Closing the year on splendid revenue growth, Norway-based chip company Nordic Semiconductor is eyeing to follow the success with an even better year in 2022 by marking its name in more verticals while continuing its reign in the Cellular IoT market. Svenn-Tore Larsen, Chief Executive Officer of Nordic Semiconductor, spills the beans on the company’s market forecast for the year, its strategies to work around the chip crisis and how India fits into its global growth plans.
Q. What are the challenges and possibilities Nordic encountered in 2021?
A. The pandemic’s global impact on society and the world economy has, in turn, affected the organization and operations of Nordic Semiconductor. The company’s focus during the challenging year has been to foremost safeguard our staff, followed by ensuring business continuity for customers, suppliers and partners.
While Covid-19 has had a negative impact on the world overall, on the positive side, it has been the catalyst behind a dramatic mainstream uptake in a range of technologies that were previously confined to niches.
For example, the boom in online shopping and the need to transport billions of vaccines across the globe has accelerated technologies in the logistics, asset tracking and location services sectors. The pandemic has also triggered major interest in wearables and other connected devices that initially supported social distancing and contact tracing to slow down the progress of Covid-19 but can now be turned to other novel applications. Nordic’s technology has been used in dozens of innovative designs for these and many other boom sectors during 2021 resulting in the company’s revenue doubling over the last two years.
But Covid-19 has brought challenges to Nordic too. For example, semiconductor chip supply has been subject to major constraints which have extended lead times. The impact has been felt the most in booming sectors such as healthcare, smart home, asset tracking, and Virtual Reality (VR)/Augmented Reality (AR), but there are supply challenges across all sectors. Nordic staff have worked tirelessly with the company’s suppliers to increase inventory and also with customers to help them overcome component shortages. The situation is improving but it will be many months before normal lead times return.
Q. What are the most important new items in Nordic’s industry segment in 2021 and what has been the impact on the market?
A. Bridging the physical and digital world demands Nordic’s advanced connectivity solutions. The company has the expertise to do these things through its investment in people—Nordic has grown rapidly in the last several years and now has over 1,150 employees—particularly engineers. 70 per cent of employees work in product Research & Development, driving the innovation which will underpin Nordic’s future growth.
As a result of this investment, the company is the market leader in Bluetooth Low Energy (Bluetooth LE), a popular short-range wireless technology and a leading supplier of other short range wireless technologies such as Thread and Zigbee. Nordic is also well-positioned in the emerging cellular IoT market. (Cellular IoT is a leading technology for Low Power Wide Area Networks (LPWANs), a vital technology for the IoT.)
Following its acquisition of Wi-Fi IP and expertise from Imagination Technologies Group, Nordic is also developing Wi-Fi 6 (the latest version of the Local Area Network (LAN) wireless technology) chip for IoT applications. The company’s broad portfolio of products and solutions, combining low-power high-performance ICs, feature-rich embedded software and a wide range of development tools makes us a global leader in IoT technology.
Nordic has also launched its first Power Management IC (PMIC). The product is designed to perfectly complement Nordic’s short-range wireless SoCs and enables designers to not only power their IoT devices but also to charge the wireless product’s batteries. The PMIC extends battery life and makes it much easier to design devices that use energy harvesting. In this way, Nordic is not only enhancing wireless design but also helping engineers design sustainable solutions that require the manufacture and disposal of fewer batteries.
Q. Looking forward to 2022, which is one market segment that Nordic is looking to expand to?
A. After becoming a leading supplier of short-range wireless technologies and a growing player in cellular IoT, Nordic wants to enter the space of Wi-Fi solutions.
While the company is new to the Wi-Fi sector, development is on track for the first product to enter customer sampling during the second half of 2022. The company’s intention is to offer customers “one experience across all the key IoT technologies”. To meet that objective, Nordic will focus its efforts on hardware, software and support, and service solutions that embrace all key verticals.
Nordic will continue to target key verticals including Industrial IoT (IIoT), logistics, smart home, healthcare, retail, consumer and education among others. Particular examples include the fast-growing asset tracking sector where short-range wireless and cellular IoT technologies work together to track the position and condition of valuable cargo. In addition to Nordic’s hardware and software, the company has also launched a location services solution, nRF Cloud Location Services. The solution builds upon Nordic’s versatile cellular IoT connectivity enabler, nRF Cloud. The product provides Nordic customers access to a full location services model once their cellular IoT products are commercially deployed. nRF Cloud will also offer those same customers firmware over the air (FOTA) updates for devices in the field.
Another key market segment is the emerging next generation of wireless audio, Bluetooth LE Audio. LE Audio enhances Bluetooth Classic audio by providing higher quality audio streaming with longer battery life for speakers and headphones. The technology will include the Bluetooth Audio Sharing feature, enabling use cases where, for example, multiple headphones connect to a single audio stream. Nordic’s nRF5340—the world’s first dual Arm Cortex-M33 processor wireless SoC—is fully compatible with Bluetooth 5.2 and is the perfect device to power LE Audio products.
