CEO of Centec Corporation. We have a full day ahead of us. Before we start, let me just introduce you to the Semtech team so that you can interact with them, as you as we during the day here. I'll start with Emeka. Emeka Chukwu is our Chief Financial Officer.
We have Gary Bouchon, is our General Manager for our Signal Integrity Product Group. Mark Castello is our General Manager for Our Protection Products Group. Mark Pegaloo is our general manager for our wireless and sensing product group. And all three of those executives will be presenting today. In addition, we have Alastair Fulton, who's a head of marketing for our wireless and sensing products group.
Madhu RAYabari who's at the back there. Head of Marketing Strategy for our Protection Products Group. Bharat Taylor also at the back there who's our Head of Strategy for Our Signal Integrity Products Group. And we have, Chris Chang, who's our corporate business development and marketing executive. And we have a couple of admin, Nicole, Lucio, San Sarah Castin, helping us with the event today.
So those are all the Centric employees. We also have some demos in a room next door here, you'll see demos on protection, some demos on wireless and sensing our LoRa products. And also some videos of signal integrity products. Please take the time and opportunity to take a look at those. There's some very interesting things we're trying to demonstrate there.
So we have a full agenda. I'm going to start with how the Semtech journey is going and where we are in that journey. We'll then I'll hand it over to Gary Bouchamp. Gary will talk about similar integrity products. Specifically how we're powering the data center revolution.
Mark Costello will then talk about protection products. And the golden era of protection and why we believe this industry is about to really transform into a very exciting one for us. And then we'll spend quite some time on, LoRa, specifically the wireless sensing product group. Within that, we'll talk about LoRa and spend some time on how that's really transforming both Semtech and the industry in the low power wide area network space. And then Emeka will wrap us up with how the financial story comes together, the end of the day here.
So what are the messages for today and the goals for today? Before we really get into this, The message that I want to send to you, and I'll start with this and I'll end with this is that the history of Semtech and Semtech's been around for over 60 years, I've been the CEO for about 12 years now, actually over 12 years. There's no doubt in my mind. This is the best time in the company's history from many perspectives. Very exciting time for us.
Very exciting time from a product standpoint, from an end market standpoint, from a customer standpoint, from an application standpoint from a financial standpoint. And so as I look at it where we are today, it's just a really exciting time for is just many things going on that are exciting and very much we've been implementing this strategy over many years, and we're starting to see now the fruits of that strategy come together. And that's essentially what we're going to explain to you today is why we feel that way some of the different elements of our business. We'll also some of the goals today are to introduce you to the strong leadership team many of you know me, many of you have had many discussions with you, many of you know Mecker and Sandy, our Investor Relations Director, but introduce you to the rest of the team to kind of get a perspective that this is really a true team operation here and to really show you the bench strength we have. We'll talk about our path to $1,000,000,000 in net sales and beyond and why we think we can get there.
Within a reasonable timeframe and how we're going to kind of drive growth beyond that. We'll talk about our growth engines and then we'll talk specifically about Some elements of the business that are non financial, but elements that since I've been with the company, I've said are very important. Diversification, our end market balance, our geographical balance, our portfolio balance and our financial balance. You'll hear me talk a lot about balance. And I say that this balance word, we put this place in place Because I've been in this industry for over 30 years and I've seen many cycles and I've seen many, transitions within end markets and I've seen many geographical issues, much like the trade issues we have today.
And sometimes you have to sit back and say, you know what? I want to mitigate against that. And so the balance in all of these areas is what we try to achieve. I'll show you how we do that. And there's a reason behind it.
And then finally, we'll talk about in addition to the engines that are growing and driving our growth today, some of our future innovations. Are both unique and exciting. And it's really part of our culture. We focus a lot on innovation. When people ask me, customers ask me and partners ask me, well, how do you keep your edge?
How do you maintain when you've got competition coming in from all regions of the world? How do you stay ahead? Well, key is innovation. There's no stopping people copying you or trying to rip your products off or take your technology and even steal it. But the way to stay ahead is to continue to innovate.
I mentioned our team and some of the executives I've introduced you to, I think it's a world class team and it's very experienced. It's culturally diverse and we all share the same values. 13 executives here, 11 of them are from different countries. We have representation from Nigeria, from Switzerland, from Canada, from England, from France, from Israel, from Korea, Scotland, and Sri Lanka. So we are a very truly a very diverse group.
And the one thing I would say is that this wasn't by design. We just chose the best executives and we ended up with a very diverse team, very strong team. Throughout history, Semtech has grown through acquisitions. And organically. A few points to mention really with our acquisition strategy.
We don't do acquisition for scale. In general, we do acquisition that makes strategic rationale. So we look I like to think about things at 1+1 equals 5. How do we make the target company and our company come together in a way that drives strategic value in the industry. Very different kind of philosophy that most companies view acquisition, but that's the way we've always done it.
We will do acquisition for Sam expansion in the past, if the opportunity that we're faced with is not big enough, I may go to the board and say, we need to grow our market opportunity. And therefore, we need to do an acquisition. In general, it's for Sam expansion or diversification or for strategic rationale. And through the years, I can give you some examples of that. Acquisition of Zenix gave us wireless transceivers.
The acquisition of Genum gave us an entry into the optical communications. Today is our data center play. The acquisition of Aptivision gives us the entree into a pro AB space. And the acquisition of IC Interconnect just recently gives us the ability to accelerate some of our innovations and protection. So throughout the years, we do acquisition.
We'll continue to use our balance sheet to help us in this area as we go forward. Over the last 12 years, in my journey here as the CEO, we have transformed the company. The portfolio has totally transformed The end market have transformed and even the infrastructure. Infrastructure meaning our own internal ability to provide world class operations, including the implementation of SAP as an ERP system, Workday and Salesforce which on the surface of it, you say, well, everybody does that, turning all of those systems into enabling our ability to grow the company without growing headcount in a large way. So not the R and D side, but the SG and A side specifically has been a key element of our of our strategy.
And so we feel very good about where we are from an infrastructure standpoint, and that's the ability to now drive the growth without adding a lot of OpEx. Jameka will talk about. But the other most the really important thing here is the balance and end markets you'll see our growth in enterprise computing space. And I'll talk about this when I talk about end market balance, what I mean by that is we see that too much of our business is exposed to one end market like consumer or too much is exposed to industrial we think strategically about, okay, how do we rebalance? And so part of this story line is to try to make sure we do have that end market balance.
The other part of the story is obviously growth. We've had some challenges over the years. We've had some some ups and downs and sometimes you learn from this. Sometimes you have too much customer exposure to too much end market exposure. In the case of FY 2016, too much exposure to Huawei to energy exposure to Samsung.
And we try to offset that and fix some of that going forward. And I think today, we're, as I said, we're in the best position that the company's ever been in. And one of the reason they say that is that we feel that we have a lot more balanced end markets and customers. FY 2018 was a very special year for us. As we always be the way I like to think about the financial performance is the result of all the strategies you put in place in the execution.
I felt for the last several years, our strategy has been on point. We have a good strategy. We have very good execution. And we're starting to see the results. And FY 2018 was the first, example of that.
We had record sales, record operating income, record earnings, record revenues for both our Signal Integrity Product Group and our Wireless And Sensing Product Group record design wins. What's more important though than the financial performance of FY 2018 is the storyline underneath it that really starts to show you why We believe we're going to continue to drive record performance going forward. So I'll start with our vision, which hasn't changed seen the same vision since I joined the company put in place. And there's really key four key words that I want to on. So the statement is to be the global leader in analog mixed signal platforms and algorithms that enable architectural and performance differentiation.
Big statement, a lot of big words in there. Let me really kind of focus in on a couple of things. One is analog signal. That's what we do. Don't do the digital, we don't do, much system on chip.
We really focus on analog differentiation. Also focus on algorithms. And this is a really a key differentiating point for us is that when we look at how we are approaching our customers, and our approaching systems, we look at both analog and we look at algorithms and differentiation. And that enables architectural shifts in our customers. We're able to go to our customers and say, why are we doing it this way?
Why are you designing it this way? If you were able to change something in your system, by changing the analog or changing the algorithm, you can look at it from the totally an architectural shifting standpoint. And so we'll give you some examples of that throughout the day, but that's an important part of our vision and strategy. Obviously, our goal also is to achieve leadership positions in our target product segments and deliver revenue growth exceeding the high performance analog sector and attaining the high end of our stated operating model. As we look at the industry strategically, we like to focus on what we call megatrends.
And these are trends that we believe will continue for many years not just 1 year, not just 3 years, but maybe 5 years, 10 years. And so we focused on 3 different areas. 1 is IoT, the internet of things. One is mobility, smartphones, wearables. And the third is, hyperscale data centers, cloud, big data.
Those three areas. And why do we focus on those? It's just because we think that they're going to continue for quite some time and they fit our portfolio of competence as well. So in the IoT world, we believe there'll be billions of sensors, billions of low power sensors will be deployed and that's going to continue to drive this insatiable appetite for more data. We believe within the mobile industry, there'll be billions of mobile devices continue to be sold in the next few years.
And on the data center side, we think that there's going to be continue to be more data centers deployed and really just because more voice video and data and IoT traffic will continue to drive that need for more data centers and more and more data traffic. We're focusing on those as we look at this strategically, we try to figure out, okay, how can we get more products into the IoT space? How can we get more products into the mobile space? How can we get more products in and technology into the data center space? I've talked for some time about balance and I want to just kind of take a step back and show you this is our kind of portfolio today.
So we strive for end market and geographical balance. Stry for end market balance 34 percent of our business is Enterprise Computing. 31% is high end consumer, 23% is industrial. 12% is communication. And these segments all behave differently.
As you know, high end consumer can be volatile. Can drive lower gross margins can be a shorter time to market, but there's also value in high end consumers play they tend to innovate very, very fast. It drives innovation, the need in the company. Equally, some of the other segments like industrial communication more stable, higher gross margins, longer time to revenue though. Sometimes it takes longer to drive the revenue.
Automotive is an example of that. We have lots of momentum in motive, but it does take time for the revenue to come in. So having the balance is a good thing for us. Equally, as I mentioned, geographical balance You look at our regional balance, you have 50% from Asia, 7% from Japan, 18% from Korea, 18% North America, 7% Europe. A large part of the Asia number is also demand that's really for and demand in other regions of the world.
So but we have a fairly, fairly good balance. And as I mentioned, with all of the issues in the world today, sometimes that balance that you strive for is you only realize the benefit when there's issues in the world. And so I think as I speak to my board about what if scenarios, I think we're in a very good shape from the standpoint of having a balanced geographical outlook. We also strive for product diversification. I've seen in the industry when you have a product momentum and you have a strategy where customers disrupt or competitors disrupt the space It's always good to have a broader portfolio, some diversification, and that's what we strive to achieve.
And that's what we have today. Signal Integrity products It's about 44% of the business. Our protection about 29% and wireless sensing about 27%. We have a very nice product base broad portfolio based there. You're going to hear today from the 3 general managers of this business.
And the takeaway is simply that in our Signal Integrity business and really in the data center space, we are we just have really, really outstanding portfolio of clock data recovery circuits. Here, the name Clear Edge, you'll hear the name Tri Edge, Gary will talk about that. In protection, you'll hear the name Z and Z Ultra, And this is our protection platform, really targeted mobile, but also now increasingly at industrial telecommunications and automotive products. Markets. And then wireless and sensing, while we have a number of product areas in there, we're going to focus on LoRa.
LoRa is a really an incredible story for one that's taken a long time for us to bring to realization, but it's a very powerful story and one that we need to spend some time on. In our strategy, in addition to these market trends we look at and focusing on the the mega trends and we focus on diversification, but we also focus on disruption. And so what I mean by that is we will try to go to our customers and specifically create value in these spaces. And by creating value, I mean innovating And by innovating, I mean, bringing both analog and algorithm differentiation to this marketplace. And you'll see in specifically in LoRa, but you'll see it also in other areas that we're moving slightly up the value chain.
And the opportunity for us the move up the value chain exists because of the ability to disrupt. So you'll see that in the CDR space, the Gary will talk about. Powering the data center revolution. You'll see that in the protection space with our Z platform, enabling the next generation of mobility And you'll see that in our LoRa play, which is really we're focusing on the message that we believe it's the DNA of IoT. I mentioned Sam expansion.
What's one of the things that was very obvious to me when I first joined Semtech 12 years ago is that the SAM wasn't big enough. We needed to expand our SAM. I believe we have done that We've done that through acquisition. We've done that through really targeting new markets. And going forward, I believe our SAM expansion is going to grow even faster and you're going to hear that from the general managers.
Today, we believe we have a $3,000,000,000 opportunity and growing to about a $7,000,000,000 opportunity. So a doubling of our opportunity, and I see good growth from all of our product groups in terms of sand growth. So the $1,000,000,000 is the market and the revenue that we are looking at now. It's clear. We see it in our sights.
And it's clear to me that the current growth drivers, the 3 that I mentioned to our CDR platforms, our Z platform and our LoRa platform will get us there. But what comes beyond that is we have a lot of emerging technologies based on the same kind of, portfolio and markets but just adding a little bit more differentiation, adding a little bit more disruption. And some of this you'll see in the demo room IoT, for example, the LoRa tags, which we have opened up, we've talked about in the marketplace and microservices you're going to hear about for the first time from our wireless and sensing team is what we believe can drive future growth for us. From the data center side, you'll hear about our PAM4 CDRs. On the mobile devices, you'll hear about our Z Ultra platform and protection.
We also did an acquisition of a company called AptoVision. You'll hear about that briefly for ProAV. And then the whole area is smart power and energy harvesting. This is all future, small emerging, but it's all driven from the current growth drivers that we are we have in place. We pay a lot of attention also to competition.
And one of the things that I emphasize with the team, the R and D team as let's focus on what we do well, what we can call a competence. Not on what we believe we should be doing or what our customers are asking for necessarily just what we do really well. And a competence for me, it means you do it best in class. You have the best skills in the industry. And so as I mentioned, we focused on high performance analog, which includes circuit innovation, package innovation, driving patterns, driving partnerships within that segment.
It also means architectural disruption means going to customers and figuring out how to make their systems smaller, of higher performance, lower power. We will do application specific products. We're not a catalog company. We don't do catalog products. We do application specific products.
And we'll push the technology envelope. If the envelope says A, B and C today, we'll try to see how we can do DEF tomorrow. So we'll push the envelope. And then as I mentioned, algorithm design, we can create flexible architectures, We bring our applications knowledge to the table for our customers and we try to create partnerships across our target segments. So, briefly let me touch on Laura.
We are going to spend some time on Laura, but we could spend the whole day on Laura for sure. It is a game changer for IoT. It's a game changer for Semtech in many ways, and Laura is rapidly becoming the defector standard in what could be a very, very big industry. The few things that I'm going to say about Laura, and then we're going to obviously Mark and Alastair will spend a lot of time talking about the details We've invested in this technology for quite some time. I would say it's on the verge of about 12, 13 years, actually It includes the radio, the algorithms, 2 acquisitions.
We've spent a lot of money investing in this space. Today, as we look at, LoRa, We see end mode chip sales. We see gateway chip sales. We start to see end mode chip royalties coming from some partners. And we see microservices concept, which today is a concept.
