When communications chip giant Broadcom needs to develop a new technology for its customers, it scours the world looking for start-ups, and often, according to Broadcom Chairman Henry Samueli, “we end up finding those companies in Israel.” In fact, he said, “it’s actually somewhat amazing — no matter what technology we need, there is usually an Israeli company already doing it, and they are often the best in the world at it.”
In an exclusive interview, the usually reticent Samueli (he gives about one interview every couple of years, on average) discussed some of the current and future technologies and challenges that California-based Broadcom faces, as well as the contribution of Israel to the company’s success. He also talked about how the hockey team he runs contributes to Broadcom’s success.
Broadcom is a serial acquirer, buying out more than 60 companies since it was established in 1991 — eleven of them in Israel. Among the technologies Israeli companies have helped developed for Broadcom are Passive Optical Network processors (developed by Broadlight, a recent Broadcom acquisition); mixed signal semiconductors for microwave backhaul systems (Broadcom acquisition Provigent); system-on-a-chip (SoC) solutions for femtocells for better Internet connections (Percello); switch fabric solutions for data center networking equipment (Dune Networks); and more.
The Israeli teams are now part of Broadcom global units, which typically tackle a specific area (LTE, networking equipment, etc.) on a worldwide basis, instead of dividing teams up by geographical location, as most other multinationals do.
In some ways, running work groups as single units with offices around the world makes it easier to manage teams, said Samueli — but in other ways, the challenges for Broadcom are greater than they are for companies that typically assign a task to a team in a specific location, and later on try to integrate their work into what other teams are doing in order to create products.
“One of my primary challenges is to meld these teams, all of which have different corporate cultures, to get them to work together,” Samueli said. “But the rewards are worth it, because all our employees see themselves as part of a global corporation – which encourages them to be motivated and see the value of their work.
Samueli was in Israel for a first-ever Broadcom technical conference, where representatives of the units in Israel discussed the new technologies they are working on. It’s been said (and not just by Broadcom) that 99.8% of all data traffic in the world touches a Broadcom chip; the company’s technology is in products as diverse as microwave transmitters, wide area network switches, cellular baseband equipment, and consumer devices like cellphones and tablets. The conference discussed the future of the market, and how Broadcom’s products will fit into an increasingly mobile device-driven communications world.
While Samueli declined to give specifics on the technologies his Israeli acquisitions or Broadcom in general were working on, he said that a lot of it was tied up in developing technology for the LTE (4G) cell network. While 2012 was Broadcom’s most profitable year ever, there was a bit of a falloff in recent months — a result of the heavy investment Broadcom is making in LTE.
“We’re in investment mode now, so it makes sense that profits would fall somewhat while we spend money to develop new technologies,” Samueli said. “We expect the payoff to come within three years, when LTE really begins flourishing.”
One reason for Broadcom’s embracing of Israel, said Samueli, is the company’s “man in the field,” corporate vice president Shlomo Markel, thanks to whom Broadcom has acquired 11 companies in Israel.
“Shlomo has his finger in the pie of Israeli tech,” said Samueli. “When we decide we want to work with a company that is innovating in a particular area, I tell Shlomo about it, and he typically tells me about 3 or 4 Israeli companies that are already doing it.”
And more often than not, those companies end up as part of the Broadcom family, whether through acquisition, partnership, or some other business relationship. “We are happy to get great technology from anywhere, and we have eyes and ears that are checking out companies all over,” said Samueli. “But somehow we find that the best ideas come from Israel.”
While there are no acquisitions on the horizon that Samueli was prepared to talk about, he did say that partnering with start-ups was more crucial in the chip business now than ever before.
“When we started out, you could design a chip with a few guys in a basement,” Samueli said, describing the roots of Broadcom, which he started in 1991 with partner Henry T. Nicholas III. “Now a chip is likely to have 20 different technologies and a huge amount of intellectual property, and it could cost as much as $100 million to design. Economies of scale are hugely important, so only the largest companies — who get to market first — are able to succeed in semiconductors today.”
Israel, he said, was a hotbed of innovation, giving Broadcom an opportunity to leapfrog its competitors and get to market with a new innovation first. “By now, we usually look at Israel first,” he said.
And that search for innovation continues. During his visit to Israel, Samueli, together with Joseph Klafter, president of Tel Aviv University, signed the first agreement of its kind between the Broadcom Foundation and TAU in a first for Broadcom outside the US. Under the agreement, Broadcom will establish a research fund for TAU scientists that will focus on finding breakthrough solutions for cyber threats. The aim is to develop a new generation of authentication methods, which will enable secure interaction between users and their digital environment — smartphones, e-banking, e-health devices — and future technologies such as smart watches, connected cars and wearable devices.
When it comes to teamwork, Samueli is an expert — not just due to his helming of Broadcom, but also because he is owner of the Anaheim Ducks hockey team.
“Buying it was an opportunity that was just there,” said Samueli of that acquisition. “But it’s turned out to be really fun.”
While Samueli didn’t get any new technologies when he bought the Ducks, he did get lessons in teamwork — lessons that apply just as well at a multi-national tech company.
“To succeed in hockey you need teamwork,” he said. “A team may have some great players, but typically the team that works best together does the best. I look at running Broadcom in the same way. We have a culture where people have different skill sets, but they are happy to leverage their skills to help others, and to help the company. If you want to succeed you have to make sure your colleagues succeed as well. In that, hockey is a lot like the tech business.”