Broadcom Inc. (AVGO)

Status Update

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Jul 21, 2021

Great. So I think we'll get started. Good morning, everyone, and thank you for joining us. I'm Stacy Rasgon. I'm Bernstein's Senior Analyst. I cover the semiconductor and semiconductor capital equipment space here at Bernstein. Today, it's my honor to host Broadcom's teach in on their storage segment. Today from Broadcom, we have Hock Tan, Broadcom's President and CEO Jaz Tremblay, Jack Rodani and Dan Dolan. Jaz is Vice President and General Manager of the Data Center Solutions Group at Broadcom, responsible for developing silicon software and adapters for data center storage solutions to cloud service providers, enterprise customers and embedded OEM systems. Jazz also manages the PCIe switching and Ethernet adapter franchises and joined Broadcom through the LSI acquisition where he was Vice President of North America Sales. Jack is Senior Vice President and General Manager of the Brocade Storage Solutions division at Broadcom. In this role, he's responsible for leading the strategy and execution of the company's storage networking business. He joined Broadcom through the Brocade acquisition, where he was Senior Vice President of Storage Networking. Finally, Dan is Senior Director of Marketing of Broadcom's HDD storage business and is responsible for driving the strategy and roadmap for the company's HDD storage electronic solutions. Dan joined the company also through the LSI acquisition, where he was the Director of Marketing for LSI Storage Products and previously held product marketing positions at Agiosystems and LUSN Technologies. Now today's teaching will last about 1 and a half hours. We can go a little longer if we need to. We'll have Q and A following the presentation. To ask a question, if you registered through Bernstein's portal, you should have a link to our Pigeonhole Forum where you can type your question in. If you don't, you can feel free to e mail questions to me at stacy.razgonbernstein.com and we can make sure to get those asked. With that, I'll turn things over to Hock Tan, Broadcom's President and CEO. Go ahead, Hock. Thank you. All right. Thank you, Stacy. I'm pleased to be here today for storage teaching, the number 3 in our continuing series of providing more transparency, more details of the various segments and drivers within the Broadcom platform. Now having said that, and I'm as Stacy said, I'm not planning to say much here today, but I'll start with a few words about Broadcom and the critical role Broadcom plays within the storage ecosystem. Then Jazz, Jack and Dan will lead the discussion of our storage franchises. All right, next to begin. Well, at the risk of repeating myself and this same slide here I presented in the last two teaching, but it's worthwhile perhaps to reinforce our business model that drives Broadcom. So today Broadcom is a leading provider of technology to the global IT ecosystem and a critical partner to the world's largest enterprises, which includes most of the Fortune 500. And as we note here on the left, since 2009, which happens to be the year we went public, we expanded the Broadcom platform from 8 to 23 different product franchises. And we have stayed true to how we build these category leading franchises. And let me describe what each is. There are 3 common attributes. 1st, each provides mission critical technologies to end users and that ensures a sustainable demand. Secondly, in each vertical, we have the technology leadership. And finally, we not only have technology leadership, we tend to be number 1 market share. And you hear today how our storage franchises fits very squarely within this criteria. So looking again at this slide since 2,009 on the left, we have grown our revenue over this period of times, 2,009 to 2020, through both organically. And I will say organically, we've probably grown to the extent I can estimate probably high single digits compounded annual growth rate, but also we've grown through acquisitions. And you see here revenue has grown to $24,000,000,000 from $1,500,000,000 when we went IPO, a 16 times growth rate. But during the same period, consistent with our business model I described earlier and clearly a contradiction to the naysayers some of naysayers out there who view incorrectly that Broadcom is simply an industry roll up, which we have done, which increased our R and D spending 25 times. We need to do that to grow and sustain our leading franchises. And what's even more interesting, the end result of that is that we grew operating profit 84 times. You might say how? Gross margin, product margin improved as we go through newer and newer product generations and we have a platform scale on infrastructure costs. Right next, underpinning this space this technology leadership are our basically roots, which comes from the great innovations of American technology icons of the such as Bell Labs, HP, Hewlett Packard, LSI Technologies and even Broadcom Classic. We gained this heritage and the exceptional engineering talent that goes with it through our acquisitions as you gather. And today Broadcom has emerged as having the largest intellectual portfolio intellectual property portfolio, I'll say, in the semiconductor industry, more than 20,000 fundamental patents. And our storage business is no exception and is an example of the value created through our acquisitions during this period of LSI Technologies, Proton Classic, PLX Technology, Brocade and Emulex, acquisitions from which we extracted set of product franchises, which you'll hear more about today, with a history of proven technology, broadening innovation and execution and very deep customer relationships. Next, and as highlighted here today, the focus of the teaching will be our products, hardware and software and technologies applied in the enterprise server storage connectivity segment. Together, these businesses represents over $4,000,000,000 of annual revenue in fiscal 2020. And as highlighted, this end market is driven over 80% from enterprise demand. And now traditional enterprises very, very relevant today have started to recover from the pandemic. Wasn't the case 12 months back over the last most of the last 12 months, but as we see over the next 12 months and with great visibility these days because of tight supply constraints, we are seeing pent up demand from enterprise customers resulting in a very, very strong and accelerating demand trajectory in this business back half of twenty twenty one and continuing now as we see through most of 2022 calendar year. And next please, my final slide just simply sets the stage for today's teaching. Across all data center deployments as together, data is created in servers, computing that is, and stored in storage and access through the network. Broadcom, its platform, enables this server storage ecosystem by connecting these elements in a very in a highly reliable and extremely efficient manner. And as you know, about roughly half the 12,000,000 service today go to enterprises. So today go to enterprises and every one of these servers does require some form of storage attach. In fact, 70% of these enterprise servers have direct attached storage controllers, which is an excellent franchise for us. And Jess will discuss that today. Now with the excitement particularly, and I would call it and the marketing hubris in the computing space between Intel, AMD as well as future possibly future multi based servers, connectivity of servers to storage has become quite exciting and game changing. Meanwhile, the other 30% of enterprise servers remains very stable, boring almost because they use very high end fiber channel send attach, a purpose built network for mission critical servers and storage. This is another franchise Jack will elaborate more on today. And not to be forgotten, the primary choice of high capacity storage in data centers today, both in cloud and enterprise, continues to be nearline hard disk drives. Thankfully, we have not had much footprint on the client side as Dan Dolan will explain later historically. But we have been able to leverage what we had initially as an emerging nearline hard disk drive business into today a very substantial franchise within the hard disk drive storage industry. With that, I'm pleased to turn the presentation over to Jazz. Thank you, Hock. So my name is Jazz Tremblay. I've been with the company for 15 years. I'm responsible for the Data Center Solutions Group. And today, I'll be giving you an overview of this franchise and how we've achieved a number of market share. So with this slide, what I'd like to do is put things into context. Enterprises, their main focus is to deploy applications. And once the time comes to choose the infrastructure to deploy that applications, data protection and data privacy are core decision criteria and they have options from an architecture perspective. The first option is on the left for mission critical applications. Here, the data is stored on the drives located in external storage systems and the data is accessed through servers interconnected through a specific storage networking, specifically fiber channel. This architecture provides the highest level of data protection and security. The second option in the center is for enterprise grade applications. Here, the data is located in the drives in the service directly interconnected to the CPU with a purpose built storage adapter that provides protection and security. And this is the core focus of the division that I run-in the storage connectivity franchise. The third option is moving your workloads in your applications to a cloud environment. And typically, the drives are located in the servers and software is utilized to provide data protection, typically replication where you simply copy the data from 1 server to the other. So again, when the time comes to pick your infrastructure to deploy your application, data protection, data privacy are very critical where you decide, do I keep this application on prem