The medical sector is also a key sector Nordic is looking at. One example is the treatment of Type 1 diabetes. Nordic customer Diabnex offers its Clipsulin insulin injection monitoring and recording device which features wireless connectivity powered by Nordic’s nRF52832 SoC.
Q. Do you see the Wi-Fi 6 standard creating more demand? Will there be new applications?
A. Definitely, as the Wi-Fi 6 standard’s primary goals include performance improvements and better power mechanisms. We believe we will see devices with improved connectivity and much-improved power and battery management. Additionally, with a host of IoT devices operating in our Wi-Fi environments, the new standard allows us to design devices that can negotiate both when and how often these devices should share updates or request access to the networks. The result will be better applications with long battery operation.
Q. Which new items or technologies have shown significant growth in 2021, and the best development potential in 2022?
A. Nordic sees the short-range wireless sector continuing to exhibit good growth during 2021 and that will likely accelerate into 2022. Cellular IoT has gained good traction during 2021 and looks set to take off in 2022.
Nordic is in a strong position to take advantage of this growth with its nRF9160 SiP which integrates a powerful Arm Cortex-M33 dedicated application processor, LTE-M/NB-IoT modem and GNSS. The nRF9160 is suitable for global operation and continues to gain certification with network operators across the world. The SiP is a compact cellular IoT solution with class-leading battery life and software support and is perfectly matched to the demands of applications across a wide range of industrial, commercial and consumer sectors.
While Nordic is a relative newcomer to the cellular technology market, it has deep expertise in the sector through its Finland engineering group. This expertise has been combined with Nordic’s renowned low power wireless experience to produce the award-winning nRF9160. As a result, Nordic’s cellular IoT revenue is now seeing good growth and has more than trebled to $14 million from Q3 2020 to Q3 2021. The revenue is spread across multiple customers with projects ramping up over time. Customers are supplying Nordic-powered cellular IoT products into the logistics/asset tracking sectors, as well as industrial and environmental segments.
Cellular IoT will be a driver for the digitalization of society, and the technologies in which Nordic has invested will open new markets both for M2M and M2People applications.
Q. How difficult has it been to meet customer demand in light of the persisting component shortage? Do you think the component shortage will continue in 2022?
A. Nordic believes component shortages will continue in 2022 as demand will continue to exceed supply. The company’s wafer suppliers are working hard to resolve this situation, but there is considerable inertia in ramping up wafer fab capacity. Nordic has taken early and decisive action with its wafer suppliers to secure customer deliveries for 2022 and the company is working hard every single day to secure additional capacity.
However, Nordic faces a continuing and challenging exercise to meet customer allocations. These allocations have been based on agreements with each customer but are also based on the company’s moral obligation to support them. We have tried to balance the allocation to both tier 1 customers and smaller customers as we want to protect high volume customers with long commitments while seeding new applications which exhibit high future growth potential. The policy has enhanced the relationship with long-term customers and new start-ups alike, resulting in strong estimates of rapid growth.
Q. Has Nordic imposed any price increases on its customers? Do you plan more price rises?
A. While several competitors did increase prices as early as the first quarter of 2021, Nordic did not take advantage of the economic challenges created by the pandemic and high demand for its products to increase prices.
However, due to marked increases in wafer cost, shipping, test and assembly, Nordic is responding with a small price increase for its products from December 2021. Provided there is no further deterioration in market conditions in 2022, the company will not make further price adjustments.
Q. What would your advice be to design houses and OEMs, so that they are better prepared for similar challenges in the future?
A. New technologies increasingly involve greater complexity, both in terms of protocols and the number of components needed for a product to work. In many cases, Nordic’s customers will not have enough in-house expertise to bring products to market. They need to work together with several partners to build a complete, production-ready system.
OEMs and design houses that grab the opportunity to strengthen their relationship and expertise through e.g. partner programs (NPP) will have a much more robust path to succeed if we should experience similar situations in the future. Approved Design Partners can fill the customer’s knowledge gaps, provide accurate forecasts to manufacturers, and importantly secure necessary products.
Q. How has been your experience with India and what are your expansion plans for India?
A. India is a place for immense growth opportunities when it comes to consumption or as a knowledge bank in resources. Our India activities are categorized in two verticals: (i) Selling Nordic Chips and (ii) being the global Design Center in India.
In terms of India’s importance, we all know that this is a land of opportunities, and we foresee humongous growth in the coming 5 years.
Honestly, even the first few years of our presence here has been very motivating. In the last 2+ years, we have practically seen excellent growth in sales revenue. We started from scratch in the country, and we are not far away from being a region with double-digit in Sales revenue.
In fact, the design team is out with its new hiring plans and it is available in our career section on the web – and it’s just the beginning. On the Sales front, too, we have concrete plans to strengthen with more resources soon. It might be tough to say how many, but we will be sizable in the coming years.
The focus will grow to a more granular approach towards Regional Sales & Marketing support with FAE Team for the company but we are yet to put any dates to those. These plans on paper would have been executed in-field if the last 18 months would have been normal. Nevertheless, we are going to invest in Indian resources more in the coming times.
