5G buildouts stoke Xilinx earnings

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The ramp up to 5G is happening faster than expected for semiconductor company Xilinx, which provides chips for next-generation radios and basebands.

The San Jose, California-based company reported revenues of $800 million during its third fiscal quarter 2019, representing 34% year-over-year growth. Its communications business was especially strong driven by the wireless market. Xilinx's communications revenues grew 41% year over year. In particular, the company saw unexpectedly high growth from early 5G deployments in South Korea and China.

Victor Peng, Xilinx’s president and CEO, said during the company’s earnings call, “So I think in earlier calls we've talked about how we are in virtually all the pre-5G proof-of-concepts and demonstrations, not only in the radio but even in the baseband. We really started seeing true deployments in North Korea and the very, very early beginnings of that in China.”

Peng also said he thinks 5G is going to be “a larger deployment overall, compared to the past generations.” He added that there will be waves of 5G technologies, and “in 5G there's going to be more radio.”

Analysts on the earnings call expressed some concern about the U.S.-China trading situation, given that Xilinx is seeing strong growth in its wireless business in China. Peng said the company is obviously monitoring the situation closely, but that circumstances could change on a tweet, so it’s very difficult to predict.

“The tariffs that are in place do impact us, where if the things stay the way they are, we will continue to do the business,” he said. “I would also add that our strength in wireless is not just in China. I mean all our Tier 1s across all the geographies we're seeing strength.”

Xilinx is renowned for inventing the field programmable gate array (FPGA). An FPGA is an integrated circuit designed to be configured by a customer after manufacturing, providing a certain level of programmability. FPGAs are widely used in data centers, and Peng said Xilinx’s data center business is doing well.

“We continue to build a very strong momentum with hyperscalers, where we are expanding our ecosystem for a broad adoption of our products and applications across the compute, storage and networking segments," he said. "We had design wins and applications including big data analytics acceleration, machine learning inference, video transcoding, network acceleration, as well as in storage controllers.”

Some of the company’s data center customers include Amazon, Alibaba and Huawei.

But the company doesn’t want to be perceived as just an FPGA provider. “We are a platform company,” said Peng. “And that's why we believe we can sustain double-digit growth.”

For its guidance, Xilinx said it expects to exceed $3 billion in annual revenues for the first time in its history.