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1 November 2018

Maxlinear revenues slide, but signals optimism on DOCSIS 3.1, 5G

Maxlinear, the US mixed signal RF specialist chip-maker, came out this week with results down on a year ago and on last quarter, but with an incredibly healthy view of its future, suggesting that it will grow by 20% next year on the back of 5G backhaul, supporting data centers at hyperscale with 400 Gbps connectivity chips and by dominating chip shipments for DOCSIS 3.1 (alongside Intel and up against Broadcom).

That backhaul must go back to its launch in early 2017 at Mobile World Congress of a 20 Gbps Millimeter Wave SoC, with full duplex modem in readiness for 5G backhaul and virtualized base station fronthaul.

This completes a journey from the fairly impoverished market of broadcasting (ISDB-T tuners) to TV sets (Can Tuners) to broadband CPE (DOCSIS) on to cellular, one of the richest markets in the world in a gradual transition for the company over almost a decade.

For the quarter it had sales of $85 million, against $113 million this quarter last year, and year to date (3 quarters) of $297 million against $306 million for last year, with R&D and sales costs roughly flat, and a net loss of $13.9 million compared to a $9 million loss a year ago.

But the company is clearly ramping for these new markets, and Maxlinear clearly referenced Comcast’s DOCSIS 3.1 roll out, which we understand has been fully available nationwide for about 4 months, and it is just waiting for marketing campaigns to get customers to sign up for it. Comcast is now selling multiple tiers of broadband with one over 1 Gbps to the consumer. It previously had a fiber only business 1 Gbps offering, but now can deliver this throughout its footprint.

Comcast has a lot on its plate right now, including buying Sky in Europe, and ramping its MVNO operation, it is well ahead of any other US operation on DOCSIS 3.1 and can set its own timing for ramping this. Another MSO that has just reached the point where it can roll out DOCSIS 3.1 to anyone is Charter, accelerating to just behind Comcast in the technology, and this may have been the mystery MSO that Maxlinear also referenced on its earnings call. Essentially it has one deployed and ready to install customers, and one getting to the point.

In the cellular space Maxlinear said that two out of the top three wireless backhaul OEMs are entering production with their wireless backhaul RF solution this year, which will drive “well ahead of 20% growth in backhaul.”

Maxlinear claims that its RF solution is the only one to support channel aggregation, which is quickly becoming a critical operator requirement to double data capacity in existing 4G and future 5G transport networks. It said,  “We will be able to drive more modem share gains in 2019 with our fifth generation microwave modem, which we just started to sample.” It also said it has a 14 nanometer CMOS wireless access transceiver to be shipped in 2019

Maxlinear said “We expect to be in a strong position to intercept the wireless market transition to the large massive MIMO 5G wireless access infrastructure slated for 2020.

The company says it has now taped a 16 nanometer fiber optic 400-gig PAM4 production silicon for connectivity inside datacenters. This is another area where it seems to be taking on Broadcom. It says it is in a strong position to participate in the initial 400-gig PAM4 deployments supporting a large tier 1 hyperscale datacenter buildout, with mass production slated for the end of 2019. We believe the only other player ready with a similar solution is Marvell.

Additionally, InCoax Networks of Sweden has developed the world’s first multi-gigabit coaxial cable-based access solution using the Maxlinear owned MoCA Access 2.5 networking chip, which it developed after buying Entropic .

Maxlinear claims to be witnessing early-stage multi-gigabit MoCA in-home connectivity deployments at a major tier 1 North American telco – which we presume is neither AT&T nor Verizon, but one of the other, smaller tier 1s.

Right now the company is shipping about 75% of its DOCSIS chips as 3.0 and 25% as 3.1 and it pretty much expects that ratio to reverse sometime in the next 12 months.

There is little reference to which revenues comes from its original business and which from Exar which it acquired in March 2017, which does most of its business in China.