NEW YORK – With almost 60 percent of its business is coming from a single customer – in this case Apple, Inc., it’s not quite kosher to call Cirrus Logic an independent fabless chip company any more. For many in the electronics industry, Cirrus Logic today walks like a captive and talks like a captive company of Apple.
It’s clear that Cirrus Logic has little choice at this point but to do everything it can – from supply-chain management to specific investment choices – to satisfy its biggest customer’s wishes.
Cirrus is predicting its September quarter revenue to shoot up more than 70 percent sequentially – thanks to Apple. At a time when the rest of the industry will be grateful for single-digit growth in the third quarter, Cirrus’ projections are a gift horse that no company would look in the mouth.
Wall Street expects Cirrus Logic, come September, to get design wins in what could be Apple’s biggest product release in years – iPhone 5 or iPad Mini.
The Austin, Texas-based chip company has been gradually adding new technologies to advance its audio codec and secure its Apple design wins. This includes adding in its DSP package features like audio amplifiers and noise suppression and echo cancellation technology for the iPhone.
Cirrus’s chips are also believed to be a shoo-in for Apple’s highly anticipated mini iPad, a smaller-screen media tablet. Apple is reportedly looking to add a 7-inch screen tablet to complement its existing 9.7-inch iPads.
Getting ready with a steep product ramp -- without a hitch -- for the single biggest customer is no easy task. Jason Rhode (left), Cirrus Logic's CEO, talked about the importance of getting the device ready far in advance, securing capacity with fab partners, working with a number of back-end assembly partners and readying a broad array of advance packaging. However, Cirrus is no stranger to such meticulous preparations, noted Rhode. “Cirrus has been a fabless company since 1984 before fabless was cool,” he added.
Why such an intrigue?
Curiously enough, Cirrus Logic’s CEO and a cluster of financial analysts participating in a Cirrus Logic conference call Monday (July 30th) managed not to utter the word “Apple” even once during the Q&A session that lasted almost an hour. They danced around the topic by vaguely referring to “the biggest customer.”
I remember back in 1995, Cirrus was talking very big and touting themselves as the next $1 billion semiconductor company. Their stock went over $60 that Spring before ending the year around $20. It basically spent the next ten or so years declining all the way to $4 and that was before further losses during the 2008/2009 crash. On the good side, Jason Rhode was still toiling at UMD during that period.
We are all speculating but I'm sure both Apple and Cirrus are working hard to not to overly dependent on each other when at the same time they are in a hard embrace. They both know the rules of the market, I hope Cirrus has got parallel design teams churning out other products which can then replace with Apple's when and if they eventually divorce. In that case, IMO, they would see a dip for some time but should still hold on well.
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