Get started here.
Great.
Hello everyone and good afternoon. Thank you for joining me for the first day of Needham's 28th Annual Growth Conference. My name is Neil Young, and I'm a Semiconductor Analyst here at Needham. It is my pleasure to host this fireside chat with Synaptics. Founded in 1986, Synaptics is leading the charge in AI at the edge, bringing AI closer to end users and transforming how people engage with intelligent connected devices, whether that be at home, at work, or on the move. The company powers the future with its cutting-edge Astra AI native embedded compute, various wireless connectivity, and multimodal sensing solutions. Joining me from the company, I have.
Yeah, this is Ken Rizvi, CFO.
Munjal Shah, Head of Investor Relations.
Great. Well, thank you guys for being here today. So just to get started, maybe a little background. I know Synaptics has evolved significantly from its origins to what you've described as now an emerging AI or edge AI, excuse me, solutions company focused on sensing, processing, and connectivity. Could you maybe start by giving a brief overview of where the company's story has been and where it's going now?
Sure. Thanks, Neil. Maybe I'll start off, and Munjal will jump in here as well. First off, thank you all for joining us. Happy to be here. Thank you, Needham, and thank you, Neil. So if you look at the history of Synaptics, it's a very rich history, coming up here on 40 years in the semiconductor space, and the company's gone through, I would say, several transformations to capture the opportunities over the last several decades. So if you look from a historical standpoint, we have unbelievable technology in terms of our touch sense and sense capabilities overall, and we've captured opportunities as we saw the proliferation of PCs, and then the next phase of growth in terms of smartphones and phones, and now what we're seeing is this movement to the edge, and specifically AI at the edge.
As we think about the story for Synaptics, we have these unbelievable capabilities around our interface and sense technologies that have been world-class and number one, number two market shares in most of the markets that we compete in. But this next leg of growth for us will be around edge AI. Specifically in that area, we have really two platforms that you've highlighted, Neil. One is around our connectivity platform, where we have world-class capabilities in Wi-Fi, Bluetooth combo solutions. So think of Wi-Fi 6, but we're actually leading the charge in the IoT market with Wi-Fi 7 solutions. Then our Astra platform. You had the opportunity to come see us at CES last week, and we were showcasing our Astra platform. We've been working over the last couple of years to develop an AI edge processor from the ground up.
So it's been architected for AI to be able to run AI natively on the chip at the far edge and at the physical device level for the far edge of the network. And so that is really the next leg of growth that we have ahead of us as we think about the next two, three, four years. And so we're really excited about the opportunity. We're seeing significant investments in the semiconductor space and the data center. We believe that investment will move to the network edge and the far edge, where we are very strong with our solutions on sensing, on connectivity, as well as processors.
Great. Thank you. That was a great intro. So just speaking about the Astra that you brought up, can we start with, you described it a little bit, but going in depth maybe, how does it expand your addressable opportunity in IoT, and what ways is Astra differentiated from competitors' offerings?
Sure. So if you look at the opportunity set, so folks don't think of Synaptics necessarily as a processor company, but we have a rich history over the last several years on the processor side and this new architecture that we've developed under the Astra brand, this 2600 series, as I mentioned, built from the ground up for AI at the edge to be able to run it natively. And it is a unique solution. So if you look at the capabilities, it's a two-core solution, but on the compute side, but more importantly, on the NPU side. So we have our own NPU. We actually have a collaboration with Google, where we've embedded their Coral RISC-V NPU. We're the only provider out there, the only semiconductor provider that has embedded that into our solution. We also have co-processors in terms of audio and vision.
So it really packs a lot of punch for this solution and at this cost point for a lot of these far edge applications. And I think the transformer capabilities that we have are very unique. You won't find that at this price point from anybody else out there in the market today. And so we're very excited. The other piece is really power. So when we think about the far edge, a lot of the devices are very power sensitive. And if you think about our device, we've architected it to be very low power, so low, in fact, that when you think of some of our partners, like at the CES, we showcased one of our partners, Toradex, who's building some Single Board Computer for the industrial and healthcare markets.
One of the benefits that they outlined at CES was the fact that our power consumption is so low, you don't need a heat sink. You don't need a separate fan. So you're able to incorporate AI for these use cases very power efficiently. So a lot of punch from a compute standpoint at a very low power consumption level. Anything else, Munjal?