We're starting to show it. You can see it in the demo room and Alice will touch on this. Very exciting area for us for many reasons. But essentially, what LoRa enables is the connection of battery operated assets indoors and outdoors, low cost communication, low cost infrastructure, low cost end nodes, low power technology, fixed and mobile communications, scalable and secure networks and public and private networks. So there's a lot of stuff in there and we'll try clarify what LoRa does, how it's where it's focused and why we're so excited about it.
One of the beauties about it is the SAM is really limited by your own imagination. We see so many applications across the globe from smart environment and industrial, protecting against forest fires, protecting against air pollution, protecting against earthquake's smart metering, measuring electric water gas meters smart city applications for smart parking street lighting, traffic sensors, advertising displays, security and smart home smoke detectors, security systems, smart appliances, agriculture, irrigation control, environmental sensing, animal tracking, and then tracking of assets, motorbikes, cars, bicycles, kids, pets. And this isn't just a list that we've made up. We have customers around the globe that are in production today in these areas. And so the key message is that the SAM is really kind of unlimited It's early.
It's starting to be, what I would say is starting to emerge and become real, but we are really intrigued by and excited by the opportunity that's emerging because it's a new industry that's being created, very, very exciting area. So why invest in Semtech? In addition to obviously all of the exciting growth engines we have and the excitement around LoRa, We focus on some fundamentals and the fundamentals of growth as an analog company, multiple growth drivers I mentioned the balance and the mitigation against the risks in the industry. And we're a very financially stable company. You'll see we spend a lot of time focused on managing our balance sheet, managing our P and L, making sure that we're doing all the right things to continue to deliver earnings growth for our shareholders.
It's a balanced growth story with huge upside. The message I'll leave you with as I hand over to Gary is that the journey is really just beginning. As I said, we've never been better poised to take advantage of the secular growth opportunities. We have world class products, world class infrastructure, world class team, and Laura really is a game changer for us. And I urge you to spend some time, look at the demos and talk to the team here about not only Laura, but the other elements of our business, but really understand Laura, as we go.
And it really is just the beginning. So the format of today is that each presenter will present and then we'll have 5 minutes of Q and A. And then at the end of the day, we'll have all the executives up and then we'll do a Q and A. So if you don't think of your questions now, please writing down and we can answer them at the end. But let me open it up for questions for now.
Craig, can you just leave my point?
Craig Ellis at B. Riley FBR. So thanks for the information that we'll see today. I wanted to go back to the Semtech timeline and look at the deal history of the company. Can you just reflect on what you've learned as you've done different sized deals, different technology focused deals as it relates to how you see a pursuit of a SAM that's going from $3,000,000,000 to $7,000,000,000.
And how necessary do you feel M and A would be as you look ahead to pursue that Sam from the technology and product position that you have today. Thank you.
Yes. So the M and A has always been important part of our toolkit. We've always viewed it as a good vehicle. We generate a lot of cash. We have a strong balance sheet.
We need to use that effectively. And up till now I would say my message to the board has always been, let's look for Sam expansion, let's look for diversification, let's look for how we bring competencies in. And I'd much rather bring them in through acquisition and try to develop them organically because it just takes a lot longer. And you always think you know more than you actually know right? So, but I would say today that the difference in our thinking is really driven by Laura because Laura, the opportunity is so huge And we really, really can't acquire companies to help us with this other than moving up the value chain.
And so as we look at lower opportunity, there probably will be acquisitions, but there'll be more probably smaller kind of tuck in acquisition type deals. And more deals that will kind of, I think, bring us strategic more strategic value in driving the LoRa growth. And I think once you hear the wireless and sensing story and maybe you see the demos and things like that, you'll start to get a sense of why I think that way So yeah, I think M and A will still be part of our toolkit, but I think probably smaller type of deals.
Any other question? Okay. With that,
I'm going to hand over to Gary Bouchamp, driver communicate on our Signal Integrity products.
Yeah.
All
right. Okay. Well, thank you, and good morning, everyone. My name is Gary Bochomp. For a quick bio, I'm an Executive Vice President and the General Manager of the Signal Integrity Products Group here at Semtech.
I've been with Semtech for the past 6 years and with a JANM, a company that Centec acquired for 12 years before that, so 18 years total in this area. I have a 23 years' experience as a general manager and 3 patents in communications. I founded this particular group back in 2001, and I've been running it for the past 17 years. So I have a unique perspective on, long term growth. Okay.
So for some context, the Signal Integrity Product Group last year delivered $262,000,000 in sales. That constituted, as Mohan mentioned, 44% of Semtech's overall sales. And we shipped over 300,000,000 units last year. Our team is very innovative on the technical side. Mohan discussed that.
We we talk about that every day. And from a marketing point of view, we think we have a really strong world class team. In total, there are over 300 people focused on in this product development area spread throughout 8 different locations around the world. And as you might expect, we have quite a number of patents and patents in application. Now, let me just pause here so we can run a quick video for you.
It'll give you some flavor of the Signal Integrity Products Group and then I'll continue with the presentations.
SemTech's signal integrity products group delivers world class solutions. For point to point transfer of ultra high speed data to the optical communication, broadcast television, and professional AV markets. The digital world of social media video streaming, cloud computing, IoT, 4g and 5g wireless networks have driven explosive growth resulting in fiber optic connections to the home, global mobile wireless infrastructure expansion, and the construction of hyperscale data centers. Encompassing several city blocks, housing 100 of 1000 of interconnected servers using 100 gigabits per second fiber optic connections today and 20400 gigabits per second in the near future. The Semtech Optical portfolio, more than 450 products, including clear edge clock and data recovery and fiber edge physical media devices, enable low power data transport and applications from less than one meter to more than 100 kilometers for the 20400 gigabit per second PAM4 data centers of the future.
Semtech's new portfolio of clock and data recovery products, the Tri Edge platform targets the highest volume short reach applications inside the day center. Semtech is powering the data center revolution. As an active contributor to networking standards development, and with more than 300,000,000 optical ICs shipped in 2017, Semtech is a leader in data center fiber to the home and wireless infrastructure markets. Over the last 25 years, Semtech Video Broadcast products will become an part of broadcast television workflows, enabling the acquisition and distribution of video content around the world. This portfolio extended with the acquisition of ACTOVision and the Blue River Technology.
Leading the way as the ProAV market transitions from May switching to video over ethernet. Semtech's differentiated Blue River Technology offers flexible software defined AZ with up to 4 k resolution transmitting over low cost IP networks without compression or latency, critical to enhance your experiences in public venue such as airports, retail, healthcare, and sporting arenas. Semtech Signal Integrity Products Group offers a world class portfolio necessary to build the high speed interfaces of today and meet and exceed market needs of tomorrow
Go ahead
with the video.
Okay. There are 5 key takeaways that I'd like to share with you here today. The first is, we are the world's number one IC supplier to the Datacom industry. For optical transceivers. 2nd, last year, fiscal 2018, the Signal Integrity Products Group delivered record sales at $62,000,000, but all three of our largest product lines, the CDR, PON and PMD, they also all delivered record sales.
So it wasn't an isolated area driving our growth. It was fairly broad. In the current year, fiscal 2019, we're forecasting this to be the 9th straight record year of growth, driven by the 100 gig data centers and I'll expand on that in the presentation. I'd also like to share with you that, all of our market areas in all of our market areas, the data rates are increasing and they're increasing And why that's important is as the data rates go up, the need for signal integrity content goes up, and we're seeing that in our sales. And lastly, we've mentioned here a few times the acquisition of a company last year called App Division.
This particular acquisition has significantly increased our SAM by about a third. And it's a very meaningful acquisition to us puts us in a particular space where we have an absolutely unique and disruptive technology. So that's very important. And I'll be spending some time on this this particular opportunity that we have in front of us. I'm going to first start off by providing some, introductory slides to get you a little familiar with the, Signal Integrity group.
And I'll follow that up by speaking to 4 of our 6 market areas. So the agenda is shown here on the slide. First though, what are signal integrity products? Essentially their ICs have helped transport data from point A to point B in some form of work and do so reliably. And there are 3 key elements that drive the need for signal integrity.
1 is data rate. The other is the transmission distance. And the third is the media type. And by that, I mean, are you transmitting over fiber optic cable or copper cable or some kind of copper trace on the circuit board? For us, what we're seeing is the key driver is data rate shown here on the slide, in 4 of our market areas, are the data rates, the key data rates as they are today and where they're they've either already they're transitioning to or are shortly going to transition to.
So in the data center area. The key data rate today, the high speed data rate is 100 gigabits per second. That's driving our sales to record levels. But the data rate there too is moving to 400 gig and 400 gig. And as data rates go up, the need for more signal integrity con content goes up.
On today, the vast majority of PON is at 2.5 gigabits per second. That's transitioning. In fact, has started to trend for the past couple of years, we've been shipping parts in 10 gig PON, and that's growing. That's moving to 10 gig PON. That's the next growth area.
Wireless base stations Today, the signals the front haul and back haul communication signals are at 10 gigabits per second. That's moving to 25 and 100 gigabits per second you've all heard of 5th generation wireless or 5G wireless. Well, that's going to require higher data rates. And in our video broadcast space, The main data rate today is 3 gigabits per second that delivers to your through the broadcasting system that delivers high definition TV. 12 gig has started already as to deliver 4K or ultra high definition TV.
So you can see the data rates aren't increasing by 10 or 20 30%. They're increasing by 100, 200, 300 footprints. It's very significant. That has a very meaningful impact to the the amount of signal integrity content that's needed in the industry. Now I indicated previously they're showing here.
There are 2 main areas. 1 is Datacom and the other is video. And, I'll be speaking to 4 of these six markets. I'd like to point out that, Mohan made this comment at the company level. The company is quite diversified.
The Signal Integrity Products Group is also well diversified. This has taken quite a number of years to arrive at this kind of state but we do have a very diversified business. We have diversified products, diversified markets and a very diversified customer base. And we believe this diversification is key to grow our sales for the past 8 years in a row, even in times when you have market or customer even product supplier issues. We have no customer.
That's a 10% customer. And last year, fiscal 2018, we had 36 different customers had purchased more than a $1,000,000 of our product. Shown in the pie chart, if you look in the green, the top left green area. The pie chart is designed to explain how our sales were distributed by the size of customer in the prior year. So in green there, we show that 19% of our sales last year came from customers that were smaller than the $1,000,000 you see that 19% of our sales last year came from customers that were between $1,000,000 $5,000,000 in size.
In yellow, we're showing that 15% of our sales last year came from customers that were fairly large between $5,000,000 $10,000,000 customers. And off to the right in dark blue, you see that 47% sales last year came from the very largest customers. Those are customers that purchased more than $10,000,000 of our products last year. And these customers, many of them, especially the larger ones, they're not just purchasing 1 or 2 products in a specific area. Some of these customers also play in virtually all of the market spaces that we participate in.
So we're able to do very large bundled sales with them because we have many over 4 fifty products. And so we're able to bundle large groups of products that span multiple markets and that gives us a competitive advantage, the bundled pricing in the marketplace. So our market trends and growth drivers, 2 of our markets are considered the main contributors to our current growth and our near term future growth. The data centers are contributing today to our growth and certainly well into the foreseeable future that should continue, but also the acquisition of ProAV is the other growth driver that is just beginning. So the macro trends, I think you're all familiar with certainly in the data center space, whether it's cloud computing, social networking, video streaming and now artificial intelligence and certainly IoT.
That's all contributing to the growth, in the data center space. And in ProAD, as I'll explain later, it's the proliferation of video screens that you see all around you now when you go out into public spaces, whether it's train stations, airports, sports bars and things like that. Behind the scenes is where ProAV is being installed. To stitch together all the information that's being presented to you on the various screens and to switch it, to change it, to update it, etcetera. That's pro AD and that's growing quite rapidly.
I'll spend some time speaking about that. Our market SAM in total, it's set to double. The last year, the market SAM was estimated at $460,000,000. We had over 50% share last year in all of the markets that we play in on average. Our SAM is expected to grow to almost by fiscal 2022.
And as I mentioned, the main growth drivers are from the data center and growth drivers of the SAM I'm referring to are the data center space and ProAV. You can see the impact of the ProAV acquisition if you look at the bars in purple. The ProAV as a significant amount of SAM. And it's actually a special kind of SAM to us because we have a unique product that's highly disruptive and we think we're going to make some ways in this particular space. In fact, it's already happening and I'll talk about that shortly.
So to sum all this stuff by way of introduction, This is our datacom performance over the past decade, but we've grown from roughly $26,000,000 in fiscal 'nine to almost $20,000,000 last year. That's almost 10 times growth in almost 10 years. This kind of decade long growth it doesn't happen by chance. It's the result of being in the right markets and choosing the right strategy in that market. It's good planning and execution as Mohan has indicated.
Centex certainly has that. And you have to have excellent products. Clearly, you have to do a lot of things well. To have this kind of sustained long term performance. But crucially, you also need to have the key supporting infrastructure that allows you has the actual capability to deliver high quality products and do so in an extremely dependable manner.
And that's what our customers tell us. Every day that Symtech as a company is known as a high quality supplier that can be relied on to deliver. And so it's a key ingredient in continued long term success. We within the group, we have a day to day focus on innovation, quality, cost and customer care. We look at that every day and the end result is we have become a very dependable partner for our customers.
They tell us so. So with that introduction, I'll now discuss 4 of, our 6 markets starting with the data center. So this chart shows the growth expected in unit volume for the optical transceivers at various data rates. And today, the high volume data rate is at 100 gig. That's the dark blue bar This has been responsible for our recent record sales.
So if you look at the blue bar, the dark blue bar in calendar year 2017, you see the size of the bar. That drove us to record sales last year, record CVR sales. And you can see how much room, how that's expected to grow over the years. This is from the most recent light counting report. So our 100 gig space, we have ample room to grow.
On top of that though, there are what's known as 25 gig data centers about the start and 400 gig. When it comes to 25 gig, that's shown in red on this chart. In China, later this year, the 25 gig data centers are expected to start to be deployed. And these are being deployed by companies, which are the size of Alibaba, Tencent and Baidu. They're focused on 25 gig data centers that satisfies their needs.
So that's real near term growth. We already have products we're already sampling, etcetera. On top of that near term growth, there's longer term growth, which is 400 gig. That's shown in green. The 400 gig market is perhaps 1 or 2 years away.
So when you look at 100 gig, that's here and now, and it's growing. We have some near term growth, which is 25 gig on top of that and then 400 gig for some longer term growth. So we're pretty confident that this space is going to continue to grow. Of course, it is. The internet just continues to expand.
So today, the 100 gig optical transceivers are generally some variation of 4 channels of 25 gig as shown, one example is shown here on the chart. These are being deployed in the millions per year for data center use today. And they've become very cost effective, very power effective and extremely reliable. They've set a really tough bar to beat in terms of the metrics that matter. And so our Clear Edge technology, that's our CDR technology, it's become the number one selling 100 gig CDR solution for these kinds of products.
Some of them include integrated TiAs or integrated laser drivers, others are standalone. We have quite a family of clear edge CDRs. Last year, we shipped about 12,000,000 of these 100 gig CDRs. That's up from $5,500,000 a year before. So that gives you an idea as to the, the growth.
