Can Xilinx Deliver on Its Plans for Growth?

Xilinx reported record revenue in the last fiscal year, and it has plans for more growth in coming years. Can it deliver, or will competitor Altera get in the way?

Jun 12, 2014 at 2:00PM

Programmable-logic-device maker Xilinx (NASDAQ:XLNX) posted record revenue in the fiscal year ending this March, and at its 2014 Investor Day, it laid out a plan for annual growth of 8%-12% for the next two years. Can the company manage its current and future technology portfolio to deliver on these ambitious goals, or will competitors like Altera (NASDAQ:ALTR) and Intel (NASDAQ:INTC) thwart the company's efforts?

28-nanometer node
Xilinx's current flagship products are its 28-nanometer FGPAs. They were the first 28-nm chips on the market when they were launched in 2010, and they dominate at the 28-nm geometry with 70% share. It's taken several years for client prototypes to make it to volume production, but last year, Xilinx finally earned a substantial $380 million from 28-nm, exceeding its target of $350 million.

For the next year, Xilinx has set a more ambitious goal of $700 million in revenue from 28-nm. It seems likely the company will achieve this number, considering the 40% sequential growth of 28-nm chip revenue in the most recent quarter. Also, given the nature of the market, the company has good visibility into many current customers who will be ramping up production with 28-nm FPGAs.

In particular, the Kintex-7 FPGA, which Xilinx states was explicitly developed to be attractive in the wireless market, is expected to do increasingly well thanks to the continued rollout of 4G LTE. Even though the LTE rollout in China has been a hot topic in the technology market for quite some time now, Xilinx management claims that it is still only in the very beginning stages and should benefit the company for several more years.

The next generation
Starting last December, Xilinx began to unveil the new generation of its products, which it calls UltraScale. The mid-range Kintex and high-end Virtex products, built on 20-nm nodes, were the first to be announced and are already shipping. Like the 28-nm generation before it, the UltraScale products will likely take several years to generate significant revenue, but they are the future of the company.

But, there is where things get interesting. Xilinx's main competitor in FGPAs, Altera, is developing its own next-generation products in an exclusive partnership with Intel. Intel recently opened its world-class foundry to third parties, and so far, Altera has been its biggest foundry customer. The big news is that Intel and Altera will be manufacturing FPGAs on the 14-nm node, a generation ahead of Xilinx.

Who will win the next generation? When asked about the tendency of Xilinx and Altera to trade off the dominant position at subsequent geometries, Xilinx CEO Moshe Gavrielov answered that he doesn't "think there is a physical rule of nature that says that you need to swap leadership." He also reiterated that he is very confident about his company's position for the next generation of chips. Still, with Xilinx's foundry, and TSMC only rolling out its 16-nm node late this year or early next year, Xilinx might find itself a year or more behind Altera.

Taking on the ASIC market
The fight for the next generation of FPGAs is especially important, as Xilinx and Altera hope that their addressable markets will increase drastically in coming years. Both companies have claimed that FPGAs are becoming more competitive relative to application-specific chips, known as ASICs or ASSPs, with Altera estimating that FPGAs could eventually take almost $50 billion from ASICs and ASSPs.

The change seems to be happening slowly at the 28-nm geometry, with one-third of 28-nm design wins coming against incumbent ASICs and ASSPs. But, this is likely to accelerate rapidly with the new generation of FPGAs. It is becoming economically infeasible to continue to produce limited-applicability ASICs and ASSPs using the most advanced technological processes, and this will give new FGPAs more of an edge.

In conclusion
Xilinx is well-positioned to keep benefiting from the success of its 28-nm chips in the ongoing LTE rollout. However, success down the line is not guaranteed, as competitor Altera seems to have a momentary advantage in the development of the next generation of FPGAs. Keep watching for design win announcements to find out who will take charge of the expanding FPGA market over the next several years. 

You can't afford to miss this
"Made in China" -- an all too familiar phrase. But not for much longer: There's a radical new technology out there, one that's already being employed by the U.S. Air Force, BMW and even Nike. Respected publications like The Economist have compared this disruptive invention to the steam engine and the printing press; Business Insider calls it "the next trillion dollar industry." Watch The Motley Fool's shocking video presentation to learn about the next great wave of technological innovation, one that will bring an end to "Made In China" for good. Click here!


Srdjan Bejakovic has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers