萊迪思半導體 (LSCC) 2021 Q1 法說會逐字稿

Welcome everyone to the Lattice Semiconductor's 2021 conference call.

I would now turn the call over to Rick Muscha, Director of Investor Relations.

Thank you, operator, and good afternoon, everyone.

With me today are Jim Anderson, Lattice's President and CEO; and Sherri Luther, Lattice's CFO.

We will provide a financial and business review for the first quarter of 2021 and the business outlook for the second quarter of 2021.

If you have not obtained a copy of our earnings press release, it can be found at our company website in the Investor Relations section at latticesemi.com.

I would like to remind everyone that during our conference call today, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company.

We wish to caution you that such statements are predictions based on information that is currently available, and that actual results may differ materially.

We refer you to the documents that the company files with the SEC, including our 10-Ks, 10-Qs, and 8-Ks.

These documents contain and identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements.

This call includes and constitutes the company's official guidance for the second quarter of 2021.

If at any time after this call we communicate any material changes to this guidance, we intend that such updates will be done using in a public forum, such as a press release or a publicly announced conference call.

Some financial information that we present during the call will be provided on both a GAAP and a non-GAAP basis.

By disclosing certain non-GAAP information, management intends to provide investors with additional information to permit further analysis of the company's performance and underlying trends.

Management uses non-GAAP measures to better assess operating performance and to establish operational goals.

For historical periods, we've provided reconciliations of these non-GAAP financial measures to GAAP financial measures that can be found on the Investor Relations section of our website at latticesemi.com.

Let me now turn the call over to Jim Anderson, our CEO.

Thank you, Rick, and thank you, everyone, for joining us on our call today.

I'm very pleased with our strong results in Q1, as we continue to execute to our strategy, drive product leadership and deliver shareholder value.

Let me start by covering a few highlights from Q1 of 2021.

We grew revenue 19% year-over-year with continued double-digit year-over-year growth in our 2 largest segments of communications and computing and industrial and automotive, which represent over 80% of our total revenue.

We also grew revenue sequentially by 8%, with sequential growth in each of our key market segments.

In particular, we're pleased to see a second quarter of sequential growth in our consumer segment.

We expanded non-GAAP gross margin by 190 basis points year-over-year, as we continue to execute on our gross margin expansion strategy.

We achieved record non-GAAP operating profit of 28%, while non-GAAP net income increased 52% year-over-year.

And we delivered sequential growth from our Lattice Nexus platform, with our second device family, Certus-NX entering production in the quarter.

Let me now provide an overview of our business by end market.

In the communications and computing market, revenue increased 7% sequentially and 28% on a year-over-year basis.

Our key growth drivers remain data center servers, client computing and 5G infrastructure.

In servers, growth was driven by expansion of both attach rates and ASPs, as we continue to drive an increase in Lattice's dollar content per server.

In client computing, as we've discussed in prior earnings calls, we continue to ramp new client computing platforms that began production in 2020.

In 5G infrastructure, we're benefiting from ongoing deployments, with higher revenue both sequentially and year-over-year.

We continue to see communications and computing as a long-term growth driver, given its multiple growth vectors.

Turning now to industrial and automotive market, revenue increased 9% sequentially and was up 20% on a year-over-year basis.

Q1 growth in the industrial segment reflects consistently strong customer adoption in a broad range of applications, including industrial automation and robotics.

And as the digital transformation in industrial and automotive applications continues to accelerate, the Lattice product portfolio is well-positioned for sustained long-term growth.

Turning now to consumer, revenue increased 14% sequentially, our second consecutive quarter of sequential growth, and was down 6% year-over-year.

The revenue base in consumer has begun to reflect the results of our strategic shift into applications with multiyear revenue streams and higher margins, and where our solutions are enabling customers differentiate their products.

I'll now provide some product road map highlights.

I continue to be very pleased with our team's execution.

Since the launch of Nexus at the end of 2019, we've launched 3 device families based on the platform.

CrossLink-NX, the first device family from Nexus platform, achieved first revenue in Q4 of 2020 within 12 months after launch, and grew sequentially in Q1.

Also Certus-NX, the second device family from the Nexus platform, began production in Q1.

And our third Nexus device family, Mach-NX, which launched at the end of last year, remains on track to generate revenue towards the end of this year.

We continue to be pleased with the broad adoption of our Nexus platform across all our market segments, where the power efficiency and faster performance are helping our customers differentiate their applications and systems.

Software remains an integral part of our strategy as well, and we continue to develop a portfolio of higher level software solutions that make it easy for our customers to adopt Lattice products and get to market quickly.

During the quarter, we expanded the capabilities and improved the performance of 2 of our award-winning software stacks: mVision focused on embedded vision applications and Sentry for platform security applications.