If I just back up, If you look at the 12,000,000 CDRs, again, look at that calendar year 2017 dark blue bar. Foam 1,000,000 CDRs in there, there's a lot of room for growth for this market going ahead when you look at the size of the bars going forward. I'd like to comment on the past 3 years of optical module pricing. The 100 gig optical transceivers, they've experienced a dramatic price reduction over the past 3 years. Going from about $30 per gigabit, that's $3000 per module to $500 per gigabit, which is $5 sorry, $5 per gigabit, which is about $500 per module.
We're showing just one line here. It's actually a composite of the 3 more popular 100 gig transceiver types. There are several different flavors. Shown here is that the average pricing of the PSM4 LR4 and CWDM4 types of modules. That we put it all together on a single line here.
The conventional solution that I've shown previously the 4 by 25, all of these are 4 by 25 gig in some capacity. Our customers have been very clever and they found the ways getting their costs down and being able to ride this cost curve down. And what's happened as a result is what was thought to be a relatively short term solution 4 channels of 25 gig, making up 100 gig. That's become a longer term solution now. Its success has created this virtuous cycle.
The success is breeding success. Initially there are hundreds of thousands of parts deployed in 1,000,000. And now it's going to be tens of 1,000,000 of this type of solution. And the end customers have gotten quite comfortable with the reliability data that they're getting back by having so many units deployed in the field. So success is bread success.
And so we expect this to continue for quite some time into the future, this type of solution. However, the future, we're going to see a change in the data center. The next generation of data center will use a new communications protocol called PAM4. That essentially doubles capacity over the current solutions, which are called NRZ. And 3 years ago, it wasn't thought possible that, you could use an analog CDR for high speed PAM4 communications.
But there have been advances in the optics, advances in the electronics and certainly in many of the techniques. And that have changed that view. And so today, CEMTech, we are focused on developing a whole line of PAM4 CDRs called Tri Edge for 100 gig, 200 gig and 4 100 gig high volume applications inside the data center. This is the lowest cost, the lowest power and the lowest latency solution possible. So our focus is on high volume.
And what that means is the shorter reach solutions. By short reach, I mean, from a few tens of meters to a couple of kilometers. That's enough to cover virtually all the applications inside the data center. We're not focused on the data center to data center links in the future. We're not focused on that today either.
Our focus is on the high volume to linking of the data centers is obviously lower volume solutions. So this is our focus today, and we're in develop development of many of these products and we had one of them on display at in our booth at OFC a few months ago which was for us that was the star of the show. Turning now to
wireless.
So the quarterly growth in mobile data traffic has been extraordinary. Shown here on this chart from Ericsson. If you look at the last four quarters, you see a growth of some 64% in data traffic usage in required. Just over the past 4 quarters, Ericsson publishes a good report. It comes out once a year updated quarterly where they put their these kinds of actual statistics in the report.
And it's quite remarkable the amount of growth This demand though is actually outstripping the capacity of the systems and the industry really is in need of a transformational technology to deal with it. And that's what 5G wireless is all about. 5G wireless isn't an incremental change from 4G wireless. It's a completely different architecture requiring a lot more nodes and higher data per second. Today it's a 10 gigabits per second.
I'm talking about the backhaul and front haul links. What that means to us is today, there are no CDRs required in the wireless front hole and back solution. Tomorrow with 5G wireless, all of the links are going to need CDRs. So suddenly we're moving from a market where we're selling TIAs and laser drivers in the future, it's going to be TiAs laser drivers and now CDRs. That's effectively going to double Centech content in in the wireless space.
So that's a meaningful development for us. Obviously, we're very pleased to see that. We have 70% share of the market today, which is today it's, as you know, it's known as 4th generation or 4G wireless or LTE We have over 70% share of the ICs shipping in that market today, specifically TiAs and laser drivers as I've just mentioned in 5G, we're also going to add CDR or CDRs to that mix. We don't have those today. And the light counting forecast shown on this graph, shows that the number of 5G wireless nodes required is quite significant.
We're already sampling 5G wireless parts today, to our customers. Those in China are being very proactive. And Japan and Korea are also becoming very proactive in the 5G wireless space. So This is a technology that will be adopted. It holds great promise for extremely high speed very fast low latency kind of communication for all of us who use smartphones.
Turning now to the pawn market. The pawn market continues to be a good market for us. Last year, we had a record year. This year, there's an increase in the number of units. That are being deployed.
And that's driven by a major replacement cycle of smart ONUs. And ONU is the, the box that resides the endpoint box that resides at the customer premise. In China, they are now replacing O and Us with what are called smart owned use. And there's a replacement cycle, and that's why you see a bump. If you look between calendar year 2017 2018 2019 on on this chart, if you look in the dark green, you'll see a bump in units, 15000000 to 20000000 additional units because of this smart replacement cycle.
The smart on news will allow the telecom operators like China Mobile And China Telecom to offer new services to their customers. Things like being able to control your smart home remotely from your smartphone or tablet, things like that. And so our customers were telling us late last year and the fall of last year to expect increased units at 2.5 gig in 2018 2019 as a result of this, smarter when you replacement a second. We're starting to see that now. The light green bars on this chart, that's 10 gig PON, and that has already started.
So on top of the 2.5 gig smart O and U replacement cycle is the emergence of 10 gig PON. We've been shipping for the past few years, 10 gig PON in smaller numbers. Until last year and the year before, we got into the 1,000,000 of dollars of sales. And that's shown in the middle, chart at the bottom. The Chinese government is strongly behind 10 gig PON.
They want to increase the bandwidth for their citizens to the home by a factor of 5. And they're making a conscious effort to push in that direction just like they are in 5G wireless. The higher data rate, we're moving out from 2.5 gig Pawn to 10 gig Pawn means CDRs are going to be required in some of the parts. In fact, we already have parts and we're already selling parts in production that includes CDRs for Tengick and 10 gig is a sweet spot for us. For the past decade, we've been the leader in 10 by the runaway leader in 10 gig CDR sales, some 90% share.
Also in some of the TiAs and laser drivers. So we understand 10 gig solutions very well and we're just leveraging our know how and that's space to deliver a product in 10 gig PON. In 10 gig PON, we have about 70% market share, just like we do in 2.5 pond. So we're strongly positioned in PON and obviously we're pleased to see the data rates moving higher even in PON. Now I'll switch to our Video segment.
In July of 2017, we acquired a Montreal based startup called App Division with about 35 staff. They had just begun to deliver revenue. So we acquired them at the right time. They're in a really exciting video space called Professional Audio Video or ProAV for short. The ProAV market is large.
It's a few times larger actually than our existing video broadcast market. We played in the video broadcast market from 20 years. ProAV is quite a bit larger. Video broadcast and app division is exclusively focused on this ProAV market. They have a technology that which I'll describe shortly, which is disruptive, It's unique and there are high barriers to entry, and they have a significant lead over any competition.
The existing market uses what we like to call dinosaur technology. It's old technology. It's just right for a complete overhaul using modern technology and you know, enter activations. That's what they're doing and that's why we acquired them. They have something very unique.
So what is the technology, the app division technology? It's called Blue River. Today, professional audio video systems use customized or custom switching and signal route dedicated signal routing systems. So you'd have your Ethernet network in your building, you have to build another network with custom built switches to handle your audio video. AMP division converts all the all the audio and video through 10 gig Ethernet solutions to IP, And the 10 gig Ethernet switches, they're made in the millions and tens of millions around the world today.
So app division has developed the technology to convert everything to an ethernet solution, which is widely available and low cost. The technology has won a number of accolades in the industry, and today it's being either implemented or tested by virtually all of the major players in pro-eighty. In fact, just a couple of weeks ago, there was a, the largest conference called Infocom was held in Las Vegas, the largest conference for professional audio video. And it was a a very large success for us and for this type of technology. We have reached the tipping point as I'll comment on here shortly.
And one of the writers produced the following commentary after the after the conference was over because it was sort of what you call the hit of the show. And the writer from RAVE publications and says No one can argue that sending AV audio video over an IP network isn't the future of AV distribution. Of course, it's not going to happen overnight. Or even in 1 year, but 2018 will forever be known as the year when everyone in AV was introduced to the AV over IP infrastructure. So what we've seen is customers, what we saw at the Infocom show or were some of customers that had previously heard of this technology, decided for whatever reason not to implement it, coming back to us to say They're hearing that everyone else is implementing it and they don't want to miss the party.
And so that's kind of the definition of tipping forth and that's where we're at. And we have some very unique capabilities there. So why is that happening now? Why is the disruption happening now? 3 things are required.
You need the bandwidth to be able to carry the data. You need improved cost over whatever you're doing today. And of course, you need the technology to put the data on the network. When it comes to bandwidth, for the first time, the bandwidth from an IP network in this case, 10 gigabit is more than what is actually needed to transfer the high video rate of the day. Today's high video rate is 4K.
Gigitiveness has no problem with transmitting 4K. I'm talking uncompressed crystal clear transmission. The cost for the first time today the cost per port of switching, with an IP network solution, 10 gig in this case, is lower than the custom switch that are being built specifically for this market. And of course, you need the technology to put the audio and the video onto, 10 gig Ethernet systems. And that's what the app division Blue River Technology is.
It allows the signals to get on and off the 10 gig IP. It allows even for a, in a greenfield installation. If you install the 10 gig Ethernet network, just for your your employees to use ethernet, to use the internet. I mean, you can also use that network to carry all your audio, video needs, your pro AB needs. For us today, what you have to do is you have to install an ethernet network for your internet they have to install another, network for your ProAV.
So there are a lot of advantage here. The future is very clear. This is where the where the future lies. And you'll probably you'll have seen it everywhere, this proAV. Airports, train stations, sports bars is a big application today in stadiums of all different types.
In operating rooms, Hope you don't see them there, but they're there. Classrooms, in fact, in our demo, you'll see a very good demo of how they're being used in hospitals today, linking operating rooms, etcetera. Clashions, don't know if any of you have been to a university lately, but you'll see they're all got audio and video plugged in. Malls, industrial control, there are these everywhere where you see multiple TV panels displaying information, whether it's advertising or useful information for train times and things like that, behind the scenes That has all been coordinated and switched. The information is refreshed.
It's updated. It's changed. That's what ProAB is all about. It's virtually everywhere. In addition to acquiring this what I like to call it, a gem of a company.
There and They're starting to make sales. They're at the tipping point. We're seeing that now. The market that they're actually in is actually expanding. So we're not just in the static market trying to take share, which we think, which is our goal.
The actual the overall sand itself is expanding. And the reason is that some of the drivers are listed here. The printed signage is being replaced by digital TVs, an example that I think most of us have seen, if you've been into a McDonald's restaurant anytime in the past several years, you'll notice that the menu and the pricing is all displayed now on, on video screens. It used to be printed signs. With the video solution, they can change the breakfast menu to a dinner menu.
They can change the prices. They can change what's being displayed photographs of the food items and so on. Behind the scenes, that's what ProAV is all about. In the past, you couldn't do that. You can think of a lot of applications where print is signed.
It's just billboards and things are being replaced by these kinds of video screens. And the video screens themselves they're going down in cost and they're going up in quality. And that's driving additional adoption. But mainly, what is really driving in this video itself is becoming a very important means of communication and collaboration in our society. In fact, today, traffic over the internet over 80% of all traffic on the internet is video.
So it's becoming increasingly popular. And our objective here is complete disruption We want to displace these incumbent old legacy, technology solutions with modern Ethernet. It's it's, it's what's happened in other industries. If you look at, the way you used to watch cable TV versus Netflix being delivered over IP systems and so on. It's not the first time, but this is the first time in an established market, professional audio video market.
We're pretty excited about it. We think this is going to be $100,000,000 product line for us in the next 5 years, and that's rivaling the size of our CDR space, our CDR market. I should mention 4 years ago, our CDR market was my in signal integrity product group my 4th largest product line. Today, it's my largest product line. That's the impact of the 100 Gig data centers.
It has really moved our sales significantly higher. And I should point out here, Mohan talked about specific reasons for making acquisitions and so on in synergies. In this particular case, this was a company that they have tremendous algorithm capability, and the way they would deliver the product was through an FPGA. So they take all their algorithms and they would put them in FPGA form. FinTech though, we can turn and are now turning their algorithms, etcetera, into a into a fixed chip.
That means it's we're driving the cost now And what that does, it's opening up many applications. We couldn't have seen we couldn't have addressed if a custom chip wasn't developed because FPGAs are much more expensive. And so there's a really good synergy right there. You've taken a software company basically, which is what that division are. Combined it with a chip making company, you put the 2 together and you get a lower cost product, which actually opens up the SAM.
So we're targeting any number. We've got a very large customer that's interested in the ASIC solution because they'll they could end up using this technology inside your home in big volume. But the only way to do that is to get the cost down. Was a really nice example of synergy between the two. So let me just summarize here on a couple of charts.
We see continued growth ahead for the Signal Integrity Products Group. The growth drivers are shown here, just to summarize what I talked about, the continued Ethernet expansion, 25 gig, 100 gig, there's 200 gig, 400 gig coming, increasing data rates. That's a big part of our content increasing in some of our core markets or our foundational markets. We have strong China backing, 10 gig PON 5G wireless. And I just talked about the, shipping point in professional audio, video space.
And lastly, we think we're well positioned for the future. We are powering the data center revolution. And we are disrupting the ProAV space. We feel really positive about where we're at today and where we're headed. So thank you for listening and I'll take any questions that you might have now.
Great. Thanks for the overview. We can help from Bloomberg Intelligence. So it seems as if China wants to ramp up their optical manufacturing capabilities over the next several years. Given your market share as well as your exposure to China, mean, how do you foresee your market share going forward given what China wants to do?
Yeah, China is for quite a number of years actually, they have a number of smaller startups within China have produce devices, chips to mine compete. We need to stay ahead and we are staying ahead on the basis of innovation. We have to continue to do that. What you're talking about is a is really a microcosm of what's been happening between East And West for the last 20 plus years. Where the West is trying to stay ahead in any number of industries based on innovation.
And that's what we have to continue to do. Is continue to innovate to bring out more advanced products at better price points. And so we've seen the threat from the local Chinese supplier, chip suppliers. It's coming. It's not there yet, but it's coming.
And we're continuing to innovate and staying ahead. They're coming out now with products that are about a generation behind where we're at.
I've got a
question. Can you
talk about the relative cost per gigabit at 4 by 25 data center CDR is like true single Lambda 100g. And do those cost points? Do they have to get close to parity for go? Or is bandwidth is bandwidth a consideration and all that bandwidth needs? Thanks.
Cost has came
And today, the 4 by 25 gig solutions have become surprisingly cost competitive. And that put a lot of pressure on the 100 gig single Lambda solutions. So today, I gave some average pricing for optical modules of 5 if you want to choose 1, one of the more popular ones now, which is one of the lower cost ones, is called CWDM4. That's about a module today, an aggressive pricing is around $300. So that's about $3 per gigabit.
The DSP solutions will have to compete with that, but they'll have to compete with something else. You can take I talked about PAM4 doubling the capacity and systems. You could take 1 of those 4 by 25 gig optical modules And if you replaced what our ClearEdge CDRs and drop in our Tri Edge CDRs, which basically run at twice the speed, you could use the same optics just pop out the CDRs and replace with the, try and CDRs. And suddenly you've got a module for roughly the same price that's doing twice the data rate. So suddenly your $3 per gigabit or $300 module can come down very quickly in price.
