Mobile Takes Back Seat at CES 2019 for Synaptics

We came away from

Synaptics' SYNA product demonstrations and investor presentations at CES 2019 with renewed confidence in our positive thesis on the firm. Beyond its mobile-centric portfolio, the company showcased a bevy of promising initiatives across consumer Internet of Things, automotive, and even PC. Financially, we believe the firm has done a nice job over the past six quarters driving gross margin expansion while maintaining stable operating expenses ($108 million on average) amid volatile revenue (chiefly due to its mobile exposure). We foresee stabilization in the mobile and PC businesses augmented by growth in consumer IoT. Our $64 fair value estimate is intact and we reiterate our view that investors with the patience to deal with the volatile nature of the semiconductor component space may find current price levels attractive, though we reiterate our no-moat and very high uncertainty ratings.

When we asked former Conexant president (and current Synaptics vice president) Saleel Awsare how the firm would build on its current far-field voice offerings found in countless Google Home and Amazon Alexa products, he highlighted the firm's latest AudioSmart solutions, which target voice-enabled smart home devices such as hubs, speakers, and appliances. These system on chips were designed on a 22-nanometer process node (fairly advanced for consumer IoT) and feature neural network acceleration for superior speech recognition as well as the latest far-field voice processing to improve voice pickup in noisy conditions. We saw this work fairly smoothly on a smart speaker in a room with a loud movie, music, and numerous people speaking in the background.

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