The open source part of it.
Oh, the other piece, yeah. Yeah, spot on. The other piece that I think is unique in terms of how we're thinking about the world and how we're thinking about AI at the edge is we're very much a believer in the open source community. There's a lot of activity in terms of software, in terms of the model that is evolving very quickly. There's a lot of fragmentation. So we're believers in the open source community. We are not a walled garden solution. We're trying to take the best of breed models, along with one of our partners, Google, in terms of looking at that ecosystem. So how do you drive these models all the way from the cloud to the network edge and into the far edge?
How do you quantize these models to make them much more efficient so you can run them not only at the far edge, but seamlessly through the cloud? That's part of the story of Synaptics in terms of this open source model and architecture.
Great. Yeah, I definitely want to learn more about the Google partnership, but maybe a few follow-up questions on Astra first. So I guess, how has initial reception been for Astra among customers and partners? What initial applications or end uses are you guys focusing on? And where is Astra seeing the earliest traction? And sort of where do you think the biggest growth opportunities in the future can be for the platform?
Absolutely. So good question. So Astra is the brand of our processor family. But what we came out with at our tech day here in October, we started to sample our 2600 series. So this is the processor that we built from the ground up, focused on AI at the edge. That is now sampling with our customer base today. It should go GA here, end of Q1, beginning of Q2 timeframe. So we're really excited about that. That's our MPU class of product. We also have behind that coming out more of an MCU-oriented class of product. So a little bit lower power, still has a reasonable amount of compute capabilities, but targeting a different series of applications.
From a customer standpoint, I'll just look back to last week because you and I were at CES, and you were at our booth there, which was a great showcase of some of the opportunities that we have for the Astra platform, and specifically, there's some opportunities in the industrial side, so with our partner, Toradex, in terms of looking at industrial applications, they're a leader in terms of targeting with their SBC single board computer, industrial healthcare applications, leveraging this technology. We were also able to showcase there on more consumer-oriented applications and ability as an example to take a live video stream, essentially convert that audio into text, and then in real time translate that into another language, all done locally, so no need to go back into the cloud. It could be computed on a local basis for more consumer-oriented applications.
I think one other application we were able to showcase there was the ability to run a large language model. So if we think of players like Google, they have obviously their Gemini model that's running at the cloud, but they also have smaller models, still large language models, but running at the far edge. So we were showcasing Gemma 3 running locally again, natively on our Astra platform at CES. So that's another example of applications where you're able to interface with the products, with the technology via video or via voice directly with these models. And then the other applications can be areas such as fleet management. And so the ability to utilize this technology and the vision capabilities to improve quality management as you run materials through any product line, that's another opportunity for us.
So I would say if we look at that midterm growth, you'll see more industrial-oriented applications. In the near term, not a surprise. We would anticipate that we'll see more consumer-oriented applications, or it could be in the wearable space. It could be in home appliances, in the smart home market. These are markets where the design cycles will occur much faster. But we're excited about the platform. The pipeline is building. We're showcasing, and we're able to showcase the technology now that it's out there and very strong interest from the customer set.
Great. I'll just add to it. At the CES show, if anybody was there this year, we saw a lot of physical AI and robotics types of applications that a lot of the companies were showcasing. And we also have a potential play in that end market in terms of robotics, where we could use all our technologies, not just the Astra platform that we talked about so far, but we can also add our wireless connectivity piece, our touch sensing piece, all three technologies coming together for those types of end applications.
Yeah, and that one, I mean, just to add on to that, it's a good point, Munjal, is that if you look at the demo and there'll be a YouTube, you can go to YouTube and take a look at it. But in essence, if you look at the hand, one of the technologies we're able to showcase and utilize is what we believe is world-class touch capabilities that we've developed over the last several decades and utilize that into these new markets such as robotics and the ability from a tactile basis to be able to sense anything from a bottle of water versus a steel pipe or anything from a raw egg to a cooked egg. All these capabilities vis-à-vis our touch.
And it incorporates not only the touch sensors, which you can have 30, 40 touch sensors per hand, but also the processing capabilities to operate that hand and then the connectivity to operate back into the main operating system of a robot.