In summary, we're very pleased with the strong revenue growth and profit expansion, and continued execution of our product road map.

We're excited to be entering a new growth phase for Lattice and look forward to sharing more of our future plans at our Investor Day next week.

I'll now turn the call over to our CFO, Sherri Luther.

Thank you, Jim.

We are pleased with our strong Q1 financial results, as we continue to execute to our financial model.

We drove sequential revenue growth, gross margin expansion and record profitability, while continuing to invest in our leadership product road map.

Through strong cash generation and a focus on working capital, we have a healthy balance sheet and continue to grow our net cash positive position.

Let me now provide a summary of our results.

First quarter revenue was $115.7 million, up 8% sequentially from the fourth quarter and up 19% year-over-year.

Revenue grew double digits year-over-year in our communications and computing and industrial and automotive market segments, and was also strong sequentially.

Revenue from our consumer market segment grew for the second consecutive quarter and IP was down slightly sequentially.

Gross margin on a GAAP basis was up 50 basis points to 61% in Q1 compared to the prior quarter and was up 190 basis points compared to the year ago quarter.

Our non-GAAP gross margin increased 10 basis points to 61.7% in Q1 compared to the prior quarter, and was up 190 basis points compared to the year ago quarter.

Gross margin improvement continues to be driven by our margin expansion strategy, primarily in pricing optimization and product cost reductions.

Q1 GAAP operating expenses were $49.9 million compared to $47.5 million in the prior quarter and $47.8 million in the year ago quarter.

On a non-GAAP basis, operating expenses were $38.9 million compared to $37.5 million in the prior quarter and $36.1 million in the year ago quarter.

Our R&D expenses increased sequentially, as we continue to invest in the expansion of our product portfolio, while SG&A expenses were roughly flat sequentially, as we continue to drive SG&A efficiencies.

Q1 GAAP earnings per basic share was $0.14 and $0.13 per diluted share compared to $0.12 and $0.11 in the prior quarter, and $0.06 in the year ago quarter.

Q1 non-GAAP earnings per basic share was $0.23 and $0.22 per diluted share, which increased from $0.20 and $0.19 in the prior quarter and increased from $0.15 in the year ago quarter.

We remain focused on cash generation and generated $29 million in cash from operations in Q1.

We also repurchased approximately 300,000 shares or $15 million in stock under our stock buyback program.

Our cash balance increased to $185 million, growing our positive net cash position.

Let me now review our outlook for the second quarter.

Revenue for the second quarter of 2021 is expected to be between $116 million and $124 million.

Gross margin is expected to be 62%, plus or minus 1% on a non-GAAP basis.

Total operating expenses for the second quarter are expected to be between $40.5 million and $41.5 million on a non-GAAP basis.

We are looking forward to our Investor Day next week when we will share our plans of how we continue to build long-term shareholder value.

Operator, we can now open the call for questions.

(Operator Instructions) Our first question in queue comes from the line of Alessandra Vecchi from William Blair.

Congratulations on the stellar results, especially in such a dynamic quarter with supply constraints.

On that end, can you maybe, Jim, update us on how we should be thinking about your exposure to the supply constraints?

I know you guys did a tremendous job starting in Q2 in building up inventories.

But those now appear to have come down a little bit.

If you could just give us a little bit of a framework on that front, and then a follow-on.

Yes, thanks, Alex.

Appreciate it.

So in terms of supply chain, if you look across the semiconductor industry, certainly the supply chain is tight, as everyone knows.

I would say that from our perspective, from a Lattice perspective, I think the team is doing a really good job managing the supply chain and making sure that we're delivering to our customers' needs.

In fact, actually I'd like to take an opportunity to just say thanks to my supply chain operations team for the great job that they're doing now.

A few things that we're doing to make sure that we manage the situation and meet our customer needs is one of which you already mentioned, which is actually about a year ago this time, we started to build inventory, Lattice inventory.

And we did that proactively and strategically to make sure that we were in a good inventory position because we were anticipating some supply chain tightness.

Since we built inventory in Q2 and Q3 and Q4, and we're really glad that we did that.

And even if you look at where we ended inventory in Q1, our most recent quarter, it's more inventory than we were carrying, say, a year ago.

And so we're in a very good inventory position.

And then beyond that, we've been working very carefully and closely with our customers, especially our big strategic customers, to make sure we fully understand their demand and that we've got a great demand picture for the coming quarters.

And then working very closely with our supply chain partners as well to make sure that we're matching that demand with the right capacity in the supply chain, and working very closely with them to make sure that we can continue to support our customers.

But I think at this point, we're pleased with the level of inventory that we have, and also the ability to support our customers.

I think we've been doing a good job at that.

And then Alex, I think you said you had a follow-up question?

Yes.

I was just looking for a little more color.

I mean the upside to the quarter was quite strong.

