Keysight Technologies CFO Neil Dougherty told an investor conference this week that a hoped-for improvement in semiconductor supply chain issues in the second half of the year doesn’t seem to be materializing—though at this point, he added, Keysight’s combination of in-house specialty chip fab at its Santa Rosa, California facility and its investments in alternative sourcing and re-designing long-lead-time board elements out of its products are paying off.
“It’s certainly been a very challenging year,” Dougherty said, when asked about the status of semiconductor supply. “At the margin, [the] supply chain is maybe treading water. It’s certainly not getting better. It could be getting worse. We had originally been expecting some improvement in the second half; we don’t see any material signs of that at this point in time.”
Nevertheless, Keysight has raised its revenue expectations for the year, and its order backlog is about twice what it historically has been, driven by demand across its portfolio, Dougherty said, adding that the company’s revenues are a reflection of what it can deliver rather than the demand it is seeing. That demand is coming in 5G and Open RAN deployment and development, and in 6G research and development on the cellular communications side, plus 400G, 800G and terabit R&D in the wireline space, testing in the automotive sector and supporting the massive demand for testing of ever-smaller semiconductor processors.
About 60% of Keysight’s revenues are in R&D-related testing, another 30% in manufacturing test and 10% in post-deployment optimization, Dougherty said. Software is becoming a growing percentage of its revenues, accounting for about 20% overall — but Dougherty noted that for some of Keysight’s 5G and Open RAN test solutions, as much as 40-50% of the solutions are software content.
“Going forward, more and more of our solutions will have more and more of the software capabilities, because the complexity that needs to be solved needs to be done through tools like AI and machine learning capabilities that inherently are software,” said Giampaolo Tardioli, Keysight’s VP of network and operator solutions in is Communications Solutions Group, who also spoke during the session.
On the wireline side, Tardioli anticipates “overlapping waves” of investment and R&D in 400G, 800G and terabit-G. 400G accounts for less than 5% of transceivers currently, he said, while even 100G is less than 25%; 800G, meanwhile, is in “active, heavy R&D.”
Dougherty told the audience at the Baird 2022 Global Consumer, Technology and Services conference that 5G is still in its “very early days” and that each new release of the standard means another wave of R&D and deployment. In particular, Doughtery noted that 5G has still primarily been deployed in sub-6 GHz spectrum. “From our perspective, there is still a lot of investment that is currently ongoing in millimeter wave,” he said. “It’s really more a question of when, rather than if, on those higher frequencies, because we are also starting to engage on 6G and the frequencies don’t go down, they only keep going up.”
Tardioli added that most operators are still running 5G Release 15 networks, with Release 16 features (including 5G Standalone network cores) still coming and Release 17 in an “active” R&D phase.
“All the promises of 5G are still ahead of us,” Tardioli said.
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