or hosted on the cloud? And in 70% of the cases for enterprise servers, they deploy the middle application where storage adapters. Next slide, please. So on this slide, I'll give you an overview specifically of the core product that we sell in this franchise and how we've achieved number 1 position. So I'll draw your attention to the picture on the left. You have a storage adapter in the center. This is the product that we make, composed of silicon software and a board level product. Its role is to interconnect the drives with the CPU and make this visible by the application. They are deployed in the server. So it's an option that goes inside a server. Three core functions for that storage adapter. The first one is the drives and the CPUs have different protocols. So the storage adapter converts the protocols from the drives to the CPU. The second one is drive failure protection. This is very critical. So imagine you have an application that's using the storage adapter and you have 3, 5, 10, 12, 24 drives and one of these drives fails. Well, the storage adapter has the ability to reconstruct the data and provide seamless data protection to the applications. So drive failure protection is a second key function. The third function is server power failure protection. So think of a financial institution that has an application that needs to register a transaction, write a transaction to the drives, write a financial transactions. And while that transaction is in flight, the server loses complete power. Well, our storage adapter has an autonomous energy source, specifically with SuperCap technology that allows you to complete the write even when the server loses power. So again, the storage adapter has 3 core functions. The first one is drive protocol conversion. The second is it protects against drive failure. And the third one is actually protects against complete power failure of the servers to ensure you don't lose rights or any recording of transactions. And these things are very important for financials, healthcare, multiple sectors. And this form of data protection is compatible and optimized for databases, ERP, CRMs and many, many types of applications. And in fact, all the server suppliers offer our storage adapters as an option for data protection. So this franchise, the way that we're growing this franchise, growing revenue is 2 aspects. The first is we're gaining share. We've been continuing to gain share over the past decade. And generation over generation, these servers require more performance. You need the drives are getting faster and the storage adapters are getting much faster. And I'll show you a little bit more details on that. So we're growing ASPs consistently generation over generation. And compounded, this business has grown mid to high single digits consistently over the past several years. Next slide, please. Okay. So this franchise has existed for over 30 years. And let me go through a little bit of this heritage and how we've built up the number one market share position. So again, 30 year history. In fact, my Head of Software Engineering, my Head of Silicon Engineering and my Head of Storage Architecture, all three of them have worked together and for the same franchise for the past 30 years. Multiple company names, but they've always stayed together. We've got quite a heritage and a team that the industry has learned to trust and know over decades. This really all started in the 1990s when we introduced the first storage controller. And then in the 2010s, we introduced jointly with the ecosystem, the SaaS protocol, a new protocol for drives and this brought a lot more resiliency and performance to storage connectivity. And in the recent years, the focus of our investment has been to deliver the same data protection and trust that people have in the solution with NVMe type drives. And NVMe type drives provide better latency and more performance, and we're aligning our roadmap to deliver this level of performance. In fact, if you look at the slide and you take a snapshot of the past 10 years, over the past 10 years, we've increased performance by 20x, 20x more transactions per seconds over the past 10 years. And with the sustained innovation that we're an investment that we're making, we have a path to continue on that performance gain trajectory over the next several years. But at the end of the day, this is important in this heritage and the team and building this trust with customers is, if you're an insurance company, over the weekend, you experience a series of drive failures or issues with your infrastructure and the Broadcom storage adapters protect your data, they recover it seamlessly, you come back to the office Monday morning and you didn't miss a beat there. That's how the trust is built and we take this responsibility very seriously. Next slide, please. Okay. On this slide, I'll go over the 3 core components of our leadership. How have we achieved number 1 position over multiple decades of sustained innovation? Well, the first core component is the software, the most trusted data protection software. It's taken decades to create. It's tens of millions of it's 10,000,000 plus lines of code. It's real time, high complexity of real time software. The second component is we built our own silicon. So purpose built silicon specifically for this applications. It's not general purpose silicon, it's silicon dedicated for storage connectivity and data protection. And when you take the software, the data protection software and the purpose built silicon together, that's where you get the highest performance with the highest data protection. And the 3rd core component of our leadership is the strong ecosystem support. It first starts with the operating systems. So if you're an enterprise and you want to deploy your application on, let's say, Red Hat Linux, you deploy Red Hat Linux and out of the box, our storage adapters and drivers are recognized automatically. And we do this for a very broad set of operating system. This just simplifies the deployment model. And second element of ecosystem support is drive compatibility. So what customers want is they want to make sure that the application, operating system, storage adapter and drives combined with a server combination works. And the ecosystem relies on us to ensure the drives are compatible with our solution. We have a very stringent drive compatibility infrastructure. In fact, just a few weeks ago, we had Samsung come to our offices in Colorado Springs, and they brought their latest and greatest drives to go through the joint testing together. They know and as multiple drive vendors know that for the enterprise space, having the Broadcom seal of approval for storage and being on our compatibility list is important. So we invest quite a bit in ecosystem support. So we take the software, it's taken decades to perfect. We continue to optimize the purpose built silicon for performance and we invest heavily in broad ecosystem support both OS and drives. Next slide please. Okay. Let's go through how we've created the broadest and most complete route to market for our products. So when it comes time to purchase and deploy the products, the enterprise customers want simplicity. And we have 3 pillars for our go to market strategy. The first one and most important is server OEMs. So imagine your customer, you want to buy a Dell server, you go online and you go through the configurator and then you're offered a series of options for storage adapters and data protection. And you can pick and choose them and then when you buy your server, it simply comes with it. It's a very simple process and we have this process in place for all the industry's leading server OEMs. The 2nd pillar is server ODMs. Similar approach, but their focus is hyperscalers, telcos and a few select large enterprise customers, but same approach and simplicity in terms of ordering. You pick your server, you configure it, you're offered options as a storage adapter and the solution comes with you fully integrated. It's not a separate purchasing decision. The 3rd pillar of our route to market is channel. So this is a network of 100 and 1000 of system builders and integrators globally. These are typically companies that assemble software, hardware to create purpose built solutions, either for specific verticals or actually for individual companies. They assemble solutions. And what they do is they buy through distributors our storage adapters and they fully integrate them. With this community, we'll often found some of our most advanced users. So just to put it simply, from a route to market, we wanted to simplify the purchasing process and we've built up a very complete and thorough global that covers all segments route to markets for our storage adapters. Next slide, please. Okay. So we've covered storage connectivity. Let's step back and look at the different types of connectivity required in a server. So server as displayed here on the left, there's about 12,000,000 servers sold annually, globally about 12,000,000. These servers are composed of CPUs, memory, storage and a broad array of connectivity. And over the past 6 years, through multiple acquisitions, Broadcom has built the broadest, most complete portfolio from a server connectivity perspective. So let me go through a couple of these. The first one is storage, which we covered. Storage adapter is our leading server connectivity franchise, came to us from the LSI acquisition. The second one is Ethernet connectivity. So high speed Ethernet connectivity inside the server, same business model, storage adapters that came to us from Broadcom. Thirdly is PCIe adapters, PCIe switching that gets deployed mostly in servers that came to us from the PLx acquisition. And finally, fiber channel adapters, those came to us from the MNx acquisition. And if you compare storage, Ethernet, PCIe and fiber channel, they all share the same customers, the same route to markets and the same fundamental business model. And we've achieved number 1 position