You highlighted industrial, but the 20% sequential growth in industrial off of what were already some very strong comps in the back half.

Can you maybe tell us how much of that upside or how much of the upside in Q1 in general was from the full quarter of Nexus CrossLink and that beginning to ramp, how we should think about the contribution there, and potentially going forward?

Yes, definitely.

So let me start with the first part of your question around just in general what was driving the upside for Q1.

We saw strength across all of our market segments, which we were quite pleased to see.

Communications and computing, for example, which has been a very strong growth driver for us, last 2 years in a row, that's grown double digits.

We saw 28% year-over-year growth in comms and compute.

As you mentioned, industrial and auto grew 20% year-over-year.

And then consumer as well, which was a headwind for us the last couple years, but really started to stabilize at the end of last year.

We've seen now 2 quarters of sequential growth in consumer as well, which we're pleased to see.

So yes, I would say all 3 of those segments contributed to the upside in Q1.

And then as you -- the second part of your question around Nexus, yes, certainly Nexus was a contributor to that growth as well.

If you remember, we just started shipping Nexus into production revenue at the end of last year, and so that Nexus revenue which is on the first device that we launched, the CrossLink-NX device, that grew sequentially in Q1 versus Q4.

We're really pleased with that growth that we saw.

And then the other good piece of news is that we put our second Nexus device family into production in Q1 as well, and that's the Certus-NX family.

That began production in Q1 as well.

And then our third device, which is Mach-NX, which we launched at the end of last year, that's still tracking for revenue before the end of this year.

So we still see that or expect that to ramp in the second half of this year.

So yes, really good progress on Nexus as well, and we're quite pleased with the Q1 results.

Your next question in queue comes from the line of Mark Lipacis from Jefferies.

Maybe for Jim, the gross margins were the highest I think in 20 years and you're guiding them to be 62%, which I believe was the target you set at your Analyst Day.

So now that you hit that target, where do you go from here with the gross margins?

And maybe as part of that, maybe you can remind us what has driven the gross margins 500 basis points since you took the helm, and which of those drivers are still in play.

Thanks, Mark.

So on gross margins, just kind of a progress -- let me start with some of the progress that we've made over the last few years.

Yes, it's really -- the gross margin progress which as you mentioned, is almost 500 basis points over, I think, since -- if you use 2018 as the baseline, it's about 450 basis points to the most recent quarter.

And really what drove that gross margin expansion was 2 things, 2 main drivers.

Number one was our pricing optimization strategy, which we built out at the end of 2018 and we started putting that in place at the beginning of 2019.

And that had both short- and long-term drivers to it.

We continue to execute on that strategy, and that's certainly been a big part of the gross margin improvement, and we continue to execute on that strategy moving forward as well.

And then the other big contributor was our product cost reduction strategy and that was a multiyear road map that we worked with our key suppliers on 5 product cost reductions over a multiyear period, and that's certainly been a contributor as well.

The other factors, there's been a little bit of a mix benefit as well.

But the 2 primary factors were the pricing optimization strategy and product cost reduction strategy.

And then yes, you're exactly right.

The target that we had put out a couple years ago at our Investor Day in May of 2019 was to get gross margins to 62% or higher, very close to that target in the most recent quarter, and our midpoint of our gross margin guidance is at 62%.

So in terms of the target moving forward, we have an Investor Day next week, so we'll talk more about next week in terms of what might be the right business targets for the business moving forward.

But we're certainly really pleased with the gross margin expansion over the last couple years.

Actually, I have a follow-up if I may.

Can you talk about -- you introduced a number of software stacks for your products.

Can you talk about how that -- how is that being bundled together with your products?

To what extent do you charge for the software separately versus as part of a larger bundle or license fees?

Can you separate that out for us, like with the software component of your revenue mixes versus the chip side?

Is there an ability to do that?

And that's all I had.

Thanks, Mark.

So let me first start with software.

Again, as we talked about back a couple years ago at our Investor Day, software is a very key part of our strategy.

And we talked about how we were going to invest more in software, and we've certainly done that over the last couple years and we've really built out our software portfolio.

The one particular area that we wanted to invest in was application-specific software solution stacks.

And so these are software solution stacks that are built for a purposeful application, and what they do is they really make it very easy for our customers to adopt our products, our devices, into their systems.

And it makes it really easy for them to get to market quickly as well.

And so the side benefit for us is it helps us get to revenue quicker and also helps us be much more sticky on a multigenerational basis.

And we've built out 3 of those software stacks to date: the sensAI software stack which was around artificial intelligence; Embedded Vision processing stack; and a security software stack.

And as you might imagine, there is more to come down the pipe.

But in terms of how we monetize that today, that's really bundled with our hardware sale with our device sale, and it really is enabling that silicon or total solution sale.