And that puts even further pressure on the single Lambda kind of solutions. So there's there isn't yet a battle because the single Lambda solutions aren't there yet from a cost point of view. And certainly from a reliability point of it, they're brand new, the DSP solution. So, it'll take some incentive to transition to the single Lambda solutions in the near term anyway. The cost is the biggest incentive, but those DSP solutions aren't there yet.
PAM4 question. Most of the players that are talking about PAM4 are combining a DSP in your sales solution with a physical layer part. How do you are you also going to do a DSP or just a physical layer? And how do you see that setting up the competitive state of play if you can't bundle both in
the sale. Right. What we're we are seeing as well as other companies that we've been talking to and you see it in the industry, is for the shorter reaches, you can use the lower cost solution, which is a CDR based solution. So by shorter reaches, what I mean is say up to 2 kilometers. Anything inside most of the links inside the data center can be handled with up to 2 kilometers.
There's very high volume at even shorter reaches using active optical cables, for example, for maybe thirty meters or less. It's the solutions for shorter reaches. We see it as going to an analog CDR approach. For longer reaches though, DSP is quite capable, more capable, in fact, but you pay a cost in dollars and power, they're able to link the data centers to take the longer reaches from, 10 kilometers up to 80 kilometers, for example, can be satisfied with DSP. So we're seeing we don't have a crystal ball, but from what we can see is the shorter reaches will be handled with the analog CDR solution and the longer reaches will be handled with DSD.
But our focus is the shorter reach. It always has been.
All right. Thanks, Gary. Folks, let's go ahead and keep our questions at the end. We want to get back on track with our presenters. So, go ahead and write your questions down and we'll cover them when we come back at the end for our Q and A.
Thanks everyone. Next up is, Mark Costello for protection.
Okay. Thank you, Gary. Good morning, ladies and gentlemen. My name is Mark Castello. I lead the Protection Products business at Centech.
I'm very happy to be here today to give you an update on our progress since the last Analyst Day. And we're very excited not just about the growth in revenue and customer diversification that we achieved, but also about the great opportunities that are opening up for us in the future. And that's why we believe we're entering a golden era of protection. So you'll see throughout this presentation that success in the protection business relies on having the highest performance devices. So what does that mean?
It means the best electrical performance in the smallest form factor and Semtech's been an acknowledged leader in this field for many years. In fiscal 2018, we were responsible for 29 percent of the company's net revenue and we shipped over 9,000,000,000 units. Going to show a short video giving some more details about protection products and explaining why the solutions that we provide meet critical industry needs.
Today, the world is more connected than ever. From smartphones to tablets to smart vehicles. These devices give us constant access to real time information and live communication. This communication is no longer limited to humans talking to other humans as increasingly large parts of our planet are blanketed with sensors talking to other sensors. As our world becomes more connected, microelectronic chips are becoming faster and
more advanced. As this trend continues, the chips
enabling these smaller, thinner, and faster microelectronics, must scale to smaller geometries, leading to increased sensitivity to real world the and other electrical transient events. The simplest daily activities, such as walking across a carpenter tile floor or working at a desk can generate more than 8 times the amount of energy required to damage or destroy today's vulnerable integrated circuits. For more than 25 years, Sempex Protection Products Group has been on the forefront of developing cutting edge circuit protection solutions to safeguard the various buses, ports, connectors, and interfaces. Found in consumer products and electronic systems. Semtech's proprietary transient voltage suppression technologies lead the industry and protecting high speed data circuits against ESV, electromagnetic interference, cable discharge, lightning and power surges.
These innovative devices
help ensure electronic devices do not fail
in the presence of highly destructive over voltage threats. Working directly with customers and IC manufacturers, SEMTek designs and tests its protection products to safeguard the latest IC platforms, supplying electronics factors, but the protection devices they need, the moment they are ready to go to market. Semtech products the to observe extreme power surges to protect even the most sensitive ICs. Ultra low capacity to ensure optimal signal quality on high speed interface such as multi gigabit ethernet, USB 3.1 in HDMI and innovative package designs to 5 PCB layout. Semtech continues to design market
leading protection solutions
and astonishingly smaller form factors. The popular Z Pak technology, which packages maximum surge handling and the smallest footprints achievable. These robust feature sets and product differentiation have resulted in the shipment of more than 9 billion units per year, while providing an impeccable track record of on time delivery. Customers choose Semtech's proven platforms because they provide leading edge protection for virtually every high performance interface on the market today. SEMTech provides solutions to customers on time with industry leading technical support, ensuring that our customer's latest designs, are always protected.
We only employed good working people at Santech.
So the key takeaways:
protection is again a growth business. This is being driven by the rapid adoption of multiple high performance interfaces and diversification of both our customers our end markets and our applications. We've a proven ability to introduce disruptive technologies and that's significantly expanding our SAM. And all of that translates into strong financial performance in terms of revenue growth and profitability. Just to touch on vision and strategy, our vision is unchanged.
It was as and always will be to be the technology leader in high performance protection. Our growth strategy is the pronged. We grow by solving the toughest protection challenges on the newest interfaces in the industry. We leverage our technology and applications leadership to deliver first to market solutions for our customers. And finally, we're efficient and effective.
We maximize return on investment by leveraging technology platform developments Across all end markets and applications. So let's look briefly at the dynamics of the protection market. This is a really challenging and exciting time for the industry. And that's been driven by the simultaneous rapid adoption of multiple high speed interfaces. Whether that's ethernet at speeds of 10 gigabits per second.
USB 3.1, which also has 10 gigabits per second speed, but with Type C, you now have the ability to deliver up to 100 a power to charge your smartphone, your tablet or your notebook. HDMI and Thunderbolt, which are even faster up to 40 gigabit per second. All of these transitions are happening as we speak. And this is creating an inflection point in the number of protected lines. And we see growth accelerating in the coming years, up to a SAM of above $1,500,000,000 by fiscal 'twenty three.
I want to highlight the key growth drivers. We just discussed the high speed and high power interfaces That's creating a growth vector that's well matched by the advanced protection capabilities that Centric has. A second growth driver is Silicon Process nodes. There's an acceleration of a rate of introduction of new process geometries. Between 2010 2015, there was only 2 really significant introductions Between 2015 2020, the zones have been 4 or more.
Why is this important? Every time a new process geometry is added to the industry. That's adding a slice of Sam at the absolute bleeding edge of protection. And the sub key growth driver is the dramatic growth of industrial and automotive applications, including IoT, which you're going to hear a lot more about today. Put together, this gives us a significant expansion of our SAM.
So let's look at the high speed interfaces in some more detail. At these very high data rates, providing a robust protection solution, while maintaining high signal integrity is a a capability that few companies besides Semtech possess. Effective solutions require advanced technologies that don't just provide low capacitance for signal integrity, but also provide true protection. When we deliver the highest performance and in some cases like 10 gigabit ethernet, the only solution We can extract a premium from the products we deliver and this moves us away from the commodity market. We showed this slide a couple of years ago, but it's worth revisiting.
Customers introduce new process nodes to achieve things like higher speed, war power consumption, and that's great for the end product that it comes with significant risk. As you advance in process geometries, It is less practical to include any significant amount of ownership protection. So that means the latest and greatest products are much more susceptible to damage by ASD or hostile power events. And to put it bluntly, it just makes it impractical to have any level system protection on a chip. You require robust off chip solutions.
And again, every new SAM, every new node is an additional slice of SAM at the absolute bleeding edge of protection. We have a track record of having proprietary technologies available that ensure we have solutions that anticipate future customer problems And that makes our customers capable of securing their product launch schedules. And to make it a bit less abstract. This is showing an ASD event on a leading edge process node. So we're not talking about an inconvenience.
You don't just reboot or reset. This is damage and product returns that will degrade the customer experience and degrade your company's quality image. So robust solutions to prevent us from happening are absolutely critical. So we've looked at the growth drivers. Let's briefly look at the end markets.
We've had almost 2 decades of leadership in providing consumer protection solutions. Several years ago, we intensified our efforts to reduce our dependency on smartphones. We've taken our technology base and expanded into adjacent areas of security and surveillance and also smart homes and home automation. We've made significant investment in time and effort to grow our industrial and our automotive business, both in terms of revenue, but really significant expansion in our customer base. And finally, IoT, while it's great for Centech through water, it's great for all of Centech because these budgeting applications, sensors and loads are expected to be a long lifetime.
That requires the provision of high levels of protection so that customers can have a fit and forget experience. The takeaway again is versus significant sound expansion. But consumer is still an important place for us and the market dynamics are working our favor. We know the smartphone market that the TAM is around 1,600,000,000 phones per year. Dentech still has the largest share at the high end of that market.
Content can be in the $0.35 to $0.65 range per phone. And a key point is that We now have designed positions at 6 of the top 7 smartphone makers, and that's a significant change from a few years ago. The other interesting thing that's happening as technologies progress from the phone into wearables, smart home devices tablets and high end PCs, we also see more and more opportunity, things such as OLED, Type C, NFC They've all found out from initial introductions in smartphone, and this is effectively a doubling of our SAM and again, I hope you take the time to go visit the demo. Unfortunately, we couldn't bring the real thing up to the floor, but we're highlighting some of our progress in the automotive space. Connected cars often refer as a smartphone on Fios and why is that?
Well, there's an adoption of multiple advanced technologies on all levels of car these days. Infotainment was a fairly obvious connection to our capabilities in the consumer space, but we're also seeing significant opportunities in advanced driver assistance systems such as collision avoidance, lane departure, a blind spot detection and in the future autonomous driving. And why is this well? All of these functions need high levels of signal processing, high speed CPUs and high speed communication. And ensuring long term reliability requires the highest levels of protection.
The automotive market drives some of the toughest challenges for protection designs. We've got a growing portfolio of AACQ qualified parts and these have received validation from both new car manufacturers and Tier 1 automotive electronics suppliers. And it wouldn't be a Centric presentation if we didn't mention water every 3 slides. So Mark will go into this in some more detail, but this is really an important takeaway. If you think about end nodes, These can be in really high environments.
You may have a light sensor on top of a lamp pool that is potentially vulnerable to lightning. An agricultural sensor embedded in the field, a wearable device on a human or an animal that's getting frequent repetitive ESD events. The low power and long range, they're all important. A long lifetime is a big deal if you want 8, 10, even more even more years these harsh environments for electronic devices. And fortunately, we have a solution for almost every application And when we look at the opportunity, There's at least one antenna and that has to be protected.
In some cases, there may be up to 8 high performance ports that need to be protected So we've developed solutions that are tailored to LoRa, but applicable to the whole IoT market. So again, Marco went into a lot more detail, but we're really excited by getting our unfair share of the growing IoT business. So let me talk briefly about why we win and then we'll conclude by looking at the technology platforms and the financial performance. We talk about Z platform. What does that mean?
It's the embodiment of our best process package and design technologies. So is that enough? No. You have to have extremely deep and experienced system expertise. And why does this matter?
Protection is essentially a last minute business. The testing for ASD and our robustness is done just before product launch. So when problems come up, at a very, very little time and extremely high pressure from the customers to find a solution. And that requires knowledge to identify the problem a portfolio of available capable solutions and the ability to ramp extremely quickly. And we've got a strong track record of delivering in these areas And that really makes us the go to partner for many leading companies when they need a protection solution.
So I've been at Semtech for 22 years. I can't quite believe the Z platform is coming up to its 10th anniversary, but this has been a game changer for both Semtech and the industry. We've had nearly a decade of innovation in Z platform. And that's led to the next generation, which we call Z Ultra. And that's significant because this time we've taken approach of having patented solutions, both for ultra high speeds bus protection for high speed interfaces, but also for ultra high power surge capability.
We're reaching extremely low levels of capacitance to meet the latest and greatest high speed data rates But also previously we would only ever go smaller. We looked at what was needed. We looked at our capabilities and said, the Z platform can be expanded in all directions, and this is important for industrial telecom and automotive applications in the future. We've created the capability of putting over 100 amps of surge handling into a package that even only a few years ago would only have been considered for ESD applications. We designed and delivered hostile power or electrical overstress protection solutions in this package 5, 6 years ago.
6, 7, 8 different companies now make the same thing. By using the ZE Ultra Technology, We can achieve 2.5 times the energy density and a footprint of 70% smaller. This is a significant achievement.
And it
opens up new markets. Markets that were either unserved or underserved by existing technologies, and it really is disruptive. We see a SAM expansion of the order of $500,000,000. So if we put all that together what do we get? We get strong financial performance on all fronts.
Since the last Analyst Day, We've delivered on our key objectives. We'll leverage the growth drivers that I discussed and we've significantly expanded our consumer customer base. That led to CAGR overall of 13% from fiscal 2016 to fiscal 2018. What's more significant is we achieved an actual higher growth rate of 21% in our industrial telecom and automotive markets because they have long stable and more profitable revenue cycles. Looking forward, we truly believe our ability to differentiate will continue to drive financial performance.
Our first to market solutions for high performance interfaces and consumer give us a solid revenue base. The Z Ultra platform will enable even steeper expansion into industrial telecom and automotive segment. And we see a CAGR going forward in the 9% to 11% range. And that's why we truly believe we're entering a Golden Air Out protection. So in summary, protection is again a growth business.
Been driven by simultaneous rapid adoption of high performance interfaces, substantial diversification of our customer base our end markets and our applications. Our ability to introduce disruptive technologies and expand our SAM And all of that translates into strong financial performance.
Hi, Quinn Bolton with Needham. Just wanted to ask the Icedar Connect acquisition that you recently announced, how does that enhance your protection products? It looks like you've developed the Ultra already internally. So what does IC interconnect bring you? Thank you.
I think it's good. We can talk about some of these things now that ICNTech is part of the Centric family. It's probably not recognized. A lot of people think that the entire industry industry moved offshore decades ago. We've shipped over 25,000,000,000 Z platform parts 95% plus of those were made in Colorado Springs, but it's not about manufacturing specifically what it brings us is the ability to more rapidly introduce technologies like Z Ultra to production.
We don't have to wait and discuss about priorities. We know what we want to do. We've got the capability. We've got the people We've got everything we need to accelerate and that's the whole purpose. It's IP and IP and IP.
Manufacturing is good. We are very efficient or we wouldn't continue to do it, but Having a core team that works for us is dedicated to going as fast as possible to bring the new technologies to market, that's the key.
Hey, Mark, Craig Ellis, B. Riley FBR. Thanks for the presentation. I wanted to ask about the diversification in the end markets and how go to market and fulfillment changes as the business transitions from one that I think a lot of us thought of as being very consumer centric with smartphones and wearables to 1 where automotive, industrial and IoT become a much bigger part What does that mean for how you engage with the end customer FAEs, that kind of thing? And then how you fulfill either through distribution hubbing, etcetera?
Thank you.
Great question, Craig. It's been full disclosure. I have a bit of a car addiction problem. So I've been really happy. I just came back from Europe, a few months ago and I got to visit the automotive customers for the first time.
I got to really understand. Now it's suspicious. Why do they need us? They have 3 European suppliers who have been there for years. Why do they need us to provide protection solutions.