overall in server connectivity. So next slide please. Okay. So let's look at the competitive landscape a little bit and see where we stack up. So from a storage perspective, again, the franchise has existed for more than 30 years. We've achieved number 1 we've had number 1 position for quite a long time and are investing significantly given the scale that we have from a revenue perspective to keep that leadership position. On PCIe switching, we're also number 1 with a very strong position and fiber channel, we're also number 1 globally. The competitive landscape for these solutions is extremely stable and we're not seeing new entrants specifically in storage, PCIe and fiber channel. And we are growing quite rapidly from an Ethernet perspective. So for storage, server connectivity, we're number 1 overall and we're number 1 in 3 of the 4 categories that where we participate. And this is important for customers. They like having a company that is dedicated and focused on server connectivity. They want to interface with a team that offers multiple solutions and they really like the fact that we're driving more investment than the competition across these product categories. So really from a product and investment perspective, no one else has this range or breadth of solutions and customers are really appreciating the focus that we have and the commitment we have to this franchise. Next slide, please. So this is the final slide. So just to put things and summarize things. From a portfolio perspective, we're extremely well positioned in the server space with number 1 position overall in server connectivity. We're investing in 4 areas, and we've achieved number 1 position in 3 out of the 4. Storage connectivity in servers is one of the flagships in this overall portfolio and 70% of enterprise servers utilize our storage connectivity. We've achieved this for building the trust with our customers over 30 plus years, and we're going to continue to invest in this space. And with this, we've actually achieved a pretty cool milestone. We've deployed now over 100,000,000 of our storage adapters. And our strategy is very straightforward. It's focus, be committed to server connectivity. Because of the revenue scales in the number one position we have, we're out investing our competitors in these individual categories and delivering highly high differentiation from a performance perspective. And overall, we have a path to continue to grow this highly profitable franchise. With that, I'll pass it on to Jack. Thank you. Thanks, Shaz. Hello, everybody. My name is Jack Rondoni. I am the General Manager of the Brocade Storage Networking Business Unit. I've been with Brocade for about 15 years, came in obviously through the acquisition, been associated with Fibre Channel for almost 20 years. So first slide. When you think about the storage networking market, I always start with who uses storage, who uses SANs. And it's enterprises that run mission critical applications. And what a mission critical application is, the way to think about that is, if that application that's running on that server, if that is not running, your business comes to a complete halt. So it's not like e mail or something that's not important. Think about it as you're doing ATM transactions. If that mission critical ATM application is not working, you're not doing business. If you're an airline operations and that application is not running, you are not that business is not running. If you're processing payroll, and you can't because you're mission critical, your business comes to a stop. So it's very important when you think about SaaS, those are the types of enterprise those are the type of applications that are deployed on storage area networks. And the reason is these applications require that the underlying infrastructure, meaning servers, network and storage, deliver the reliability and resiliency to keep the application running 20 fourseven. It delivers very low latency to keep the applications performing as expected as well as being able to scale as well as being highly secure. The type of information, credit card numbers, Social Security numbers, very, very important. So security, obviously, is also very, very important. So because of the nature of the importance of these applications to these enterprise businesses, we see that these applications continue to be deployed primarily on premises, an infrastructure that is on premises. Because the cloud, even though it's been successful in other models and other use cases, will have it's not suited necessarily for those types of characteristics. And there's certainly we've all seen in the press certain things that has happened with the cloud and where some of the outages have happened and other things have happened. So it's very important when you're thinking about storage area networks to always start with the notion of who is deploying it, mission critical applications for enterprises. And then as I talk through this teach in and as I introduce myself as from Brocade, the important thing to remember, even though this is a Broadcom, the 2 franchises that deliver fiber channel networking are Brocade and NUELUX. And those two names are brands in the enterprise storage networking business. They are the trusted names in FibroChannel SaaS. You'll hear me use those names quite a bit because we're one of the earlier inventors from the beginning. So go on to the next slide. So now that I introduced the who uses these storage area networks, I want to make sure I'm very clear on what is a storage area network. What is a SAN? So it is a purpose built network, meaning this network is built primarily for storage workflows, for storage information. And as I mentioned before, it connects mission critical applications that are sitting on the server on the far left and connecting to external storage on the far right. Now on the far left, that red adapter there, that is a fiber channel HBA, and that is the Emulex brand. They provide the connectivity to or through the network, which is where Brocade is in the middle there, to a storage array where there's also a fiber channel adapter, which is where the storage is. So again, the way to think about it is saying is the key applications running on the server, the actual data itself, Social Security numbers, key business operations, credit card, that flows through the network and then into the centralized storage on the right hand side. Now these SANs that are delivered by Brocade and MLX use a protocol which is called Fire Channel. And Fire Channel, as I mentioned, is part of the purpose built technology for SANS. And it differentiates itself versus other network technologies in a number of ways. First is fiber channel is a lossless network. And the best way I can explain that is think about 2 people that are playing catch with a ball. In a lossless network, before the person throws the ball, the person who is to catch the ball says, I'm ready to catch the ball, and they're capable of catching the ball. So they send it over. And the ball, in this case, is mission critical information. In other networks, for example, general purpose Ethernet networks, the way that would work is the person who's throwing the information, they don't they're not going to wait or ask if the person is ready to receive it, they're just going to send it. They're just going to throw the ball over. And we're going to keep sending it until somebody says, oh, I got it. Now in a general purpose, let's say, workload or applications that's not mission critical, that's fine. Maybe 90% of the time, that's good enough. But as I think we can all appreciate, when you're transferring, let's say, your 401 from one institution to another institution, 90% is not good enough. So the lossless aspect of how fiber channel was built is a key part of the differentiation of why fiber channel continues to be deployed with mission critical applications. The other aspect of it is every generation of product, the speed doubles. And I'll talk about this a little bit more. And that's very important. As Jazz showed, the number of transactions per second on these drives are just phenomenal. The scale of information and data is going up massively. So you don't want your network to be a bottleneck. Your network's got to be able to handle the volume of that information. And then the other key aspect of fiber channel that differentiates itself is integrated security. The best way to think about this is fiber channel is off by default, meaning if you are able to go into a data center and plug into that fiber channel network, not that happens. It's off by default. You have to go and do further configuration. Now on some general purpose Ethernet networks, that's different. You plug it in, it's connecting, it's ready to go. It's kind of when you connect into Wi Fi, you're all ready to go. But you don't want that really when you're running mission critical applications. And so that's another aspect of what really differentiates Fibre Channel. So I talked about mission critical applications, hopefully give you a real clear view of when I'm talking about SANs, I'm really talking about the connection from the server all the way to the storage and why fiber channel has continued to be very well differentiated in the space. So next slide. So let me go through a little bit of kind of the history of revenue. So this is quarterly revenue for 20 years. Fibershow has been around for a while. And it includes switches as well as adapters, so it's combined. And the sources are 3rd party analysts. So basically, this market for the 1st 10 years, let's say, from year 2000 to roughly 2,008, was in a ramp phase, basically kind of peaked out in 2,008 or so. Then there's the dip of the kind of economic meltdown in 2,008. But really what I'm going to focus on is the last decade, starting kind of where that number one is. And basically, what we've seen over the last decade is that this market has remained stable for over a decade. And as you can see, sometimes quarters up, sometimes