Perfect. Thank you for that. As I mentioned, I want to move on and ask some questions about this Google partnership that you brought up earlier. So Synaptics' notable partnership with Google as part of the Astra platform development, as you mentioned, from what we understand, you worked with Google to integrate their open source Coral Machine Learning Accelerator into Astra's Torque AI Engine.
Correct.
Obviously, this deep silicon level collaboration suggests a high level of mutual commitment. So, maybe just getting started, what are the benefits of this Google partnership bringing to Synaptics in terms of the tech and ecosystem? And, if you just want to speak sort of how the partnership came to be.
Yeah, so we've been working, we've had a long relationship with Google. I think it dates back to the Chromecast days, and so obviously been working with them over a variety of projects and products since then. We believe, and one of the, I guess, key themes is around this open source view that in this world of AI, things are going to move very quickly, and you want to be able to access that open source community and leverage the best of breed in terms of the technology and the models, and so that partnership has been great. In terms of the incorporation of this technology, so we are the first to embed and the only player out there to embed this Coral RISC-V NPU.
So it's part of our overall silicon solution in the sense that we have our own NPU, but we're able to offload some of the instruction set to the Google NPU if for any reason there's some specific models that are out there that haven't been optimized on our NPU. And so it's a partnership. I think as we think about the capabilities of this 2600 series NPU, we believe in collaboration with Google, it enables us to outpunch the weight class, if you will. So for this level of compute, we're able to operate at a much lower battery consumption level.
And if I were to quote one of our partners from CES, Toradex, right, we talked about them and you were there at the booth with me, they would say, "Hey, it provides kind of two to three X compute improvement relative to the peer set out there for the same battery consumption." And the fact that you don't have this heat sink needed, it just enables our customers to have a much, much lower BOM. So as we architect this solution on a go-forward basis, we're going to look to partner with Google in terms of their NPU and our NPU and make sure that we're able to leverage that open source community for the far edge of the world.
Yeah. And we believe we have leadership in this. We've been working with them for a couple of years. So that's a big advantage as well in terms of having built this relationship from the very beginning.
Perfect. So I wanted to move on to the wireless connectivity business. So a few years ago, Synaptics acquired IoT wireless assets from Broadcom, adding Wi-Fi and Bluetooth to your portfolio. Broadly, what has this acquisition brought to Synaptics? How do you think it's panned out? And what is the trajectory of your wireless connectivity business today?
Yeah, sure. It's a great question. So our connectivity, we've essentially built it from the ground up over the last five years or so. And we have leveraged that IP portfolio. We have full access to that IP in perpetuity for the IoT markets and the markets that we compete in. In addition, I would say over the last five, six years, we've built a very strong team. We have close to, let's say, 500 or so individuals and team members prosecuting the connectivity market. We think that's one of the largest teams focused on connectivity solutions for IoT. And so we built a very strong bench overall in terms of the team.
From a solution standpoint, if we looked over the last five, six quarters or last six quarters or so, I would say we've been growing that overall IoT business substantially, I think north of 50% on average. A lot of that has been driven by our connectivity capabilities and connectivity solutions and that migration from Wi-Fi 6 into Wi-Fi 7. We also have a clear path to Wi-Fi 8, although that's still a couple of years away if we look at the IoT space. It's really a core capability.
And we think as we harmonize that with our processor capabilities, we're very unique in the sense that we can offer our customers leading edge connectivity with Wi-Fi Bluetooth combo solutions, as well as a processor to develop real solutions for the IoT market and edge or AI at the edge for many of our customers and our customers' customers.
You brought up Wi-Fi 7. It's obviously starting to gain traction. Can you speak about where you think Synaptics is positioned within the Wi-Fi market and what's driving the design wins that you're seeing now in Wi-Fi 7? Just any color on customer traction for Wi-Fi 7 and other wireless offerings would be great.
Yeah. So typically in the IoT market, what we've seen in the past is that many of our customers that are on the leading edge will want the leading edge technology. And so for the IoT market today, that's Wi-Fi 7. So think of more video intensive applications. Think of drones, security cameras, streamers, those types of applications where video is important or high performance is important. That typically leads the adoption for the highest end of Wi-Fi in the IoT segment. And then over time, what you'll see is maybe up to, let's say, 50% will be consumed by the leading edge technology out there for connectivity. So today that's Wi-Fi 7. But you'll still see this trailing edge technology for some of the legacy devices.
They may not need the Wi-Fi 7 capabilities, or if it's in industrial applications and the like, maybe they'll stay on some of the legacy technology. So for us, we think it's a first mover advantage by having this capability, and then we can proliferate it into the high performance market first. But we are in the development of still a very high performance, but more of a broad market solution utilizing Wi-Fi 7 in a monolithic chip or monolithic solution that incorporates an MCU and a small NPU. And that will open up a bigger addressable market for us as we think about 2027-28 timeframe as well. And so we'll go from the high performance side in the applications I've talked about, but then hopefully be able to leverage that technology and go into this broader market area and be a leader with the Wi-Fi 7 capabilities.
Perfect. That's a great lead-in into my next question, which was you guys have talked about the development of a wirelessly connected MCU with AI integrated on a single chip. What kinds of applications do you envision for this? If you can speak about that and how is the development of this progressing?
Say that again, Neil, on the AI.
Yeah. Management has mentioned the development of a wirelessly connected MCU with AI integrated on a single chip. I believe that's what you're just speaking on. And then sort of what kinds of applications do you envision for this? And then how is this development progressing if you can speak about that?
Yeah, sure. So I think the applications for this solution will be in areas like the smart home, home appliances, could be security cameras, wearables. So it's going to be much more power efficient than our standalone Wi-Fi solution. And from a cost point, we think we'll provide very good value for our customers to go into a lot broader markets like I just mentioned. So think of wearables, think of smart home, think of home appliances, security cameras, drones, those types of applications.
Okay, great. And then shifting to your enterprise PC business. So we've all heard the noise. There's been some concerns in the industry about component shortages that may impact PC OEM shipments in 2026. Broadly speaking, if possible, can you share your view of what PC related demand should look like in 2026? And are you starting to see any signs of these shortages impacting orders for your business?
Yeah. So we're not seeing any signs in terms of the order. And for us, right, we're not a memory consumer, but if you look at some of the applications that we service, so if you think about the PC market as an example, obviously a large memory consumer in the PC side. What I would say is in these applications like the PC or the mobile phone market, where we have focused is more on the high-end enterprise portion of the market. So with some of our customers, that's where we're focused on the Android phone side. It's really on the premium class phones there as well. Our belief is that market tends to be a little more inelastic in terms of the pricing. So based on the price point of these devices, you can absorb some of the changes in the memory prices.
But it's probably more conjecture in terms of what the demand elasticity is overall for the market. Obviously, we've seen an increase in the memory prices here substantially over the last, let's say, six, nine months or so. Not a direct impact to us, but something we'll continue to monitor in terms of the potential impact as it relates to consumption of devices. I think thus far, if we look at the consumer, if we look at the enterprise over the last 12, 18, 24 months, there has been inflation in all aspects of the business. And I think thus far the consumer and the enterprise has absorbed that reasonably well. But we'll have to wait and see.
Yeah. So are you starting to see a broader recovery in enterprise spending on devices that use Synaptics technology, sort of looking beyond PCs like we've just spoke about? And then sort of what are you thinking for this market in 2026?
Yeah, so I would say if I just look back over the last, let's say, 18 to 24 months, we came off this kind of COVID boom and we had a little bit of a COVID hangover, if you will, and it took us a while. I'm talking specifically about Synaptics as well as the broad semiconductor space to work through a lot of the inventory that was out there at our customers' customers or in the channel, and over the last kind of two to three quarters, we've spoken about this on our earnings calls and the like, but the inventory levels in the channel, that's our best visibility to inventories in the supply chain, have leaned out to levels that were pre-COVID, so I think that's a good backdrop from a demand standpoint, so then all the end demand is really flowing into our business here.