We made some investments a few years ago. This stuff just didn't happen magically we hired a dedicated marketing engineer. We hired 1 of the best application engineers in the industry and put them, we specifically told them you see a consumer opportunity, you cannot work on it. We always have the capability to address market, but other things towards the other things such as the oxygen away. This is really the power of focus.
We have the distributors in place. We've taken good people and put them on this to to make it grow by giving it the attention that needed and deserves. And we're starting to see that. Obviously, it's early days because as you know, the times of revenue is long. But every quarter, we're starting to set record levels and that should just continue going forward.
So I think we have everything in place got the infrastructure. We've got the team. We've got the channel. And what I learned on my trip around Europe is we've got the year of the customer.
All right. Thanks, Mark. We're going to go ahead and take a 15 minute break and then we'll come back with Laura and CFO's presentation. Everyone in the other room where you have breakfast and then we'll get back here at 10:30. Thank you.
All right. Good morning, everyone. So after the British accent, Canadian accent, Corticia accent. Now let's see how you cope with a French accent. So my name is Mark Pageru.
I'm I joined the Semtech in 2006 at the same time as Moan, our CEO. And I've been through all the wireless stages of Semtech and the acquisition of LoRa and where we are today. I'm now running the wireless sentencing for the group as a vice president and general manager. In wireless sensing product group, the product development is serving a vision of connected sensors, tags and attractors. Our products include smart power management, Proximity sensing and LoRa wireless.
All those areas are driven by the same grow vector, which is the internet of things. So I would like to start the presentation by inviting you to follow a short video presenting wireless and sensing and what is our vision of the internet of things.
Semtech wireless and sensing products, deliver innovative solutions for the internet of things, with high performance, low power communication, for LP WAN connectivity, and efficient no power solutions for proximity sensing. LoRa wireless products developed by Semtech, connect billions sensors, tags, and actuators today in industrial, enterprise, and consumer applications worldwide. Laura Technology is bolstered by the rapidly growing Laura Alliance. A strong worldwide ecosystem of telecommunication companies, equipment manufacturers, system integrators, sensor manufacturers, and semiconductor companies. Driving adoption of the LoRaWAN open source communication protocol.
Created just over 3 years ago, The LoRa Alliance now registers over 500 global members. This profound growth has enabled the adoption of LoRa in key region around the world. Positioning Laura is one of the most commercially viable solutions for LP WAN Internet of Things. Operators in major global markets are implementing LoRaWAN Networks to support IoT connectivity of LoRa based devices. Alibaba Cloud's adoption of LoRaWAN Networks in China is only one example of the rapidly growing global ecosystem of operators.
The
you can
like the DNA of IoT, the ability of Laura to self replicate and adapt to the variety of LP WAN Internet of Things use cases is making it the solution for billions of future devices By offering a solution that is optimized for IoT communications, customers can depend on Semtech to build the connection between remote endpoints, Pico cells and gateways, then transmit that information to the cloud. Ultimately leading to intelligent business decisions based on real time data. It's cool to be a part of the innovation that's pushing that into households and making that a standard protocol that everybody's going to know about. The beauty of it is that it's both interoperable and compatible. Laura has really allowed us to be competitive.
Offering much lower cost structure for uplifting technology than traditional cell networks. I mean, how solutions for facility management, so motion sensors and door sensor and buildings. We also have more industrial stuff like soil moisture on farms, parking sensors, water meter, electric meter. They're just plug and play, up and running, a matter of minutes to solve any case in the IoT industry. I also believe what we're seeing today in terms of active deployments is just the tip of the iceberg in terms of market potential.
What we really love about Laura and we have for the last few years is that it's here now. We're able to take this value proposition to market today. SEMTech is driving the IoT revolution by enabling a smarter
All right. So not only good looking people, but we have good looking things as well at the same time. Okay. So as you have heard in this video, we emphasize about the timeline as Laura being the DNA of IoT. And Moran pointed a very good point as well.
It's all about the transformation that we are leaving today, not only with Lorraine but everything we do at Semtech, but the transformation is very key. It has with LoRa, we already transformed the way we were seeing the wireless connectivity and the wireless business. But in addition, it also transformed the way customers now are seeing their own business. They transformed completely their business model after having testing LoRa and they figured, okay, there are different ways of making money and serving the customer much faster than what they used to be. So for all those reasons, one of the key takeaway that I would like to you to have from today is that LoRa is the enabler of low power connected devices.
So Laura has been developed by Semtech. It is a highly performance, highly efficient wireless digital modulations for connectivity. It connects sensors, tags and extractors. And LoRa 1 is an open source protocol is defining how all those devices using LoRa are connecting. The LoRa Alliance is developed together with LoRa Alliance which is a very powerful entity proliferating the adoption of the technology.
And Laura actually feels a very important technology gap. This gap is a one of The low bandwidth from short range up to long range communications. This is a gap which was existing at low rise filling especially for defense of actors and tags connectivity. And as a consequence of that, The statement that we are making is that LoRa is complementing the cellular and the Wi Fi businesses. Wi Fi is operating in unlicensed band.
It is a specifically designed for short range and high bandwidth type of devices. On the other side, you have the cellular technology, which are essentially addressing mission critical applications, outdoor use cases with high power type of communication. What we do with LoRa is we are serving high volume B2B, B2B2C applications in high license band to connect sensors, advertisers and tags with the lowest power possible and the lowest cost. So just like Wi Fi, LoRa is operating in high license band. And just like cellular, It is a highly secured connectivity because security is very important in internet.
It's all about the trust that you can have between the data communicating from the end devices up to the application server. So let's speak a little bit more about what is LoRa. So in short, LoRa is very simple. It simply connects devices to the cloud. This is what it does.
But it does this in a very unique way. First, it's about the range that LoRa Technology is bringing. LoRa can connect devices, which are a few meters away, up to 2030 miles away. We actually even have implementations by customers who have been able to make a connectivity from Earth to space putting LoRa into satellites. The second part is about low power and low power is important.
And to link that to the range, if I make a parallel to voice. If I want to get heard, I can speak louder. That's one way of doing it, but it demands more energy. What Laura is bringing is we are basically bringing you super power for your ear. So your ear becomes super sensitive.
You can hear much better. And by doing that, it requires less energy. So that's really one of the uniqueness of LoRa. We can listen with LoRa at a much lower energy. If you compare that to cellular technology, this is about 10 to 100 times lower energy to receive the information.
And this makes a big difference. The 3rd part is about security. So with LoRa 1, with LoRa Alliance, We had very highly expert companies in the alliance, which have defined the protocol of communication. And at the very early stage, we made sure that we have an end to end security encrypted messages to make sure that the devices which are sending informations are can be trusted. So it's about integrated, it's about security of the information.
The ability for the customer to decrypt the information. And the last one is about the fact that Laura is also a very simple network topology and this is important because with simple network means that you can deploy the connectivity in many different diverse ways. You can have carrier grade type of deployments. You can have Teco cell indoor type of connectivity. And as I mentioned, even satellite type of connectivity.
And Laura is supported really by a unique feature. And I would like just to explain a few of them and why they matter. So first, I have said that many times, long range. So why long range is important? Long range is important because with long range, you can significantly reduce the cost of the infrastructure.
If you can communicate further, why you don't need so many base stations. So you reduce the overall cost of deployment of the network. Power, lowest power is very important. Because in reality, most of the devices making the IoT volumes are going to be battery operating or even operating without any battery. And LoRa is bringing really the lowest power options of connectivity in IoT.
Mobility So mobility means the ability to have a device be received or communicate while it is moving. And most of the devices in IoT are going to move from one place to the other. And Laura is working very well by moving with moving devices. We tested it in having LoRa devices in plans, even in the trends, fast trends. But what is unique about LoRa is that can connect those moving devices at a very, very low power, energy.
And last is about the cost. Order to enable all those billions of devices connected to Internet, you need to have the right cost. And LoRa is a very good option to provide a very low cost of connectivity. Let's speak now about the market So LoRa is designed to address the low power wide area market of IoT. This is really the focus of what we are doing.
So it is today, I would say a relatively small market. About 100,000,000 of unit every year. It is heavily dominated by energy related applications like smart meters. And you have a few other applications which are increasing like logistic and building home automation, for instance. But as we see now, all the opportunities coming, as we see all the developer community developing solutions and customers coming to us, We believe that very quickly and in a 5 years a reason that this market is going to grow significantly and reached 1,000,000,000 of unit per year with a very, very diversified of our segments from energy Logistics Building And Consumer and even a lot of new emerging applications.
We see so much creativity from the developers And as you will see in the rest of the presentation, some of them are not at all predicted by any analyst. And this will bring the size of the LP 1 market even further than anyone anything that you see right now, displayed by analysts. And I will illustrate this a bit better, a bit later. So in this section, I'm going to show you everything that we have achieved so far. And why we believe that LoRa is becoming the de facto standard of LP1.
So there are a few metrics that we are, what we are monitoring to see whether we are on the right track. And right now, we have achieved the key metrics, the key following metrics. First is about the number of deployed gateways. So by the end of fiscal year 2018, which we ended at the end of January. We had 70,000 gateway deployed across the world.
Which is opening a capacity of 300,000,000 units of LoRa devices. So it's in volumes of LoRa devices that could be connected through LoRa network. The network is now touching 50 countries. At the end of in January this year. We had in January 50,000,000 units of LoRa devices connected.
And last, but not least, we reached more than 500 member joining the LoRa Alliance at the end of January. All of this together with a self funeral that we are monitoring, that we are logging in our system of $400,000,000. So we believe that what we achieved last year is that we set the foundations to drive the future revenue growth of LoRa for Semtech. So let's go now a little bit more into specifics and by the network, starting by the regional deployment. So this is a map that we're showing where we were at the end of fiscal year 2017.
We had about 20 countries At the end Lora 1 Countries. So a significant growth in a little bit more than 12 months. And with all the activity that we see right now are on LoRa about operators deploying. We believe that by fiscal year 2020, there will be more than on 100 LoRa 1 Countries deploy with LoRa 1 network. The second metric is about the gateway, like I mentioned.
So we ended last fiscal year with 70,000 gateway. And what we see right now and projecting for this year is the $70,000 will grow up to $200,000 gateway deployed. And the reason for this is because we continue to see a very good adoption of outdoor macro cell gateway. So these are kind of carrier grades type of deployment of network. But very interestingly is we introduced a bit more than a year ago, the lower optical cell, which is a smaller form factor cheaper, especially designed for indoor connectivity.
And the volume there and the adoption rate is incredible actually. So all in all, with both type of deployment, we will reach 200,000 gateways deployed across the world. And with gateway comes capacity. So the capacity like I mentioned earlier is about the number of end devices, LoRa devices that could be connected to a LoRa network. At the end of fiscal year 2018, we reached a capacity of 350,000,000 units of LoRa devices.
By the end of this fiscal year, this capacity will become 1,000,000,000 unit of LoRa devices. And where do we stand today in terms of actual connected devices? So we ended fiscal year 2018 with 1,000,000 of units of LoRa devices connected to a LoRa network. By the end of this year, we'll be around 80,000,000 devices, LoRa devices connected to a network. And as we see all the opportunities coming and all that, we believe that we are going to cross the 150,000,001160,000,000 units of devices by end of fiscal year 2020.
So it's a very strong momentum. And basically, we have been almost doubling the volumes every year with law. Is very, really good. The next metric is about the ecosystem. I have to say this is probably one of the best accomplishment that we can witness here.
It's about how much the technology is endorsed and how much is transforming the business from other companies. So we created a few years ago the lower alliance. And the lower Alliance is becoming a world IoT organization. The reason for that is because it has been already constructed from a business perspective. The goal was not to just to get the best technology, but it's to make sure that we have the right solution for the market at the right time.
So the quality of the LoRa Alliance is all about the members, the fact that the members are delivering all the layers of an IoT solutions. So those layers are the following. It's again around the DNA. So in the devices, we have other companies, semiconductor companies like Semtech were also delivering LoRa endpoint solutions. So Microchip is an example.
SD Microelectronics is another one. We have large module makers like Murata delivering LoRa solutions. But also sensors provider such as Schneider, such as Busch, they are all part of the airlines and there are plenty of others. Then the network. So really what is interesting about the network is the diversity of the type of network provider.
We have mobile network provider. Like Orange is a very good example of a mobile network operator who has end of the LoRa and have now a nationwide coverage in France. More recently, we got cable network operator with revenue of Comcast deploying LoRa. Again, even more recently now, we have the cloud network provider who are joining the LoRa Alliance. In March, we got Alibaba who joined the LoRa Alliance and they are now one of the board members of the LoRa Alliance.
Very recently like a week ago, 2 weeks ago, Google Cloud joined also the Laurealliance, which is a very strong investment. And we have network equipment provider like Cisco. But equally important is 1 year of the device for a new as a work, it's all about the application. And the key here to be successful is to make sure that we also close the loop and we are the system integrators are part of the Laure Alliance Family. And this includes company like Vipro, like Tata, Capgemini, or IBM, IBM was here from the very beginning of the alliance and they are now delivering solutions as well.
So with all of this, we really believe that not only we are the fast as growing Alliance, but the low hires is becoming a world IoT organization. So as we see all the momentum, we set some milestones for this year. And those milestones are going to make LoRaF the LP1 de facto standard. So it is supported by the number of gateway. I mentioned 200,000 gateway, opening a capacity of 1,000,000,000 unit of LoRa devices, Android Countries, 80,000,000 connected devices and the strongest LP1 ecosystem.
So after going through this kind of education phase and the metrics, I think what is really important is for me to bring the testimony of where we see the volumes of LoRa adoption today, where we see the emerging applications, bringing large volumes, And how do we see the future of LoRa? What is it going to open? What kind of business we are going to disrupt with the technology? But let's start by where we make volumes today. So the big volumes in LP1 are right now about smart meter.
This is a very good illustration of why LoRa is adopted. We have right now across the world about 30,000,000 smart meters connected with LoRa. And the reason why LoRa is used in both applications is just because it delivers a higher performance and it enables a lower infrastructure cost. So what does it mean? It means with LoRa, when they are adopting LoRa, they can enable lower cost smart meter.
And this is really important because there are so many emerging countries we are now implementing this kind of smart meter and all of them require connectivity. If you lower the barrier to entry for both guys with LoRa, then you can deploy much, much faster. And Laura is benefiting from a few features. So the deep indoor underground connectivity, because the commonality with all the metering space is that most of the time, the meter is very difficult to access. It can be underground sometime.
The second part is about the light network infrastructure. There is no need for repeater. It's one of the main reasons why LoRa is adopted because it's such painful to install repeaters in the network. While all of that disappear with Lara. And the last one is about the operational cost because a lot of those meters, especially water and gas meters are operating on battery.
So if you have to send people to the meter to replace the battery or as a consumer to change the battery, it's just a nightmare. So with Laura, you are basically extending your operation life of the on the battery by 10 times. But in addition to that, the utilities which are deploying a LoRa network actually have a huge asset. The reason is once you have a network, while there are so many other applications that you can connect onto the same network, it's not just about the metering. There are so many other things that you can do.
So this is what I call the adjacent segment. So with the same network, the smart meter network using LoRa, you can connect other sensors. And this enables you to deliver additional services. Like for instance, it can be about what early detection if you have a water meter assist network. Well, why don't you provide us well capability identifying where the water is lost in the water distribution network.