quarters down. We saw some strong growth in 'eighteen, 'nineteen. We did see some declines in 2020 because, as Hock mentioned, that impacted the pandemic on the enterprise. Also, of course, in us since we're in the enterprise. Now we're certainly starting to see a second half improvement starting in 'twenty one and expect a rebound as well in 'twenty two. Now more importantly, we expect this revenue dynamic to be sustainable for the foreseeable future. Let me explain why that is. Next slide, please. So this chart here is the exact same revenue chart, right? So this is the exact same revenue chart. But what I'm showing in the colors is really by generation of products because what I think it clearly shows is a refreshed dynamic that happens within the fiber channel SAN market. So again, if I start with maybe the 1st 10 years as kind of the ramp up phase of fiber channel, there was 1, 2, 4 gig products. That's all kind of the gray market. That's what was shipped of kind of that class of products. Now starting in kind of the middle there in 2010 or 20, 2009 just starting to ramp, you see the 8 gigabit portfolio of products coming in. Remember I said speed doubles every generation? So we came out the industry came out with 8 gigabit. Then what happens is it starts refreshing the installed base that is there. And then you can see with the darker blue that the 16 gig portfolio came in. And again, it's refreshing previous generations and previous generations of that. And as you can see in the red, as we get to the 2020 time frame, we're in the midst of a refresh with 32 gigabit products, call it Gen 6. So you can see that this business, especially in the last 10 years, is really driven around refresh from new portfolios of products coming from the fire channel industry. The other interesting thing is that as these new products come out, again, double speed, easier to use, lots of value for it, there is an ASP growth associated with the new portfolio, double the speed, as I mentioned. And so that ASP is that growth of ASP per port is also an important characteristic of how this industry is able to keep the fiber channel revenue sustainable over time. So next slide, please. So I went through kind of the snapshot of the last 20 years and maybe the dynamics maybe the last decade and how tech refresh and new portfolios really drive the stability and sustainability of the fiber channel market. So I'll talk a little bit more about this tech refresh process here. So first, it's required to keep up with the increasing application demands. There are more transactions being done, certainly more online transactions being done. Again, we talked about in the previous presentation the number of transactions per second of storage. Storage is getting faster as well as it's getting larger scales for drives. And so these same product generations, on average, it's about 5 years. Some customers go a little bit longer, so a little bit less. And it's that 5 year refresh cycle. As I mentioned, the higher ASP per port because of the new portfolios that really drive customers to refresh. So they get better speed. They're able to scale their applications more. They get new capabilities within the new portfolio that makes operations easier. And that's why we see our customers refresh. Now if you look at just the last two generations, again, this is from third party reports, There's about 43,000,000 switch and adapter ports. And in fact, there's probably another 20,000,000 or so of the generation before that out there. So there's a very large installed base of these fiber channel switches and adapter ports that are basically the source of the tech refresh phenomena that I showed in the previous page. And the dynamics of it are actually pretty simple, and we commissioned an internal study in this. And 90% roughly of the refresh that we see is of existing footprint. Customer has a private channel sand today, adds on to it, brings in new portfolio to replace the existing fabric. So the vast majority of it is the 90% range is really just refresh of existing fiber channel footprint. The other 10% are more greenfield opportunities that we've seen. And think of those as just maybe a new data center build out, jump off, if you will. Now 5% of those roughly we've seen are we'll be considering alternative technologies. And depending on the mission critical app, we've seen some small migration from fiber channel footprint towards that. But also, we see about half of these new greenfield opportunities are new fiber channel installs. And there, it's truly a jump ball. And we've done very well executing, and we actually win the vast majority of those. So it's very interesting dynamic. It's almost like software renewals, right? At some point, the contract comes up and they got to go refresh or you got to go and renew it. It's very similar to what we see here. And then as I showed, we're in the midst of a 32 gig refresh cycle right now. And what Broadcom has done through Brocade and Emulex is we've launched our Gen 7 portfolio, which is the 64 gig product. So remember, the speed doubles every time. That was introduced just late last year. So the timing of the new portfolio's Portech refresh for the foreseeable future is perfect because as the enterprise, as I mentioned, comes out of the challenges of the pandemic and certainly into next year, not only are we in the strength of our 32 gig portfolio, but we also have our Gen 7 64 gig portfolio at the ready. Go to the next slide, please. So I mentioned Broadcom. It's the sand industry leader, and that's really driven through the 2 franchises associated with Fibre Channel, that being Brocade and Emulex. And the thing to remember also is Brocade and Emulex were there from the beginning. So there's 25 plus years of innovation. Both companies had one of the first products in the market in the late '90s. Brocade has been a switch market leader. For the last decade, we've been about 70% market share. And as mentioned, Emulex also has is a market share leader as well for HBA. So very well positioned, both historically and currently and into the future with our Gen 7 portfolio. Next slide, please. I talked about the Gen 7 portfolio a little bit, and I just want to go into a little bit more detail. First is, this was the industry's first, currently only, end to end 64 gig portfolio. Again, we call it Gen 7. And if you remember what constitutes the SAN, you have the adapter for the server, Gen 7 ready. You have the Brocade switch. So you have a couple of pictures of the various switches that we have right in the middle. And then you have the other adapter that sits in the storage array. In addition to just doubling of speed, inside the fabrics, inside the SAN itself, we have what's called autonomous SAN technology. And essentially, the way to think about this is there is information flows that go over a SAN. Remember I talked about mission critical applications. There's a storage flow of information. And that storage is encapsulated in a fiber channel frame that's sent through the fabrics. But what we're able to do is because now the number of transactions has gone up massively, the amount of data is continuous to grow. We are able to basically profile or baseline an end user's environment. And actually, that's very important because first off, every business is different. So the how information flows through the sand is different. And so having that kind of baseline of this is what normal is, is very important. And that's what our autonomous sand does automatically. Now once it baselines, it self optimizes. And one of the ways it self optimizes is there's some business applications that run extremely fast, maybe they're running some of those new NVMe drives or other things. And then there's some applications that are slower, maybe some legacy tape drives, other things. Part of the self optimizing is our SANs are able to see how these frames flow through there, and they're able to put the, let's say, call it the slower applications in the slow lane. And I think of it as the highway and the high priority or maybe kind of more the money information goes in kind of the higher speed. So that self optimizing is done automatically. And then there's a self healing capability as well that if something goes wrong and let's say a upgrade on a server or storage array does not go correctly, and if you remember that analogy about the ball going back and forth and they say, I can't catch it, we can help self heal that. And so this is very important technology. And if you remember what I said is, this is purpose built for storage flows. A general purpose Ethernet network doesn't have that storage essential kind of analytics or view of what goes through a SAN. Only Fibre Channel has that. So this autonomous SAN technology translates into making it significantly easier to operate. So not only do you want your sands to be high perform I mean, very reliable and high performance, you want them easy to use. And the best way to use is the performance stays high automatically, and the resiliency is always there. So it's a very, very important part of our portfolio and differentiates us. The other thing is as part of the legacy associated with our business, we have a lot of highly tenured fiber channel experts in our business units. And what they are able to do is also provide very proactive and automated support. So the smartest fiber channel experts in the world, there's no question, are within the Brocade and Emulex divisions. And they also provide then that support that enterprises and our storage OEM partners require to keep those applications exactly where they are. So this portfolio, we're very, very excited about them. As I mentioned, we launched it end of 'twenty. And as we see as we get into the second half 'twenty one and next year, we see 64 gigabit Gen 7 adding on to the transition for our portfolio. So next slide please. This will be my last slide. So the fiber channel roadmap, the best way to think about a fiber channel roadmap is we always align it