Keysight Technologies: 5G is Far From Peak for Us
Keysight Technologies hosted its 2020 investors day at NYSE on March 3rd and we attended it and loved the update from the management team. We highly recommend our readers who are interested in the forefront of 5G development to listen to the replay.
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For our readers who are not too familiar with the company: Keysight is a leading player of the wireless testing market (25% of market share) and started investing in 5G as early as 2013. Different from the 4G cycle where it only captured the manufacturing side of the business (handset, low testing value), Keysight's advance in 5G technology has allowed it to dominate the R&D side of the business, which can be seen in its recent financial success (chart below). The management also recognized the potential of 5G is not only limited to the wireless connectivity and the physical layer of it. As a result, Keysight has been expanding its testing solution to the protocol layer (vertically) and to the wireline connectivity (horizontally, such as datacenter, etc.).
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We use Keysight as an early indicator to gauge where we are in the 5G cycle. There is an elephant in the room for Keysight investors as, sooner or later, there will be a big peak of 5G deployment coming. When is it for Keysight per se? The management wrote off the concern by offering three reasons:
More on R&D vs. manufacturing which was lumpy; Engineers don't sit around on their hands and they will continue R&D for the next-generation technology and Keysight will be there.
Even in manufacturing, Keysight is more onto value-added, such as components and base stations. The testing that goes on for base stations is an order of magnitude higher than handsets.
Last but not least, the expanded scope of the total solution mentioned above.
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