This is a huge savings. Like in California, we are seeing about 30% of the water is lost because of both leak. Well, now you have a very simple way to put some sensors and help to detect where the leak is and come and repair it much faster. For gas, it's all about safety, while once you have the network you can install gas leak detection. You can also install valve controller at Twitter to shut down the gas in case there is a leak.
And for electricity, it's about load monitoring, the power line surveillance. You monitor the load to make sure that there is no blackout in our lab. So all of this becomes possible and we are already lowering the barrier to entry and the same network can cover multiple applications. No, I said that I would share as well where we see the new adoption. So there are several segments which are emerging very, very quickly.
And we've seen that over the last month. And one of them is a smart home market. Laura has adopted this segment because it is simpler, simpler and more effective than other technologies. The use cases in a smart home that Laura is serving are convenience for the consumer. Safety.
For the consumer, but also the home insurance. So as illustrated in this slide, The smart home use cases are both indoor and outdoor. And this is really a uniqueness of LoRa because it's low power and it can do the long range while unlike other technology in the home like Zigbee or Z Wave, while LoRa is perfectly tuned to serve both 2 types of applications. So if you take the convenience, right, light control, home air quality, but also you can control your outdoor irrigation system. When it comes to safety, you can have you can connect motion sensors.
You can control your door locks. You can have smoke detectors. And when it comes to insurance related applications, you can have mouth trap, you can have water leak detection, but also you can have outdoor termite sensors. And I put this in terms in the category of insurance because it is transforming the business model. So in especially in North America, but also in some other countries like Japan, a lot of the construction are made out of wood.
So termite is a big issue. So most of the time every 5, 7 years, you have to treat your house against termite. This is quite expensive. So now the companies who are actually delivering the chemicals to treat your treatment have invented a new business model. They're coming to the consumer and saying, okay, look, you are going to sign an agreement, a subscription with us and we will guarantee that if anything happens to your house for termites, we are going to repair it for free.
So how can then make this business proposal? While they are installing around the house, some sensors capable of detecting the termite before it comes into the house. So before anything happens to the wood structure, they will send a team just to clear the surrounding area of the house. And that's why they can make this new business for us. So it's all about now customer retention, subscription, and other.
So it's a very good example of how a technology can transform a business activity. But we want to go further. Want to drive the technology to, to enable new segment. And LoRa tag is a very, very good example because with LoRa tag, we believe we can enable what we called the Disposable segment. We are going to make the technologies so much lower power and low cost that we will be able to connect devices just for the use of a very short time.
It can be a week, it can be a day, or it can be one communication and visit. So allow me to give you a show example. If you take the Print Media Industry, A lot of people are saying, okay, with digital, this is a die industry. Well, I think we can clearly rejuvenate this by putting LoRa tags inside the media industry. The media industry is learning a lot of harmony with advertising.
So imagine now that you have a tag, which enables the advertiser to get a feedback about the engagement. So how many customers have liked or have been interested in a special product. By putting a LoRa tag, you are connected, your print printing magazine, to the cloud. And you get a very important information about the engagement of the customer. It also enables as a consumer to get to receive much more relevant information instead of receiving so much advertising in your mailbox, well now you get much more relevant about what you want to receive.
So it's very one example where we believe we can completely disrupt the industry. The second example is about logistics. So imagine you have a LoRa tag on every parcel on every letter. Well, with that now, not only you can structure device, but you can also know when it has been opened. When, for instance, you can contact your customer to offer an additional service.
So all of this becomes possible because we can bring the technology. So So cheap, so easy to access. And the last example that we have is about compliance. If you take the drug industry quite often, it's all about, okay, checking that you have a real products real drug that it has not been open. It's not fixed, but authenticity.
While with a simple seal with LoRa tag, all of this becomes possible. You can trust what is being shipped from one place to another. This is a compliance segment. So along those years, Semtech has gained a lot of experience in this segment. We talk with a lot a lot of customers.
And we believe actually that it offers Semtech some additional growth opportunities. So we are now going to speak in the next session about the new business model that are opening to Semtech. And both business models are focused on the installed LoRa devices. So to speak for that, I would like to invite Alastair Fulton with the VP of marketing for the LoRa activity.
So as Mark said, I lead product management and marketing for our LoRa business unit. I actually joined Centech 6 months ago as part of doubling down on LoRa as a growth area as Mohan was outlining. I've spent the last 25 years in the connected device space sounded terribly long time. Long before anyone came up with the term internet of things, there were strangely things that were connected and sent data and lots of people like myself building solutions that took that data and did something interesting with it. I spent the last 10 years in the IoT platform space the 1st 8 years of which I spent with Microsoft where I founded the Azure IoT platform as an incubation actually.
And then took it through various cycles of development. And then I spent the last 2 years building a Lamada platform for Hitachi which Gartner recently rated as the leading industrial IoT platform which was quite nice of them. And which kind of begs the question why go away from that space towards the edge more. And I think it's based on a very simple conclusion that I reached some time ago. Which is when you look at the platform space, there are about 500 or so IoT platforms in market.
And you can debate how many of those are actual real platforms and how many are PowerPoint. But the problem of what to do with the data, how to drive analytics around has largely been solved. I mean, somewhere within those 500 there are the winners. The problem is how to connect all of the devices to these platforms where all the data comes from remains unsolved. And I think a lot of what you see in here today and the demos that you see will help you understand why we think LoRa is that solution that offering a simple low cost long range solution of connecting devices in simple way really is the key to unlocking value within the internet of things.
As you know, Laura, sorry, Centec has long provided low cost GPS free location services. And today I really want to share the work that we've been doing to deliver more value to the Lori system. First, while I get to that, I'd like to step back a little bit and consider the problem that we're really trying to solve as an industry. And why we think it's so important. Currently and from experience, delivering an IoT solution is difficult at best.
A solution developer needs to be very much a jack of all trades. He or she has to figure out how to design and develop custom devices. They have to figure out the application wire, what's actually running on the device, how is it controlling the actuators, the sensors, etcetera. They need to figure out how to manage those devices on a network and as Mark said, these devices typically are far away from human touch either on the ground or at a remote location, they're expected to run for 5, 10, 15, 20 years and more. And so figuring out actually how you maintain the life of that device is a very significant business problem for a lot of our customers.
And then finally, you have to figure out how to connect that device to a network in a reliable intervention freeway such that it will send the data that it is designed to collect time and time again over the many years it spends in service. In addition to all of that, if that wasn't enough, you also need to figure out the often more challenging problem of okay, how do I actually make money? What's the business model? How do I go to market? How do I sell my product?
How do I price my product? And that's one of the reasons why you see a lot of startups failing in the IoT space because they have excellent hardware design skills, but actually when it comes to the business side, they fail. And very often in many ways, I think that level of complexity is what has held up the development of the IoT as a whole. I think the IoT is one of those industries where the volume is coming, the volume is coming and it's only been in the last 3 or 4 years where we're really starting to see this opportunity be realized and its complexity that has held back that process in many cases. Laura is uniquely positioned to address these challenges for 3 primary reasons in my view.
First of all, the ecosystem around LoRa is significantly simpler. As I said, there is a Semtech SunTech central role in the ecosystem means that we can deliver end to end integration from silicon all the way up to services much more rapidly than any other technology in the IoT space. And that is a very important and factor when it comes to simplifying some of the development challenges that I was talking about. Secondly, the ecosystem around LoRa is much more open than other ecosystems including the cellular ecosystem. Laura is, as Mark was saying, by definition an open platform, it uses unlicensed spectrum And so there are more opportunities for much more flexible pricing models and value sharing models pivoting away from the model where the connectivity is the thing that's charged for which breaks a lot of business cases in IoT to a model where you're actually charging for the values of an application to customers, maybe even wrapping that into a broader service offering.
And then finally, LoRa devices by virtue of the fact that it is an and a protocol. They have a standardized communication protocol that works across all of these devices. The millions currently in the billions in the future and they also have a consistent and device model. And the reason that that's so important is that inherently developers are trying to pick the easiest part for the solution of their problem. And with LoRa, they only have to learn 1 end device model and that applies across all of the industry sectors that IOT is relevant for today.
And they also and this also is very key. They have an extraordinarily large market of end devices to target without having to relearn a technology reloan development skills and essentially retool their businesses. So turning things to the slide. I mean to date when you look at what Semtech has been doing, as Marvin mentioned our track record in the development of LoRa is long and I think highly influential. We've previously been working to support LoRa by providing industry leading silicon.
So our IC portfolio is at the core of everything that we do. We've also been providing device reference designs to make this work. And so that's again designed to help the industry over the first hurdle of well, how do I take the transceiver in the micro? How do I do the basics? We've also been providing end to end use case support.
So working with the ecosystem to identify end to end use cases where Laura is really delivering value helping you promote those. And going forward, we think there's more work that we can do to accelerate the growth of LoRa even further. And that falls into 3 categories. Firstly, by really starting to drill in and identify which areas of solution development drive timeline cost. Historically building an IoT solution from start to finish takes anywhere between 18 to 24 months.
And that's a problem because it takes a long time to get to return and of course upfront is quite a significant amount of investment. And so part of our role we see identifying those areas which really cause pain today. The second focus is really how do we how do we extract some of that complexity from the developer? How do we hide it in the box? How do we simplify so that they don't have to worry about it?
Much as with mobile application development. Mobile application developers don't need to worry about what's in the box and they have a very standardized development interface and IoT until now that's not been the case. And so what we think we need to do is provide basic application building blocks that significantly simplify the process of building building application. I'll talk to you about what that means in a moment. And then thirdly, the importance of the ecosystem around LoRa is hard to understate the many companies that have invested significant amounts of money and focus around this technology.
Those folks are key to us. And so much as what we do and how we do it's important. And so our focus is very much on how do we simplify and create opportunity for this broader ecosystem of partners to go out and build incredible things that their customers value.
Well, that's interesting.
So what are these areas of friction and how do we what do we mean when we say application building block? We think there are several areas where where Centech can really add value. And some of you I think have already seen at least one of the demos outside. The first area we're very focused on is the little blue dot location. Where am I?
And I think we're all familiar with being able to pick out, take our mobile phones out of our pocket and look a little dot that tells us where we are. Knowing where things are is kind of one of the most fundamental aspects of the internet things. I mean in many cases it is the use case. Actually being able to reliably cheaply and accurately plot position allows customers to manage risk it allows them to deliver efficiency gains, provide contextual insights, etcetera, etcetera. And today, building a multimodal location solution is actually rather difficult.
I think use cases like this is typical supply chain from factory all the way through to home delivery in this case of a television There's no one single method that actually provides location through that end to end span. Bluetooth and Wi Fi SSID and they're great solutions indoor location provided that you're prepared to either invest in the infrastructure or deal with the end user intervention that's necessary provision of device to a WiFi network, deal with it when it falls off, etcetera, which is actually the failing of many in home IoT solution when the dishwasher pulls off the network, Grandma is not going to go reprovision it. That device is essentially dead until someone intervenes. The outdoor coverage GPS is a great solution as it's cellular. They come at a very high cost though in the form of hardware costs in the form of a need for increased power and of course the cellular network operator costs that you have to pay to operate the device.
In short, there's no single location methodology which meets the needs of every use case. And in most cases, you actually have combine multiple of these approaches to know where your thing is, your TV, your package, your pharmaceuticals, etcetera. On its journey as it goes down the supply chain which drives significant complexity and cost into the development of your solution. Our approach is really as I said, you will see it in the demo outside if you've not already seen it. Is to take all of this complexity and bundle it up and turn it into a simple cloud service that you call over an API.
And to do so in a way that enables a developer to choose the location method, which is most suitable for what they're trying to do at that particular moment in time. And there's very much a trade off between the level of accuracy that you need to achieve and the cost in terms of hardware and power. And developers typically want to balance those 2 things Knowing where something is down to a really refined point of accuracy is important occasionally as something travels through a supply chain generally knowing where it is allows you to build an algorithm that you can then build more accuracy around. And for a developer kind of taking all of that complexity, abstracting it away and allowing them to focus on the real value of actually building the application that solves their customer use case is a very significant step forward we think in the industry. The aggregating device and network generated metadata like about Wi Fi SSID or Bluetooth beacons that the device can see around it.
GPS readings that the device can derive and LoRa metadata like time of flight on network and signal strength combining all of that data sending it back over LoRa and network interest single service hosted on the cloud makes it significantly simpler for the developers to focus their available time on what matters. Their customer's problem and less time on integrating all of these different methods supporting a custom solution that they built through the lifetime of the device. And going forward, we're also looking at ways in which we can simplify the device itself even further by building more location specific functionality into the LoRa hardware itself to reduce the need for external GPS modules, Wi Fi modules, etcetera again aimed around reducing costs and complexity of building a solution even further than it is today. As important, as I mentioned earlier, is what we're trying to do is really how we're trying to do it. As Mark mentioned, the ecosystem is one of the key reasons that Laura is winning today as the preeminent LP WAN solution for IoT.
And our approach is centered on providing utility microservices. The take a complex problem in this case location and turn it into a simple API call, that provide basic building blocks that solve just enough for the problem to unblock innovation while leaving plenty of room for our ecosystem partners to take that building block and build their own innovation on top and in fact their own businesses ultimately on top. Application developers can use these building blocks. They can rapidly build an application. For example, something like predictive geofencing, which is something we've seen recently where you can predict when a device is going to exit control zone based on the direction it's traveling, the speed is traveling, etcetera.
The simple API model that kind of underpins or if it runs on Microsoft Azure today, but in the future, it will run on other public clouds. Also creates a monetary flow for developers. So you build ingredients or you build applications, there is an existing API management structure which allows you to monetize those applications across a broader base of customers then you could reach yourself. And it also provides us a revenue share model for ingredient building block providers like Centec and others. Today and these building blocks are a range of different algorithms currently provided by Centec that take the basic inputs of things like time of flight, signal strength, Wi Fi, SSID, from any gateway or any device vendor that runs LoRa and turn that data into accurate geolocation coordinates in a matter of milliseconds.
It's an early stage service today. This is an area that we're investing in going forward, but it's still in beta trial. We're working with ecosystem partners. We believe very strongly in this space of the value learn by doing learn with the ecosystem to make sure that we're solving the right problems in the right way to do what we're trying to do, which is really drive a rising tide that drives the ecosystem around Laura even further. And in the future, we believe that microservices like this are going to be a key enabler for the wider adoption of not only LoRaWAN, but really the realization of the opportunity of the IoT 1,000,000,000 and billions of devices that are forecast.
We think that this is a critical and enabler. And beyond geolocation, which is where we started, for the very simple reason that as I said earlier it is the use case in IoT in many instances. We have a roadmap of other services which address other areas of friction in the development process as well as creating additional revenue opportunities for Centech and for our partners. And with that, I would like to hand back to Mark to close.
I would like to conclude this section about Laura by a few key takeaways. The first one is that the LP 1 market, we see that as the biggest opportunity in IoT. Second one is we strongly believe that LoRa will connect 1,000,000,000 devices within a few year. And the third one is with what has been presented with geolocations and microservices as presented by Alastair we are really significantly expanding the business model of Semtech by recurring monetization over the installed LoRa devices. So for all these reasons, that's why we are stating Laura is becoming the DNA of IoT.