with how the enterprise storage is going. So when enterprises are updating or modernizing their stores, it could be all flash, it could be NVMe, we align our capabilities with the SAN fabrics with that. For example, our autonomous SAN technology, it doesn't matter if it's fiber channel drives or excuse me, scheduling drives or NVMe drives, all that autonomous capability that I talked about will work. So we align our roadmap to where enterprise storage is going. The second thing is analytics is important, meaning as the storage flows, if you remember as the storage flows are going through the fabric, well, we put all these little sensors in the fabrics to basically look at the frames, never the data, we never look at payloads, just the frames as they go through to understand so we can see how to baseline, how to optimize, how to self heal. And then automation, the last is really about simplifying and enabling the SaaS to participate in modern orchestration tools that enable infrastructure, IT operations to manage their environments as effectively as possible. So kind of to wrap up, as I've shown, fiber channel is a very resilient market. As enterprises come out of the pandemic, coupled with the introduction of the new generation of Gen 7 64 gig portfolio that will support further tech refresh, we are very much looking forward to continuing to drive this market for the foreseeable future. And with that, I will turn it over to Dan. Thanks, Jack. Good afternoon, everyone. My name is Dan Dolan, Senior Director of Marketing for HD storage. I've been with Broadcom and in the HD storage market now for over 20 years, And I'm excited to be with you today to discuss Broadcom's growth and leadership in the nearline HD industry. With that, we'll get started with my first slide. As you can see on the chart, the demand for nearline data storage is growing. To put this in perspective, more data is created today in 1 hour than was created in an entire year just 20 years ago. While there is a perception of the hard disk drive market declining relative to SSDs, which is happening in client disk drives, you can see that demand for Mirrorline data storage is growing. If you look back to 2016 on the left side of the chart, you can see that the majority of the bits were stored on client disk drives. But there is a shift that's happened where now the far majority of the bits are stored on nearline disk drives. In fact, nearline disk drives are expected to account for more than 80% of the bits stored in nearline relative to SSDs out through 2025. On the next slide, we'll talk about how Broadcom Electronics play a key role in disk drives for data centers. As you may know, in data centers, there are racks and racks and rows and rows of disk drives. Inside every disk drive, there are 3 components that are responsible for the operation of the disk drive. Broadcom provides 2 of these 3 components, the preamplifier or preamp, as we call it for short, and the system on a chip or SoC. The preamp is located inside the disk drive very close to the head sensors and the media or disks to provide the highest signal to noise ratio. The SoC is a large mixed signal device that has integrated many functions into one chip over time. These two devices together comprise the data path that enables the approximately $10,000,000,000 nearline disk drive market that is growing. Next slide, please. Both devices are complex custom designs that are very difficult to develop. The preamp is a high speed mixed signal device that continues to add new functions and capabilities such as laser drivers to increase the capacity of the disk drive. The preamp is primarily an analog device that uses decades of specialized design techniques to provide world class performance. The SoC functions as the brain of the electronics inside the disk drive and has several IP blocks that are used to process information and control the operation of the drive, including the read channel core, processor subsystems and high speed interfaces. The read channel core uses sophisticated signal processing algorithms to increase the capacity of the drive by converting the analog information it receives from the preamp into digital ones and zeros that can be used by the host to transfer terabytes of information from the disk drive. Next slide, please. And we'll talk about why we win. There's four key reasons why Broadcom has maintained its leadership position in the nearline disk drive electronics market, and I can sum it up as follows. Our leading process technologies and innovative IP designs have a time to market advantage that produces quality silicon that works right the first time. The preamp uses custom process technologies that are developed by Broadcom and specifically tailored for the HD Nearline preamp, providing significant advantages to our customers. The SoC leverages Broadcom's low geometry process technology leadership to provide our customers with the leading edge benefits on the most advanced technologies. Through strategic acquisitions and our market expertise, we have been winning with this strategy for over 2 decades. Now on the next slide, we're going to look at where the HD industry roadmap is headed. As you can see on the left side of the chart, the nearline HD industry continues to innovate to increase capacity and depends on Broadcom Electronics to make it happen. Not only do we expect to grow with the market, but we'll add silicon content to help continue driving solid growth. And finally, I'll wrap up on my last slide with some key points. Broadcom is a leader in the large and growing new line hard to describe electronics market. We have a long history and a proven track record with over 2,000,000,000 units sold. Our annual revenue growth of over 20% since 2016 also demonstrates the strength of this market and Broadcom's performance leadership. With that, I'll hand it back to you, Hock. Thank you. Okay, I think you're on mute. Still on mute, Hock. Stacy, could you hear me okay? I can hear you fine. Is it? I think we're fixing it. There we go. Yes, we got it. Okay. There we go. Stacy, you hear me now? Yes, sorry. Sorry about that. Just I want to leave you guys with just 2 thoughts before we open up to questions. One is, as you can probably gather today, in this space of server storage connectivity, Broadcom is pretty much ubiquitous. That doesn't stop innovation technology from upgrading in the hardware, software in this space. We out invest our limited competition in this space. And because we do that and we continue to do the out execute, we have been gaining share quite dramatically over the last 5 years. 2nd point, deep customer relationships, strong ecosystem support you've heard about are very important characteristics and we have those. We're trusted. We're practically branded in this space. And the message I'm coming to you is price sensitivity is not a big thing in this space. And the combination of these 2 makes this segment of our market of our business, our platform extremely attractive. So with that, Stacy, let me turn it over to you for questions. Got it. Thank you so much for that, Hock. So we are going to go to the Q and A portion of today's teach in. Again, if you register through Bernstein's portal, there should be a link to what's called our pigeonhole forum where you can type in questions. If you do not have that link and you just like to e mail questions to me, you can do that. My e mail is stacy. Razbonbyrnstein.com. We actually have a ton of questions in the vision. We probably won't be able to get to them all. I do have a question of my own. One of the biggest questions I always get on this segment just is growth. People tend to think of it as an ex growth segment. It doesn't sound to me from what I'm hearing today that you guys have shared that point of view. And I know you've given some growth targets for some of these that you talked about Brocade being stable. But just in general, can you talk about how you see normalized growth across these three segments going forward? And maybe how that rolls up into how you guys view for normalized growth for the storage segment overall? Like I get the near term cyclicality and some of those other drivers that are going on. But how do you think about that? Well, yes, we have history of 10 years, 5 years. But if you look at it over the last 5 years, as I indicated, we have the organic growth in the home market is about mid single digits. Couple that with share gains in this segment, we have been growing closer to high single digits on a compounded annual growth rate, keeping in mind there have been some level of cyclicality, volatility through year as we go through years quarters. But over compounded 5, 10 year level, we see ourselves continuing to grow probably mid to high single digits. Got it. And one of the top questions in the Pigeon Lock just sort of relates to it, but specifically for the fiber channel business for Brocade. And I get the driver you sort of talked about stable revenue with ASPs going up on new technology. But that chart that you showed, I believe that was for the whole market showed ASP per port doubling on stable revenues, which implies units or I guess at least ports potentially cut in half over that time. Is that actually true? And I guess how does that trend going forward? How do you what do you expect for like, I guess, unit or port growth versus ASP trends going forward to maintain these kind of like stable relationships? Do you think like ASPs can like double again over the next 5 years and ports get cut in half again or what? If I could take it on first, then you give them on elaborate. What you're missing in that and what Jack may not have elaborated clearer is this, let me do the simple math. There are As you said, Jack indicated, there are over 43,000,000 ports installed today. The dynamic chart that Jack was showing, but not all 43 refresh in any 1 year, Stacy, keep in mind, translate to an annual cadence of refreshment, you're talking about 4000000, 5000000 pots refreshing or coming up on