As we look at calendar year 2026, I think we're optimistic. There's a lot of great trends that are going on in terms of some of the more mature markets even. If we look at the PC space as an example, this refresh cycle, we haven't seen that since 2021, 2022 timeframe. So there's an expectation at least out there that we'll start to see some PC refreshes or movement to AI PCs. Or as Windows 10 moves off and people have to move to Windows 11, those are all potential drivers in terms of areas like PC demand. We have RTO activity, return to office activity, and you're seeing enterprises upgrade some of their workstations or conference rooms. There's speaker systems. All of these devices have an ability to incorporate our technology, and so that's also goodness.
Then even in some of the mature markets like the mobile phone space where it's more unit driven, I think we have some unique capabilities or opportunities to expand our SAM in the sense that on our last earnings call, we talked about a win, a new technology, and we announced a win on the horizontal foldable phones. We have a very strong share on the premium side and candy bar phones and vertical flip phones, but we've come out with a new technology on the horizontal foldable phone side. We have a design win that should ramp in the second half of calendar year 2026. I think you can assume there'll be some follow-up wins as well that we'll announce over the next couple of quarters. There are some exciting opportunities in both our mature segments as well as these growth segments in core IoT.
And so it's an exciting time for semiconductors. I mean, I look at it as a time where there's been such significant investments in the data center, but in order for a lot of companies to monetize that technology and monetize that investment, things have to move to the edge and the far edge, and that's where we play.
Okay. Yeah. I wanted to move on to mobile. You sort of answered my first question there with the foldable dual screen devices. So can move on from that. But I want to talk about you guys recently announced a strategic engagement with Qualcomm to advance fingerprint and touch technology across mobile and PC platforms. Could you briefly discuss this and how does this collaboration fit into your mobile strategy?
Sure, so yeah, we had a partnership that we announced last quarter with Qualcomm on the fingerprint. They are a leader in some of the fingerprint technologies, and we are a leader on the touch side, so harmonizing those technologies to create a solution for both the mobile market as well as areas like AI PC, it's an opportunity to continue to push AI into those devices, whether that's on the handset side where obviously they're a strong player, or on the PC side where we're a strong player and to essentially collaborate on the technologies using their fingerprint security and sensing technology along with our touch capabilities.
Okay. Thank you. Moving on to sort of financial model, capital priorities. So regarding capital allocation between M&A, buybacks, and investing back into the business, can you just speak a little bit on what your current priorities are at the moment?
Yeah. I mean, if I were to categorize it at a very high level, first and foremost, continue to invest in the business. We continue to do that in terms of especially around some of the growth engines that we have. So invest organically. That can be around go-to-market software capabilities. And on the R&D side, we continue to do that. I would say second, we will look at tuck-in opportunities where we can enhance the technology. I mean, these are areas we did a small acquisition as an example of a Bluetooth technology, which is more of an acqui-hire that we did several quarters ago. So those types of opportunities to enhance the capabilities we have from a technology standpoint.
And then third and fourth, I would lump them together, which is we want to maintain a strong balance sheet, which we've done, and ample liquidity on the balance sheet, but also return capital back to shareholders. So if you looked at 2025, our fiscal 2025, I think we returned somewhere near about $128 million back to our shareholders. And then in July of this past year, we announced a share repurchase program of $150 million. We started to do some nibbling in Q1, and you can assume we talked about it on our last earnings call, continuing to repurchase shares in our fiscal Q2. And when we report earnings, we'll give you the results at that time.
Okay. And finally, last question for me. Are there any topics or questions that we haven't covered that you would like to address? If not, any key message you want to leave with investors about Synaptics' future that we didn't touch on yet?
Yeah. I would say one of the things that even now when we go speak to investors, I think if they knew us from five, six years ago, they have not heard where we have invested in over the last five years. And so this edge AI capability that we've developed both on the connectivity side where we have what we believe is best-in-class connectivity capabilities with Wi-Fi 7 and a clear roadmap to Wi-Fi 8 is unique. And when you harmonize that with the processor technology that we've developed and the fact that we've been working in collaboration with Google to embed their Coral RISC-V architecture, we think we're uniquely positioned for edge AI. And obviously, we got to execute like all companies do, but we're really excited about that opportunity ahead.
We're excited about the technology of our Astra platform that is going, that's sampling and should go GA here end of Q1, beginning of calendar Q2. And we're excited to tell the story.
Okay. Great. Thank you for your time today.
Appreciate it.
Thanks, Neil.