type of deals, focusing on manageable acquisitions that fit its business model.

• Software Pivot: Broadcom moved into infrastructure software due to the similar characteristics and business models. The company focuses on optimizing and sustaining critical software, leading to significant profitability improvements.

• Networking Business: Broadcom has not seen signs of a digestion phase in the networking business, with strong demand expected to continue for the next 6 months. The company's lead times and order policies provide clear visibility.

• Wireless Business: The wireless business, despite being seasonal and concentrated, is now considered a core asset due to its sustainable leadership and long-term contracts. Broadcom continues to invest heavily in R&D to maintain its leadership position.