an annualized basis, not $43,000,000 or $43,000,000 $43,000,000 is installed base, annualized is $4,000,000 $5,000,000 Of that $4,000,000 $5,000,000 to use Jack's example, 90% of it goes into the same fiber channel vendor because there are only 2 fiber channel vendors in this world. And we're the leading guys, of course. And they are in they do not interoperate in the data center. So you refresh the data center, you refresh with the incumbent, 90% goes in. And Jeng indicated only 10% is a jumbo. And on that 10%, which are mostly greenfield site or they totally rip out and expand the new data center, half of it goes back to data centers and the other half possibly go into other technologies. So you're really talking about 5% of a refreshment of 10%. That's how the math really works. And that's how you end up, we call it stable, it's actually slightly growing. I will call it low single digits to even possibly in some years mid single digits is what fiber channel is. And it's driven by the fact that even as you have slow attrition of the parts, keep in mind, attrition is 5% of probably 8% of an installed base, your price is going up pretty dramatically with new generation. Got it. Datchit, do you have anything you wanted to add to that or is it Hawk's good? No, I think it was all set. Got it. Another question for you on Brocade. So this is a segment that you actually don't include in storage anymore. You obviously put it it's in the software segment. It was in storage before you bought CA and formed that software segment. Why do you include it in software? Like is the go to market? Is the customer strategy different for like Brocade versus some of the other storage segments? Like what's the reason for that differentiation in your reporting? It's end user. The end user is a system. Jack is selling software and with an appliance virtually. It's the product is really that Jake described very strongly the software and you sell it as a system. Okay. But it is the same customers, correct? It's still the same enterprise customers? Well, JPMorgan, say, is a huge customer for mainframe CA, mainframe software, Cementech, cybersecurity protection and proxy as they are for JAKs, Brocade, Fiber Channel SENS systems. Got it. Got it. I have another question here. Let's if we can stay focused on the fiber channel for a minute. Somebody would like to know like how you see the growth opportunity in 2020 beyond for that business as we get, I guess, sounds like 2 different cycles. We've got just a general enterprise rebound and a move to 6062, which obviously should have higher ASPs and we'll see about the units. But do you expect like into 2022 like growth and I know like things are cyclical, but do you think growth into 2022 and beyond can actually be higher maybe than call it the mid single digit kind of growth levels that you've been talking about historically, given those two cycles I kind of hope to be playing out simultaneously? Jay? Yes. So certainly, as I mentioned, I think you can hear me, right? Is 2020 because of the rebound from the pandemic, we would certainly expect a rebound in a growth, maybe single digit kind of number. And as you get into that refresh cycle, I think the way to think about it is 90% is existing installed base, 5% is kind of this jump ball, which we win the vast majority of the time. So if we can execute as we have been on that beyond even 2022 and with the shift to more 32 gig and more 64 gig, certainly, I think that eking out a single digit growth is a realistic goal for us as a business. Got it. I guess the 132 would be 5 years, you said these are about something like a 5 year cycle, so that'd be 5 years? Yes. 132? Yes. I mean, it's kind of you saw from the chart maybe halfway through and 64 is just our add on and just keep going. Got it. Got it. Yes. It's a very go ahead. Sorry. No, go ahead. Finish. No, no, no, I'm not talking. Okay. Got it. I don't know if you guys can give us any sort of like high level view for how the storage segment splits out between I guess in your reported segments, it would be primarily service storage, connectivity and hard drive. Can you guys give us any sort of like just even just a ballpark estimates for how the storage segment roughly splits out between those 2? And then Brocade, we kind of know a little bit like here and there, but in Well, I would say it's about roughly the size of Brocade and the Jazz BIS segment, which is the enterprise grade connectivity for storage and largely enterprise again, is about roughly the same size as Brocade. And so if you take this $4,400,000,000 revenue segment, I described in one of my slides early on, thing as it has broken down to almost like I'm trying to say close to 40% for both Jazz and Jack, roughly close to 40% of that total for plus $1,000,000,000 And about 30% over 30% is on our hard disk drive business that Dan Dolan went through. In other words, our hard disk drive market is almost $1,000,000,000 It's just about $1,000,000,000 to put it in round numbers. Got it. Do you guys do sort of similar stuff in SSDs as you do for HEDs? And I saw the chart. I know it's smaller. But obviously, it is growing. It's growing off of a small base, but on a percentage basis, it should be growing. Well, I love to answer that. Then I'll give pass it to Dan to give you more elaboration. Hard disk drive, as Dan indicated, there are only 3 electronic components, chip components, semiconductor components in a hard disk drive. One is the SoC, Dan talked about, which is really the brains, the rechannel. It used to be the rechannel, it's gone beyond rechannel. Now as things like HAMR come into play, it ends in the various other items. Then there's the pream, which also has taken on more as more discounts in for nearline and in complexity of the architecture enhances and multiple heads show up and you start going to 10, 11 disc with more preamps. And the 3rd item, which we do not anticipate is controllers, mono controllers. There's somebody else. Those are only 3 components, but we have 2 of them. And in each of the 2 we are in, there's differentiated deep differentiated technology in the semiconductor space we own and keep enhancing. In flash controllers, which is in SSD to create solid state drives, while there are technologies, we do not see there's two reasons why we're not be considering it as the core franchise. One is the differentiated technology is not that obvious and deep, even though we do touch on that, they are not that obvious and deep. And secondly, it's just the dynamics of the market, right? If you have a fab that produces in an SSD $10,000 of memory, flash memory, dollars 20 flash controller can be given away for free. Okay. Got it. Dan, did you have anything to add? No, I didn't. I covered it very nicely. Thank you. Got it. I have a question on like you talked about some of the differentiated technology, especially process technologies within preamps and even in SoCs. My understanding, I thought you guys were fabulous on these parts, but from what you said now, I'm not so sure anymore. Like how do you actually handle the manufacturing of those parts? For the SoC, that's true. It's a fabulous model, Stacy. On the preamp, it's a process technology that we own and it's custom and developed by us. So it's more of that kind of internal model. Okay. Do you actually make them yourselves in your own fabs or do you like outsource them using a process that you'd like to transfer? We make our own fab. Make them, make them. Okay, interesting. Yes. To keep part of the differentiating strategy. Got it. Can you talk a little bit about what makes it special? I gather it's a mixed signal, so like analog, digital kind of thing, but there's anything specific that you want to call out? Specific for the preamp or both the preamp? Preamp. For the preamp, as I said, it's a process technology that's developed by Broadcom. So it's a proprietary process technology. But you can imagine, if you're developing the foundation that our design team works with to provide the best products in the industry, we focus on the parameters inside the process and we can tune those specifically making other trade offs in the process to provide the best performance. So that kind of gives you a flavor of how we do that. We've done that for several generations. Got it. Stacy, I can add to that. I can add to that because I know why you're driving it. Now there are people out there who talk about doing preamps. You don't do it outsourcing, not if you want to compete against us because the process we develop is unique, is a unique process and it's not available easily out there in the foundry industry. And that's what creates the differentiated performance. And not to mention, we own the fab, so the cost to us for wafer is half the cost if you try to do a foundry with suboptimal process. Got it. Interesting. Another question on HDD on the pigeonhole here. Somebody would like to know what happens to HDD in preamp content as the industry moves to HAMR drives? And what your view in general is on how much of nearline HDD shipments HAMR will represent over time? That's a very good question. So the HAMR technology requires a laser driver, which is an entirely new IP block that we add to our preamps to drive the lasers that are in the disk drives. The amount of capacity that can be increased with the addition of laser drivers and the HAMR heat assisted magnetic recording technology is significant. And we do absolutely expect a transition to this technology, but it's a whole system solution that's being worked out. We think the technology is mature and it will absolutely ramp in the future. I can't provide an exact date, but it will ramp. Got it. That's helpful. And Steve, just to follow on to that question, on the storage connectivity, because Dan and I go hand in hand, the drives in enterprise and data centers attached to storage adapters, multi actuator technology and innovation in the drive space is actually driving refreshes on our side. If you go back 5, 6, 7 years ago, the industry was so maniacally focused on SSDs that you kind of saw a little bit of innovation in the HDD space, not as much in the limelight. But the top hyperscalers have made it clear that HDDs are going to be core to their storage infrastructure for decades to come. And we're seeing actually a wave of refreshes for the top hyperscalers and an enterprise of HDD systems, purpose HDD systems. And they want to make sure from a connectivity perspective, they're future proof for the multi actuator drives. Got it. One quick question just popped up here as well. I know you mentioned that like client isn't a huge driver of this business, but you do have some client exposure in the HDD business, I assume? Yes. Dan, go ahead. Yes. The answer is it's a good question. We do have some client business, but it's not the majority. The majority of our business is near Got it. And I guess given the trajectory that you put for nearline growth, it sounds to me like, again, going back to the growth story in general, you do think the HD business is a growth business, it can grow. Again, barring the cyclicality and everything that can be there, but Yes, I absolutely think it's a growth business for us, yes. Like Hock talked about, it's maybe single digit kind of growth, but it's a growth business. Got it. There's a question here on the pigeonhole, people asking about CXL, Compute Express Link. Is that a protocol that's important for this business? And do you have any plans to support it? And are there any consequences if you do not? So, Akal, feel that question? No, please. Yes, Jess. So there's if you zoom into a data center, there's the connectivity landscape is quite complex. The pillar for connectivity inside the data center is Ethernet. You've got fiber channel. You've got multiple HDD and SSD technology, SaaS, SATA, NVMe. And you've got specific memory interconnect like DDR and so forth. And then there's another category of basically AI, ML accelerator interconnects. Historically, that has been PCIe as the interconnect of choice. And we're actually the market leader in PCIe interconnect inside the data center. That's an area that we invest quite a bit. Now what has happened with there's been a whole series of different connectivity protocol, Gen Z, CCXL, NVLink for that type of application. And many people in the industry have been chasing the Holy Grail of data center connectivity, which is let's have one connectivity fabric that will cover storage, networking, accelerators, memory, the whole works. Personally, I don't believe that that's going to materialize. And I think CXL is going to be very successful in the memory disaggregation space, where basically companies want to serialize and disaggregate DDR and other types of memory, which historically has not been interconnected. That has been dominated by DDR as a protocol directly interconnected to the CPUs. So I think CCX, CXL is going to be good initiatives. We're very supportive for memory disaggregation. Now for AI, ML interconnect and things of that nature, whether it replaces PCIe or not, we'll have to see. But it is, it's very interesting to follow the dynamics around protocol races and different interconnections inside the data center. And there's been many that have come and gone, but Ethernet, Fiber Channel, PCIe, storage connectivity protocols, DDR have been there to stay. So we'll see what happens. Got it. It's helpful. Question on one of the connectivity areas you plan. So you obviously mentioned you're number 1 in 3 areas. What about Ethernet? What is your competitive positioning in Ethernet? So yes, go ahead. So Ethernet is a very important segment and we have number 1 market share in Ethernet switching, both in hyperscale and enterprise. That's an area where separate franchise and there was a teaching session on that. We historically Broadcom has been number 1 in Ethernet connectivity, Ethernet adapters. Since then, we've invested in different areas. And right now, we're really focused on investing and leading in simple enterprise NIC technology. And we're seeing a lot of refreshes in that space. We're seeing transition from 10 gig to 25 gig happening in the enterprise and that's driving ASP gains and refreshes. And in the hyperscalers, we're seeing the transition from 25 gig to 100 gig, 200 gig. And we're also seeing in HPEC in different sub segments in enterprise adoption of 50 gig, 100 gig technology streaming adapters. So that's an area where we're focusing our investment and we have aspirations to regain the number one position in enterprise space. Well, Stacy, let me expand on that. We have not much invested in that space. What you're saying, NICS, network interface cuts is what you're saying, let's cut to the chase. We're not considered it as a very strong differentiated space previously, historically, when it was 10 gigabit and below, not big deal. And we do it, we have the capability to do it, but we have not focused on it. Since it's gone up above 10 gigabit connectivity, the certain bandwidths, 25, 50, now 100, We have stepped up our focus on investing and basically creating products in that space. And as Jess said correctly, we gave them the level of investments and given the fact that it's in a way looked at as really a key part of connecting to the server of a server connecting to the network or connecting to storage for storage control for storage connectivity sometimes. We have made a we have basically taken an initiative that we want to be going to be number 1 in this space. And we are well on the way to doing that with the level of investments we have made, especially in the 50 100 gigabit bandwidth, NICS. Got it. And as you see, just to add on to that, the recipe for success is very common across the different storage adapters that go into servers. It starts with leading process and leading IP. So typically on these technologies, we're 1 process node ahead of our competition, which drives better power, better performance. The second thing is the SerDes, which is the underlying technology where you get the reach and the connectivity base, because at the end of the day, this is all connectivity. You need to have the best SerDes with the best reach, best power, best performance. And this is an area where we really out invest the competition and differentiate significantly on Surtees, and this is shared across the different storage connectivity. Then the second aspect is mindset around low power hardware accelerated technology to deliver performance. And the 3rd recipe for success, which is common, is the system mindset, is delivering the purpose built silicon with the software, with the adapter and having an execution machine that basically out performs the competition when you integrate all these things together. That's the secret sauce to our success. And we're going to apply this, like Hock said, to a high performance Ethernet mix. Got it. That's helpful. That's helpful. There is there are other questions here on the handle. There was one I just saw that I wanted to grab. Hold on a minute. Here we go. Somebody is asking about cloud storage adapters. They wanted to think through how content per drive for Broadcom varies I guess between cloud and enterprise. In particular, the question is, is there lower Broadcom content per drive for cloud storage adapters since data protection is performed at the software level or is that just not an area where you guys play anyway? Stacy, exactly right. And I think as Jay has put up in one of his early slides, with the exception of Dan Dolan's hard disk drive, where a big part of hard disk drives non enterprise, but in the cloud and certain cloud or large hyperscalers like, well, I won't mention names have used hard disk drives as their core storage. What JAC and Jazz largely focus on their business is driven through enterprise. Cloud use software replication as Jazz say for really data protection and data recovery. And in Jack's case, totally enterprise, not cloud at all. And in most of Jazz's case, I would say most of it very little cloud. Got it. There's another question, I think around some of that. Again, Jazz talked about the ones of data protection software. Somebody would like to know if there are R and D synergies with Symantec, especially around data loss prevention products and other capabilities that you can or would bring with future products along those lines? So security is key for our customers, but it's different type of security than what a Symantec would offer. So the security aspects that we're really focused on is protecting the data from a physical perspective and protecting the server infrastructure from external attacks. So we're very focused on security, but it's a different complementary security than application level security threat protection. Got it. That's helpful. But overall, I would say that we differentiate on security. And overall, as a company, we have a mindset around being leaders in security at the right level for the technology that we build. Got it. That's helpful. We're bumping up on our hour and a half. So I'm going to, I guess, open it up to Hock or any of you if there's any closing remarks, anything else anybody wants to say at this point as we bring things to a close? Stacy, not at all. And if you have any further questions you really want to pick, by all means, continue. But no, we don't have anything to add. Okay. There are more questions, Trevor. We can keep going on some of these. Happy to do that, Stacy. Yes. There's a question on market structure. So I know you said and they were this pretty good talking specifically about Marvell. I think across a number of these segments, you do compete with Marvell. Are most of these primarily duopolies like hard drives, I think, as you and Marvell. You talked about a fiber channel like HBAs. I think it was Zenulux and QLogic as you and Marvell. Can you talk to maybe just a little bit broader around the market structure, not just in the connectivity, but maybe more broadly across these different things? Well, the most interesting one you talked about a