Thank you. I will take now a few questions, if you have.
Mitch, this is RBC. Just a quick one on the unit count here. So if you're going to do 80,000,000 devices, and that kind of gets you to the 80,000,001,000,000 revenue range you guys have talked to. It implies that ASPs are basically flat, but I guess what would drive ASPs up or down in the future in terms of the number of units?
So right now the ASP for the device for the chip we are selling in the end devices are between $2 to $1. And as we are expanding the technology, we are creating also different version of the LoRa chips. So some will be for high end devices. Some will provide additional features associated with the geolocation and some will be for much cheaper applications like LoRa tag. So we'll have a span, a panel of, let's say, of different LoRa devices with different price points.
But with volumes, of course, the price will of course go down.
All right. Thanks, Mark.
Good morning. My name is Michachiko. I guess I'm up here to end the cycle of foreign accents. I want to take a moment to thank the presenters before me Mohana's CEO, Gary Bochamp, GM for SIP, Mark Costello, the GM for Protection, and Mark take a look at the GM for wireless and sensors. I really want to thank them.
The reason I'm thanking them is because I think they've really made my job very easy. All I have to do now is to come up and show you what the financial performance is going to be like. But before I get into that, a few house guidance. As you know, we're making a whole lot of forward looking statements here. And I'm sure you guys know that the actual results will to really differ from some of these estimates.
So, please take that into account and the company undertakes no obligation to update all these estimates. In addition, we will be referring to or we have been referring to a whole lot of non GAAP financial measures. These non GAAP measures are not intended to replace the appropriate GAAP measures. So please be aware of that as you think about the non GAAP measures that we are reporting. If you do need to have a reconciliation to the GAAP measures, we do have a reconciliation at the end of the presentations or you can come talk to me at the end of my presentation and I'll walk you through that.
So moving forward, There are few things that I would like to leave you with by the time I'm done up here. I think you have heard the stories from both Mohan and the General Manager's strategies. And I would hope that by the end of my presentation you would have come to the conclusion that we do have a lot of growth drivers that are driving our revenues today, but in addition that we have some emerging opportunities that will continue to drive our revenues beyond our 1,000,000,000. Target. We've also talked about having a whole lot of value added platforms that is bringing a lot of value to our customer.
And because of the value that we're bringing to our customers, they're willing to pay us for it, but we should expect to see our gross margins being sustained at the current levels, also expect to see them expanding in the future, but more importantly, we expect to see our operating margins expanding significantly. And we will continue to generate a lot of cash. That is one of the things that we've done very well and we expect to continue to do that. And has have a whole lot more opportunities to make sure we continue to grow both organically and inorganically. So very quickly, let's review what has happened to the last time we were here.
We are back here 2 years ago. So since then from FY16 to FY18 are looking ahead to FY19 based on the sensors estimates. The expectation is that we would have grown our revenues by 30% in this timeframe. And that our gross margins because of our growth drivers from FY 2016 and looking ahead to the consensus, would have expanded 140 basis points. At all, in that same timeframe, We've been able to grow our revenue story percent, expand our gross margins and we've held our operating expenses flat, basically And as I go through my presentation, I'll clear in on how we've been able to do that while continuing to invest in our growth drivers.
But more importantly, I think within the same time frame, our earnings per share on a non GAAP basis. Has grown 156%. That is more than 5 times the rate of the off revenue growth. So when we talk about having leverage in the model, you can see that we are actually showing that we have leverage in the model. So going forward, we still believe that we're not done that the road ahead is still pretty exciting.
And how do we get there? Obviously, if you want to keep growing, you need to have a whole set of foundation or baseline that is very stable, We have the sort of core products that are very good and very stable and we believe in the next 5 years should continue to do very well for us. Our Poin and wireless base stations, actually as I was listening to Gary Boischamp, I was beginning to think that maybe this is a little conservative because it does look like our base station business is going to be a growth business going forward based on 5G deployments. Our broadcast video is a very stable business for us and we expect it to continue to do that. Our legacy protection products being sold into handheld devices will continue to do very well for us and we have some power and higher products.
So the key takeaway here is that we do have a solid foundation of core revenues that should allow us to continue to grow our top line. So moving ahead on top of the other reason The reason that I think we continue to grow is when you look at some of the few attributes of the revenues that we get, Gary talked about not having any significant customers in his product line. With the good news is that across all of Semtech, we do not have any direct customer that drives more than 10% of our revenues today. We do not have any product that drives more than 10% of our revenue. 55% of our revenues are down through our distribution.
So definitely that means that we have a lot of customer engagements. We have a lot of people who have enjoyed doing business with something. That is another reason, given how broad and diverse our customer base is, even the balance in the end markets. That is another reason why we feel very good about our abilities to continue to quote momentum that we have seen. So let's talk about the growth drivers.
We've been talking about this now for a while. And of course, with the 30% growth that you've seen, There is definitely validity in the fact that these are growth drivers. You've heard the story of the IoT space, our LoRa platform, That is doing wonderful things. I should continue to do wonderful things. Gary Buschamps talked about the data center The fact that as the speed and the data rates are going up, you need more CDRs.
And so that is something that has driven a lot of growth for us and we expect that to continue. I heard from Mark Costello, our Z Platforms. That is really, allowing us to expand the market opportunities that we have and the handheld space. So, we're expecting our growth engines in the next 5 years to grow at a rate of 20% on a compounded, average weight. So that should get us these two areas that we believe should get us to $1,000,000,000, but we're probably not going to stop there, right?
And so we've talked about the emerging growth areas. And we believe this emerging growth areas will take us beyond the $1,000,000,000 mark. Some of these criteria are the ones that you just heard about from, from Mark, Pedro, and Alister. We've talked about a lot of tag opportunities, right? That is no revenue today.
We're still working on those, but we're very excited about them. We've talked about the lower microservices, the geolocation. That is something where we have very small revenues today. That we believe is going to be a significant opportunity for us. We've talked about a lot of IP licenses and this is where we're enabling our semiconductor complex.
To also sell LoRa. And then we found we're getting a little royalty from them. We don't have that much revenue from that today. But it's also an exciting area for us. We talked about the PAM4 CDRs driving the 200 gig and 400 gig data centers of
the future.
That is pretty exciting for us. Gary spent a few time talking about the professional audio video, expanding our design for the company significantly. Bringing some disruption to that space. It's talked about $100,000,000 of that business in 5 years. That is exciting for us.
We talked about a Ziotrope for our protection platform, expanding the market opportunity for us, expanding our sand by 500,000,000 dollars. That is pretty exciting. We didn't talk a whole lot about smart power and energy harvesting. That is going to be a common attraction for the next Analyst Day. We'll have a whole lot more to share about that.
But With that, with the emerging growth areas and with the growth areas that we already have, I hope that you can see a path like we see to $1,000,000,000 and beyond. Our record gross margins has been very stable. With respect to sustain the stability of the gross margins. The one of the reasons I'm sure all of you care about gross margins is because it is a key indicator of the value that you bring to your customers. Because if you're not bringing a whole lot of value to your customers, I'm sure they're not going to they're not going to pay you for.
So the fact that we've had our gross margins pretty high and expanded means that we continue to bring good products. We continue to bring good value to our customers. Part of the reason we think we're going to sustain this is because our end markets are very balanced. We sell into the higher gross margin at Microsoft Industrial, going to get better with lower. We're selling to the high end marketer of communications.
Our enterprise computing, which is where we include our datacenter revenue, is pretty good gross margin. And our consumer business is also very good gross margin. It leaves at the lower end of our 58% to 63% target range, but it is also a very decent gross margin and it's getting better. With some of the initiatives that we have with the CRTRA platform. We continue to bring out new products.
We know from experience that the ways to sustain your gross margin is to continue to innovate and bring up new products. So when you have the guys from China trying to get into your space, you have to move on and that way you're able to maintain your business and give your ASPs and your gross margins up. We usually do not talk about operational excellence. But at the end of the day, we don't really believe that allows you to expand your gross margin. The operational excellence does allow you to sustain your gross margins.
Being able to drive your cost down even helps you to mitigate the impact of ASP erosions. We've talked about the infrastructure investments that we made a few years ago is helping us to ship more volumes without significantly increasing our manufacturing overhead. So now you know, we have gross margins that are structured on record. Levels that we expect to sustain, but we also believe that we should be able to expand them. From the simple fact that a lot of our growth is coming from areas with gross margins that are already at or above the current levels.
When you look at the emerging product areas, those are all areas that have high gross margin, the IP licensing area, the microservices, the ProAV space, all those areas are areas that are above the current range that we have today. So we do believe that when it comes to gross margins, we can sustain where we are, but more importantly, we expect to have an opportunity to expand our gross margins. So moving on, in terms of operating expenses, our operating expenses have been benefiting from the investments that we've made in the past. So in the past, we put in new infrastructure tools, we put in new ERP systems new CRM systems, new workday systems. And on the GLS side of this, We have been able to continue to scale the company without the need for adding additional headcount.
So we're getting a whole lot of leverage from the infrastructure investments that we've made in the past. The other thing that we've been doing on the R and D side I know one of the few questions that I've received in the past from investors is, are you investing in your business given the fact that your OpEx is flattish? Where we are investing in the business. But the other thing we've been doing is reassessing the areas that we've invested in the past And if there are any areas that where we see that the return on investment is not only panning out, we have not been shy about we focus into resources and those from those areas to other areas. In the last few years, we've divested of our snow bush IT business.
And recently, we realigned our power management business and merged it with our wireless and sensing to refocus them away from general power and focus them more on the IoT power, the smart power where we think and believe that we have the competencies to drive a much higher levels of return from that spending. So we've continued to spend in the growth areas that we need that we've funded a lot of those by shift their resources from areas that are not really driving the right levels of returns that we're expecting into the areas that we need. The other thing that is happening is that, Mark, take a look, talk about the LoRa Alliance Think about this. TurnTech is driving the de facto standard for the whole world. And we're doing this with us seeing significant increase in OpEx.
The reason is because we have the ecosystem that is working for us. We have a lot of partners who are supporting us in trying to make sure that LoRa becomes the defector standard. So a combination of all of that has allowed us to be able to drive our top plan and expand our gross margins, but at the same time keep our operating expenses flat. However, going forward, we still we are modeling that operating expenses are going to grow, but they're probably going to grow at the rate above half the rate of revenue growth. So what we expect to see from that it's a whole lot of leverage that even though the operating expenses might grow, but as a percentage of revenues, they should continue to come down.
So what does all of this mean? I think the market is very simple. We are growing the top line. We are expanding your margins. We are operating expenses in check.
There is nothing else that could happen to accept your operating margins. Your operating profits are going to go up, right? So we do expect to see a very nice inflection of our operating margins. If you go back to fiscal 2016, operating margin on a non GAAP basis, was about 13%. Going forward in the current year, we're expecting this to be in the high 20s.
Right? That is a significant increase in up margin. And a lot of that increase is coming from the fact that we are focusing on the right market. Mohan did talk about the things that are driving top line for us that we focus our strategies on. Right?
And that is the IoT space that needs for bandwidth, data centers, and mobility. Those three key markets are driving significant top line for us and we expect that to continue. Also, I've mentioned this before because we're bringing in a whole new level of disruption to our marketplace. We're providing a significant amount of value to our customers. They're willing to pay us for it.
That is a key driver for our high gross margins. And then I have what I call value based OpEx. I always tell the GMs. I don't have a problem with OpEx as long as you show me the return. Right?
So if you're getting the profits and you're showing the returns, you can spend any amount of money you want. So, because of all those combinations of high growth, stable to expanding gross margins and operating expenses that is very well managed, but we expect to see a significant increase in our Kraken margin. So when it comes to cash flow, a lot of you do know that one of the things that we do very well as a company is include our cash. And it is very simple. Everybody knows what the game plan is, but we do execute very well.
Of course, our cash flow generation comes from being able to grow the top line and hence grow our profitability because of the things I've talked about before. But also, I believe we have what I call a best in class cash conversion cycle. We collect money very quickly. I think our DSOs is probably in the mid to high 30s in terms of days. Our inventory target model is 90 to 100 days, and we are even though we're slightly ahead of that, but I do believe that in the near future here, we're going to be within this target range and we manage our disposements very well.
So the management of working capital is a focus. It's something that we pay very good attention to in the company. And our CapEx is now being estimated to run at about 4% of revenue as we go forward. We had previously been targeting 5 percent of revenues in terms of CapEx, but because of the investments that we've made in the past, And because of the top line growth that we're expecting, we do believe that our 4% of revenues in CapEx should allow us to continue to support the top line growth that we're projecting. So with all the cash that we're generating and that we're going to generate we look forward to putting more of that into growing our top line, but also returning a little bit more to back to the shareholders in terms of our stock buyback We are the Board of Directors recently authorized a $250,000,000 increase to our repurchase program.
And we expect to use it. We expect to use it to help offset dilution from employee grants And then in our EBITDA and then opportunistically, depending on what the valuations are doing out there, we make it a little bit aggressive in terms of our buyback. But more importantly though, a lot of our cash is going to continue to go into funding our growth. Mohana talked about doing strategic acquisitions. We do believe like he said, acquisitions is a part of our toolkit.
You heard one of the examples. The acquisition of Aptivision right. And acquisition that is supposed to bring us a $250,000,000 SAMH expansion significant amount of revenues. It's a very small acquisition as acquisitions go. Some people probably refer to that as a talking acquisition that is safe.
It is something that is giving us and additional competence in a video space that we're already in. One of the things that we're also doing in terms of building out our LoRa business is to support the ecosystem. As you can imagine with LoRa being a brand new industry in the IoT space as a whole lot of business is a whole lot of startups. That are emerging to help solve some challenges, eliminate some roadblocks that are continuously coming up. We have strategically mentioned choices where if we see a startup that we believe is going to be able to help eliminate the roadblock.
But they need a little bit of funding. We've made some investments in those companies to help get them going because the more The more these guys are successful, the more successful will be with our mission of making Laura the defector standard. If we do decide that there is something out there that makes a lot of sense, in terms of an acquisition. And there's a larger acquisition where we need to go out and raise capital to get that done. The balance sheet is very strong.
We do have some debt on the books, but it's actually very low now often as considered, right? We have a leverage ratio now of about 1.8 that we expect to be going down significantly very fast due to the top line growth and the growth in profitability. So our balance sheet is very strong and it gives us a whole lot of degrees of freedom in terms of how we choose to grow the company. So with all this stuff, with a top line growth that is 3 points above industry growth rate that is our target. I think in my 12 years of dealing with the company for the most part, We have actually grown much faster than that.
And with gross margins that are still very stable and expanding, 58% or 63%. We I think we're rapidly approaching if not at the midpoint of that range. With operating expenses that are significantly under control, we expect it to grow at the half the rate of revenue growth. I think it has become obvious that the only thing that can happen for us with operating margins to increase our target range. So, we are announcing that our operating margin target range on a non GAAP basis, we are moving it from the current 28% to 32 percent, we now believe that in the next few years here our operating range should be more than the 32% to 36%.
The midpoint of that 34%. I think we'll probably get there at an annual annual revenue run rate of about 8 $1,000,000 to $900,000,000, which allow us to get to the midpoint of that range. As previously I've mentioned, that the CapEx is now 4% of revenues. That's what we're targeting now is that our 5% and our free cash flow margin We are also increasing that to 25% to 30% from 20% to 25%. Sorry, with that, I'd just like to remind you of the pace I wanted you to take away from this presentation.