Q. Which aspect is more important to Nordic India– the country as a sales destination, or as a Design-Win destination for global products manufactured across the globe?
A. We cannot segregate these two above. The company is visualizing this country as a potential to drive both the verticals together. Our investments are in both directions to boost growth and support the government’s vision of AtmaNirbhar (Self Reliant) in semiconductor manufacturing and product development.
With low labour costs, attractive incentives for new manufacturing enterprises, and a reduced corporate tax rate, India has emerged as an alternative hub for global manufacturing. The liberalization continues to benefit foreign investors. India allows 100 per cent FDI in most of the sectors under the automatic route. To provide more clarity to foreign investors, the government recently published its latest consolidated foreign direct investment policy, which came into effect on October 15, 2020. Also, the GOI has put in place a number of policy initiatives to make the country a global manufacturing hub under the overarching plan of ‘AtmaNirbhar Bharat’ or ‘Self Reliant India’. ‘Vocal for Local’ and ‘Make in India’ initiatives have been supported by business-friendly reforms and incentive schemes to attract foreign manufacturing companies. In November 2020, the government approved the extension of its Production-Linked Incentive (PLI) Scheme to 10 flagship sectors, with incentives totalling INR 1.46 trillion (US$19.54 billion). These 13 sectors include Mobile Manufacturing and Specified Electronic Components, Critical Key Starting materials/Drug Intermediaries and Active Pharmaceutical Ingredients, Manufacturing of Medical Devices, Automobiles and Auto Components, Pharmaceuticals Drugs, Specialty Steel, Telecom and Networking Products. The lower tax rate has allowed India to compete with ASEAN’s emerging economies for foreign investment. India’s large consumer market further adds to its advantage.
For foreign companies looking to tap India’s huge market of 1.3 billion people, there could not be a more opportune time.
Q. How does Nordic see itself becoming a leader in the IoT platform ecosystem?
A. ‘Platform ecosystems’ are the result of technology platforms that bring together connected solutions into a coherent solution. These ecosystems often result from cooperation rather than competition between companies. When companies work together, innovation thrives, advanced technology enters the mainstream more quickly and consumers gain.
One example of such a platform ecosystem is Matter. Matter is an initiative between consumer giants such as Apple, Amazon and Google and technology suppliers such as Nordic which aims to reduce complexity and ensure interoperability between wireless devices and platforms to make life easier for the end-user. Nordic is taking an active role in developing the Matter standard. The company will also use its membership of the Connectivity Standards Alliance Member Group China (CMGC) to help drive Matter in the region.
Another platform ecosystem example is Amazon Sidewalk which extends smart home wireless technology, including that from Nordic, beyond the house to help track things like pets, keys and wallets.
Nordic is ideally positioned to meet the challenges brought by these megatrends through its specialization in providing ultra low power wireless connectivity for smart things.
Q. The world is facing many challenges at the moment with climate change at the forefront of people’s minds. Does Nordic have any thoughts or policies in this area that we need to know about?
A. Sustainability is one of the megatrends Nordic has identified as driving its business in 2021.
Internally, the company is doing much to ensure its own business is sustainable. The company is a member of the Responsible Business Alliance (RBA), the world’s largest industry coalition dedicated to corporate social responsibility (CSR) in global supply chains. As part of the RBA and other initiatives, the company is committed to developing technology that will help realize the UN’s 17 Sustainable Development Goals.
The design of Nordic’s products, too, is heavily influenced by sustainable practices. Every device we produce is designed to maximize battery life – reducing the environmental impact of millions of batteries. As the fog of the pandemic lifts, looking after the planet will become one of the most important business imperatives and one which will continue to inform Nordic’s future direction.
Externally, Nordic is committed to helping its customers use IoT to solve sustainability challenges. The company’s technology is helping to clean up the air and water, limit carbon emissions, tackle deforestation and protect endangered species. Nordic’s technology is also helping educate disadvantaged children, boost agricultural yields and deliver affordable and clean energy.
Everywhere you look, there is evidence of Nordic technology powering sustainable products. At our own HQ, we house several beehives that showcase Nordic wireless technology, energy harvesting, edge computing and machine learning functionality that help bees go about their honey-making business.
Nordic is also committed to helping its customers use IoT to solve sustainability challenges. The company’s technology is helping to clean up the air and water, limit carbon emissions, tackle deforestation and protect endangered species. Nordic’s technology is also helping educate disadvantaged children, boost agricultural yields and deliver affordable and clean energy.
Q. What are Nordic’s market forecasts and expectations in 2022?
A. The IoT market is expanding exponentially. Market analyst IoT Analytics reported that by the end of 2021, there were around 12.3 billion IoT-connected devices. It is forecasted that by 2025, that number will have reached 27 billion.
Nordic is seeing this growth across a wide range of sectors including the Industrial IoT (IIoT), logistics, smart home, healthcare, retail, consumer and education among others. More specifically the company sees three ‘megatrends’ driving the growth of IoT– Industrial IoT, sustainable solutions and platform ecosystems.