little and you're touching on earlier in your question, Stacy, is how this drives. And I mean, we made a point of saying, our legacy, as Dan indicated, has been where we started from years back is when Climb was a bigger part of data storage in enterprise than were nearline hard disk drives. Marvell has always been in their SoC. They did a large they were a large SoC player in client. Nearline had been more LSI from which it became Broadcom. And we use that to and as we're lucky. As Nearline expanded dramatically, we're very well positioned to strengthen where we are. And today, by far, we are nearline SoCs. And if you take the broader market, we have a larger share on the SoC side in nearline hard disk drives and enterprise drives. Client, we never had much position in the SoCs as Dan indicated. In preamp, we're basically the only guy. Regardless what you may hear out there, Stacy, we are the practically only guy, all right, no matter what you may hear out there. Now in host bus adapters fiber channel, you're right, there are only 2 players And that's Amulex and QLogic, which is under which has been which was acquired under the Marvell umbrella. And you saw the market position, relative market position of 2 players, only 2 players. In fiber channel, when it comes to the switch, storage area network as Jack indicated and Jess put up in his one slide, there are only 2 players. There's Brocade with over 70% market and there's the other guy, which is a subset vertical within Cisco MDS. And that's where it is. And as I said, that's put it bluntly, the competition in server storage connectivity when it comes to enterprise is interestingly limited. I guess given that enterprise focus, there's another question I have around synergies with some of your other franchises, for example, particularly networking and Ethernet switch. You talked a little bit about that. But just in general, are there broader synergies or complementary nature between aspects of storage and some of your other franchises? Or are they still pretty siloed? They are starting to converge, Stacy. And you hear a lot of marketing talk out there that as part of running, trying to manage networking connectivity better, you take as Jester start to touch on, you touch that little beachfront property on the server call network interface controller or network interface card call NICS from being just a plain translator from PCI Express from the CPU to Ethernet on the network to perhaps creating some intelligence in those NICs. And they call them smart NICs, which I have indicated in earnings call before and Jess is in. Or else now people heighten it by calling them data processing unit, DPUs. All that nice stuff is coming down to hasn't emerged yet to more than a hill of beans at this point, smart mix, because it's too customized on workloads, but also this. Running it in a server is a totally different game, totally different requirements, understanding from running a network where you have to understand the characteristics of network and the key thing is congestion control, management of workloads in the network to ensure ejects start to touch on historic, how you want to transfer data without congestion. Whereas in a server, no such thing happens. And right now, to be honest, there could be a convergence where then the base front property called NICS might emerge as an interesting content increase for our networking vertical or networking segment. As of right now, it's very, very server focused as Jess indicated very clearly. And we are now focused on just becoming the number one player in that space. Got it. I have another question here. I guess to get to the growth targets that you've talked about, obviously pricing seems to be playing a very large role across a number of these different segments. Can you give us some idea of which segments are maybe more dependent on increasing ASPs growth versus units? Or are they all dependent on pricing? No, not all. But this is a very price insensitive market, as I indicated earlier, as you get gathered from it. We're ubiquitous and it's mission critical and it is a lot of it is very trusted because you think about it, right? For Jazz as an example, just using example, the rate controller for data protection, data recovery sitting attached to a server barely represents 8% of a server value, total ASP. But you bring it but if it goes down, all hell breaks loose. So it's more important is quality, reliability and performance. Jens, you want to add to that? Yes, I'll add to that a little bit. So it's I think the important thing, the ASP increases are linked to technology refreshes. So example, the underlying interconnect inside a server is PCIe. To go from PCIe Gen 3 to Gen 4, it took the industry 8 years. Now we're going from Gen 3 to Gen 4 and potentially Gen 6 in less time than it took to go in one generation. And it's a doubling of performance every time. And so that creates opportunities, but it makes it very difficult if you don't have the investment scale to keep up with this pace of innovation. And it all goes back when you're doubling these performances and these technology refreshes, you've got to have the core IP, the core process, you've got to have the architecture innovation to deliver the performance. So it's making it more difficult for new entrants to come in or for competitors that don't have the revenue scale to invest and keep up with that technology refresh. So really the ASPs are linked to technology refreshes. And if you look at an Ethernet, 1 gig, 10 gig, now we're going from 25, 50, 100, 200 gig, The cadence of these refresh is actually accelerating. There's so much appetite for data services inside core data centers that the industry needs these technologies. Got it. Is it fair to say, like, I'm curious like how like on a qualitative basis, how the investment levels vary across the segments? I mean like looking outside, it would seem to me that probably like the storage connectivity space might have like higher different or higher levels of investment than say HDD. But like is that how it is or is it more uniform across the different segments? How do you think about allocating the R and D? No, it's not allocated. Each of them are run very different, very uniquely. We have our own in each of these product segments as we do have in the other 20 odd product segments out there product verticals we have out there, each runs their own R and D team, each runs their own marketing team. And the level of R and D varies very dramatically. And obviously, the longer the product cycle, the R and D percentage of revenue is actually lower obviously because you spread it out over a longer period. The area in the curve doesn't change that much by the end of the day, just spread it out further. So as you probably know, in the hard disk drive side, this high nearline capacity drives changes now every 2 years virtually, right, then almost every 2 years. So we have a new set of products for 14 terabytes 2 years ago as it is for 16 terabytes, which is a sweet spot almost 6 months ago to 18 terabytes today. And next year, second half will be 20 terabytes, all new cell products. So the cadence of investment speeds up very dramatically versus say in the case of Jack where the product cycle is more 5 years. And in the case of Jazz, it's more like 3 years, right, Jazz? Yes. Somewhere in the middle. So the percentage of revenue correspondingly matches the speed of innovation. That's interesting. So like what I'm hearing you saying is like again, I get your idea your concept of integrating under the curve over time, but it sounds to me like the hard drive business might actually have a higher percentage of revenue of current investment versus some of the others. I would argue that's not how most investors probably think about it. I know. Yes, isn't it fascinating? There's a lot of myths running around the marketplace. It isn't. I mean, we're investing in both SoCs and think about innovation happening in the hard disk drive industry to create this monster terabyte drives, which will give why it keeps growing in throughput capacity is because hyper cloud guys, whether it's Google, AWS, is using that as a long term lowest cost storage, total cost of ownership. And they get a lower load DCO, the higher the capacity and becomes a challenge not just to the hard disk drive guys, which you probably many of you hear in your calls and analyst days from Seagate and Western Digital, where they not only use energy assisted and HAMR is definitely 1 energy, Monster energy assisted. They also put in higher number of disks and then they go into multi actuators, as I said. All that impacts the content we put in our premiums and our SoCs step by step. And it's pretty fascinating because some of the leading SoCs folks, I mean, the highest capacity drives are pushing almost to leading edge silicon to create SoCs. As we have to do, Dan indicated, in updating our process technology, which is interesting process in the sense that it's basically, it's some form of hybrid process from silicon and germanium and a bunch of other stuff to press the kind of performance, which is on reading and writing, especially on the media that hunt is dry is required. Very interesting. We're running up we're 15 minutes past. I think we'll close it out here. Most of the questions, at least on the pigeonhole, have been answered and a lot of mine have as well. But if anybody else does have questions, please feel free. You can follow-up with the company. You can follow-up with me. And I'll just see if there's any other closing remarks. And if there's not, then I think can close it out here. Thank you so much. This is really interesting and fantastic. Thank you. Thank you. Thank you, Stacy, for hosting. Yes. Thank you. My pleasure. My pleasure. I think we'll close it out there then. Thank you for joining everybody. And again, if you have any questions, please feel free to reach out to me or to Broadcom. And with that, have a nice day.

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