And I hope that have made those points. And the case for that, we do have the growth drivers that shows sustainable growth beyond the $1,000,000,000 target. Because we're moving up in the value chain for our customers. We're bringing more value to them. We expect to be able to sustain our gross margins and to expand them as well.
And our cash generation engine remains very strong. We expect that to continue and that as a result of having a very healthy balance sheet, we do have a whole lot of degrees of freedom. In terms of future growth.
Greg Ellis with B. Riley FBR. Thanks for all the financial information, Emeka. What I wanted to do is ask a more qualitative question. Just on the assumptions that underlies some of the financial parameters that you set forth.
And specifically as it relates back to some of the detailed commentary we heard from the general managers and the team. For example, we heard that ProAV could add $100,000,000 in sales over years. So when we look up when we look at the core and growth and emerging growth buildup, how do we think about the degree to which that 100,000,000 is fully embedded in your forecast versus shade for reasonable conservatism. And can you comment on the economic and broader backdrop that you assumed as you look out over a 5 year period with the growth profile of the business. Thank you.
Sure. So let me take the last one first with regards to economic background and trading policies. Of course, we don't know what is going to be. So we assume it's going to be steady state. Of course, if we are getting to a broader war with China, And we're not able to sell parts to them and stuff.
There's going to be some impact, right? So that will be a headwind as you can imagine. But with regards to the numbers that we actually put into in driving this top line projections, I'm not going to get into exactly what we're putting but you can rest assured that Gary and myself were are very much aligned in terms of the expectations for the proactively market and for the other product lines as well.
Hamed from BWS. So how do you expect this ramp to be achieved? Do you need more acquisitions to get there with what your emerging technologies are? Or can you do it with what you have right now?
I think we believe internally we strongly believe that we have what we have right now allows us to get to the numbers that we've projected, right? But like we've said, along the way, there could be some strategic talking type acquisitions So really strengthens some competencies and things like that. But in terms of being able to get there, we're not factoring in any significant acquisition to allow us to get to those numbers.
Just a reminder, we'll go ahead and open the floor up to any other questions to any prior presenters. I know there's some questions earlier on Gary's presentation, that we may be missed, so feel free to ask any questions from the management team at this point.
Actually, let me invite the management team to come up here. And open up the questions for anyone on the team on any subject.
Guys, when you hit the $1,000,000,000 target, how big would you anticipate Laura is as a percentage of that mix?
When we hit the think the wireless and sensing business will continue to expand us in terms of the revenue contribution to the company at $1,000,000,000. I would expect them to definitely be somewhere ahead of 30% of revenues and maybe between 30% to 40% of revenue or something like that.
So I guess one of the key things for us is to try to grow our LoRa revenues very fast based on the adoption rate. And so we're expecting $80,000,000 to $100,000,000 of revenue this year and that to kind of double every year from there. So it really depends on I think how how the other businesses do, Jason. So that would be really the way to look at it.
So a question for Mark. When it comes to competing LP WAN Technologies, It looks like the protocols are starting to shake out between LoRa and NB IoT. When customers choose a protocol, what are some of the talking points or discussion points on why they pick 1 or the other?
Okay. That's a very good question. So I think it's a very important to understand like I said in my presentation that MBIOT place in the cellular license band. Laura is playing in unlicensed band. In reality, the customer making the decision, the they barely ask for technology.
So they are asked for a solution. So the key target for us is to make sure that the system integrator providing the final solution to the end customer and pick up the best technology. And in some cases, it will be a mix of cellular and LoRa. It's really about the complementarity. So from a customer perspective, in that case, we see the system integrator.
So we believe that the business model that LoRa is offering is much more diverse. You don't have to do business like you were doing. We M2M cellular technology. It can open different types of connectivity. It can be connectivity embedded into other services, even free connectivity in some cases.
So, it's very important not to mix the 2. The system integrators are getting to a point where now they understand. In some cases, a LoRa type of technology makes much more sense from a business a key in some of the cellular NEMBRITY makes a lot of sense.
So I think you've talked in the past about once you hit $100,000,000 or so in lower revenues that you'll start to see a mix shift from more silicon product revenues to more licensing model. Maybe if you could put some guide rails on what that looks like, what a license model looks like, as services turn up and just a sense of what license maybe royalty rates will be, just kind of a sense of how that model volts.
So Rick, let me take that. I think there's different types of licensing. We have obviously have the chip licensing and the royalties from that. Where we already have agreements in place. So we know what those royalty models are and what it looks like.
The microservices that Alastair talked about I think it's going to take us some time to establish really what value our algorithms drive out there. Obviously, we're very bullish about it, but we have to demonstrate the value to our customers and then establish in their in their value system, how much we can extract from that. So we'll see. I think it's still TBD. That's why we have it as an emerging growth driver for us.
But we are very confident. And I think you can see from some of the demos in the room next door, that the application space is very intriguing. And kind of, everybody's talking about it in the industry. So coming back to the question on NBA OT versus or cellular versus LP WAN and LoRa, we customers generally don't care about what the technology is. Things just have to work well easily low cost, low power up and then they're happy.
And so one of the beauties about LoRa and LP WAN is it makes things easy. It makes things low cost and simple. As Alastair pointed out, that drives value for our customers And so our goal is to simply prove that there's a lot of use cases that really require that type of simplicity, that type of low cost structure. And that will drive the use of microservices and things like that. So to answer your question, Rick, it's a little bit unclear for us, that part of it, but I think we're obviously very bullish about it and that's why we're investing in it quite heavily.
Back to Laura here, when you guys give out the 50,000,000 connected devices for last year, how much of that are you measuring as far as being supply chain inventory how much of that for this year's guidance are you expecting that that's also supply chain inventories that build up
as to roll out these devices?
So the $50,000,000 is, devices in operation today. So they're connected already to gateways. The $80,000,000 we have forecasted suggests that we're going to ship an additional $30,000,000 devices that will be connected this year. Of those, how much will be for proof of concepts, how much will be for real production. It's really difficult for us to say that.
So how are you managing the inventory process as the service providers come online and they build up these inventories? How do you manage that? So there's
you don't see these lumpiness. Well, we
don't see, we don't see a lot. I mean, so they build out the gateways and then use cases drive the need for end devices. There'll be in any market when there's a ramp up, there'll be initial production runs, right? But then their customers will dictate how much they put in place. So I don't think that there's going to be a lot of concern about that.
From our channel standpoint, there may be some in our distributors and holding devices in anticipation of customers ramping up, but we don't see that as a significant issue.
Just to follow-up on Laura, you'll go from 50,000,000 connected end devices at the end of fiscal 17 to sorry, fiscal $18,000,000 to $80,000,000 at the end of this fiscal year and rejection of potentially $150,000,000 to $160,000,000 in fiscal 'twenty. How are you looking at the supply chain to be able to supply? I assume that you'll be supplying most of those transceiver. So if I just look at the difference, you'll do about 30,000,000 units in calendar 2018 and $80,000,000 potentially in calendar 2019. Do you have the supply chain to handle that level of increase both in foundry test assembly etcetera, etcetera?
We do. This is we talked about operational excellence and in our protection business, we shipped 1,000,000,000 of units. So we're kind of used to the model of shipping a lot of volume. And we have foundries and we have subcons and we have multiple sources. And there's nothing unique about this stuff in terms of the technology.
Most of the IP is in the design itself or in the patents. And I think the supply chain should not be an issue for us.
Hi, Tore Somma from Stifel. So, IoT connectivity is very fragmented and there's a WAN, LAN and a Pan component. Obviously you're focused on the WAN component of it. Are you interested in the LAN and the Pan component at all or is that space perhaps a bit too competitive at this point?
So Mark touched on home automation and you'll see from the tags that we have in our demo area and we've talked about they come into the category of land and land, I think. So a lot of the use cases are brand new. And then, Mark, and I also touched on this that we're not out there saying, Hey, it's going to be this or that. We are bringing the technology and the LoRa Alliance is with a heavy bias at the moment towards more home automation, I think, and more land type of applications. But clearly, the value of the range gives you the wider area network coverage, means that there's probably both application spaces are going to do quite well with Laura.
So, yeah, I don't think we're kind of saying that it's only one or the other, Tory.
You spoke about the sales funnel for Laura. Can you talk about that qualitatively about how that is looked maybe a year ago, 2 years ago and how it is today? And then can you also talk about as you go forward and as more client devices become a part of the lower revenue stream. Can you talk about how it or how you can forecast that funnel and how accurate that can be as you move forward?
Sure. Let me take this one. So, I think a couple of years ago, we said that we were in the $200,000,000 type of identified opportunity And what we have seen over the last 2 years is about 40% to 50% conversion rate. And the cycle for the conversion is about 12 months. Something like that 12 to 18 months depending.
So we expect the trajectory to continue and to transform 40% to 50% of the $400,000,000 within the next year and a half
I guess there was a second part to your question.
As you look forward, that's been how it has acted in the past. And as you go forward and you continue to project out the funnel, how do you expect that to change given that Laura is going to grow essentially double year over year? How do you think about or how do you think about forecasting that funnel and the ability to, generate the funnel at a higher rate than 40% to 50% that you've seen in the past?
So the forecasting the funnel, we're going to continue to see that spend as more use cases come on board. The biggest challenge we have is how do you predict the conversion rate from that funnel to end production deployments, right? And so and that's some of our customers will do a proof of concept and then never go to production. Right? Other customers will accelerate their proof of concept come very quickly to production, depending on the segment, depending on the use case, depending on how important the IoT application is in that region, depending if there's any bottlenecks in that location.
So that's difficult to predict. So Our job really in many ways is to make that funnel as big as possible. And that's what we're going to continue to do. And then to try to remove the bottleneck across that the different elements of that channel, which is if you look at one of the reasons why Alastair is is here and why we hired him and why we brought him in to drive microservices is our feeling is that was that that's kind of a bottleneck for some of the industrial use cases, trying to get geolocation accurate quickly indoors and outdoors and things like that enables the opportunity if we bring the right algorithms to play for our ecosystem partners to accelerate their ability to get accurate location of an end mode device. So we'll keep doing that.
Mecca mentioned, we're making some minority investments and strategic kind of investments in ecosystem partners. And it's mostly to remove those bottlenecks so we can accelerate that funnel to revenue.
Question on the geolocation services. So when we were here a couple of years back, you provided quite a bit of detail on which you expect on geolocation services. I was wondering if the economics or if you can provide an update on the economics If I'm looking at my notes correctly, you were expecting $0.75 per year, per endpoint as well as a you're hoping for a third of a tax rate for devices. Any updated commentary on
that would be helpful. Yes. So I'll start in the macro Mark can chime in. One of the things we have recognized over the last couple of years is that what customers need from their geo location activities. In some cases, more accuracy and more, not just geolocation outdoors, but also indoors.
Different types of location. So we've kind of moved the model not only being geolocation outdoors, but also to use microservices to provide location within a building, etcetera. And that's what Alastair was talking about with your location, which you can actually see in that demo area. In terms of the economics, I don't think much has changed there. We still have to prove that we can deliver accurate geolocation at the right price point.
And so it's still, I think, a TBD for us, but we are quite confident with the new approach we have that we're going to be able to do that. Anything else to add?
Just a question for Gary on the Tri Edge CDRs. Can you remind us again where you are in terms of tape out sampling to customers? When would you expect volume production? Are there any sort of roadblocks you have to overcome for the adoption of analog CDRs for PAM4 versus a DSP based approach? Thank you.
Sure. Thanks Mark. Just before I answer your question, I didn't completely answer a prior question on the same similar topic. We were talking about 400 gig in DSP and analog. I wanted to point out that we believe both are going to coexist, DSP solution for longer reaches and analog solutions for shorter reaches.
And as many of you know, we indicated that we didn't go forward with our multiply acquisition. But I wanted to point out, they still are our partner and this is part of the answer to the previous question. We are still developing laser drivers and TiAs for 100 gig and 400 gig for the DSP solution. The only thing that's changed is we're simply not acquiring the company, but we're still working with them. So I wanted to point that out because they, they do have some really good technology and we've been developing parts to move along with their technology.
Some of our PMD parts. So the answer to your question on Tri Edge, we have We have some of our products, that were on a demo at, OFC, which I believe was in late March or the April of this year. And we, it drew a lot of customer interest. And so we've continued to work on we have a couple of programs on the go right now. 1 is for 400 gig and 1 is for 200 gig parts.
And we will be sampling those later in this year. So before the end of this year, we'll be able to sample the 20400 gig solutions. And the 100 gig will be a derivative of one of those. And so we expect to see them go into production in the following year. And start to derive some revenue later in the following year.
I hope that answers your question.
Craig Ellis again with a follow-up for Gary. Gary, in your presentation, you provided a number of examples across all the different use cases where CDR content is rising and that creates a nice tailwind for the company. What happens with ASPs is that content rises. So as we think about the total opportunity, How does the blended impact of units and ASPs impact the revenue that we had expected?
Yes, we think we're going to stay ahead of that curve. I mean, there's always ASP pressure. We're always looking for ways of reducing our costs to keep our margins whole. So as volume goes up as especially with the mega data center players, the Google Facebook, Microsoft and Amazon, those are the the 4 big players. They put a lot of pressure throughout the industry on delivering well priced products to the market.
And so we work with that constantly. So we've seen some impacts to our our ASPs. It's something where we actually see that in many of our products. So we try and keep ahead of that curve, at least try to minimize the erosion on margins by driving our own costs lower. So revenues, the net net is we believe revenues are going to go up even though we're going to see some, pricing pressure.
The ASPs will come down.
Makes sense.
The follow-up is for Mohan. Mohan, I wanted to go back to your comments to kick off the meeting because you talked about the confidence and visibility to $1,000,000,000 in revenues and then $1,000,000,000 plus. So The question is on the point with regards to getting to $1,000,000,000. Where do you feel like you've got particularly good visibility? Where's your conference confidence relatively higher.
And then on the $1,000,000,000 plus, how big is Plus?
And $2,000,000,000, Greg. Okay.
That's a good number.
Well, so the confidence actually across these three business units is pretty high. It's tough for me to sit back and say Laura Laura is any different than the others because the confidence level is driven by the eco system, many ways. And the alliance members, Google joining the alliance, Google is not going to join an alliance if it doesn't feel that there's some value there. Same with Alibaba and those big companies that we talked about. So Laura is kind of in a special place.
I think the data center business and what we are doing with CDR portfolio and how we've got great customer traction. And some of the things that are happening in that space is just very exciting. Apto vision, it's a TBD, but we you heard the story and the good feeling about it. And then with our protection business, we've been saying this a while. The market, the customers will come to us when the need is there.
And we're starting to fill it now. So to me, the confidence level on our protection businesses is increasing also. So I actually know I started the day saying that we're in the best place the company's ever been in and I'll reiterate that point that we are really in the best place the company's ever been in. And it's a very exciting place.
Any other questions?
All right. Management team invites you to join them next door for a buffet lunch. Also, the demos will be open for any of those you who missed the demos either at the break or at breakfast. But please feel free to join us and thank you for your attendance today.