And what I would say is in terms of existing customers, it has really helped us expand our share of wallet at a number of existing large customers.

But the other thing that it's done is it's really helped accelerate new customer acquisitions.

We've had some of the highest rates of new customers additions over the last, say, 6 to 12 months, that we've ever seen in the company's history, and I attribute that a lot to the software solutions that we're providing.

I think maybe in the future sometime, we may try to -- there may be some opportunity to monetize the software independent of the hardware.

But for today, we're focused on a solution sale, the combination of the software and the hardware sold together.

Your next question comes from the line of Tristan Gerra from Baird.

Could you -- and perhaps it's too early for that but I'll try anyway.

Could you give us a sense of where you think Nexus could be as a percent of revenue exiting the year, and when potentially you think you're going to be able to reach a crossover at the 28 nanometer versus prior nodes?

Yes, I think it's probably a little early to give a guidance view on that, Tristan.

But what I will say is we do believe the company has started to move into a higher growth phase this year in '21.

And certainly Nexus is a contributor to that.

Nexus just started revenue at the very end of last year, and we're ramping that into full production this year.

There's more Nexus devices that will enter production at the end of this year since Mach-NX.

And so Nexus is certainly a contributor to the top line growth both this year and in the years to come.

But the other thing that I would point out is we still are driving growth on pre-Nexus products as well.

So there are products that preceded Nexus that we continue to drive growth on as well.

So it's not like the prior products are tailing off.

We want to continue to drive growth on both the pre-Nexus products as well as Nexus moving forward.

Okay, that's great color.

And then on the consumer side, it's now the second quarter of consumer stabilizing.

Any color in terms of segments driving that growth?

Is it small speakers?

Do you still have some presence in China smartphone?

And what's the level of confidence that the difficult comps are now behind in consumer?

Yes, good question, Tristan.

So we are pleased to see 2 quarters in a row now of sequential growth in consumer.

And whereas consumer has been a headwind for us in the past, we don't anticipate it being a headwind, for instance, this year in 2021.

One of the things that's really changed over the last couple years in consumer and we had talked about this at our Investor Analyst Day back in 2019, was that we were going to rebuild the revenue base of consumer and shift the revenue base of consumer towards more multiyear revenue streams, higher margin revenue streams, applications that are less volatile and are more multiyear.

And so we really don't have any handset business that's within consumer that consumer segment now.

The revenue is really based on longer-term revenue streams, things like prosumer applications, home automation applications, applications that really live more than just 12 months, but live multiple years.

And so we feel like we've rebuilt that foundation such that it's much more stable, and we don't expect consumer to be a headwind for us moving forward.

And I think there's the potential to see some modest growth with consumer as well.

Now we still expect the primary growth drivers for the company to be communications and computing and industrial and automotive.

Those segments are our largest segments that contribute over 80% of our revenue.

Those are the segments that have been growing consistently for us over the last few years, and we expect those segments to be the primary growth drivers for the company moving forward.

Your next question comes from the line of Christopher Rolland from Susquehanna.

Congrats on the fine quarter here.

I guess the first one is probably for Sherri, but Jim, if you want to chime in.

I have, in terms of typical seasonality, I think there are some anomalies in here, but I had a really soft 3Q and 4Q traditionally, typically.

You guys are clearly on a strong growth projection or rare this year.

Maybe if you could just give us some broad strokes on how we should feel about the third and fourth quarters of this year, and are my seasonality numbers right?

Is there a slowdown traditionally in the back half or are you guys really growing through it this year?

Yes.

Thanks, Chris.

I think on seasonality, historically, our -- the part of our business that had the strongest seasonality was our consumer segment, right?

And as consumers become a smaller percentage of our overall revenue, our business has been less affected by seasonality, as the other segments are, I think, have less seasonality patterns.

So I think that's one thing to factor in.

I also think there are some Lattice-specific -- seasonality aside, there are some Lattice-specific growth drivers that have been kicking in, that have been superseding the seasonality.

Just as one example, in communications and computing, in client computing, we had a couple of new client computing platforms begin production last year, and those continue to ramp up.

We'll see a full year's benefit of those platforms this year.

So I think that's helping drive above what is normal seasonality.

And I think in terms of you asked a little bit about the second half.

I think for first half, we feel like we're off to a really good start for the year, and we're certainly seeing a good strong demand.

We don't provide annual guidance for the year.

But we do see good demand continuing, I think, through the remainder of the year as well.

Okay.

Fair enough.

And Jim, I'm going to get you back on this one for a second time.

So we're obviously in some interesting times.

People can't build cars because they can't get a $2 microcontroller.

One of the great things about FPGAs is their flexibility.

And so I'm wondering if you're seeing anything today -- are you seeing because of any of these shortages in any other areas of the market, are you finding people that are coming over, whether they're replacing an ASSP, as you mentioned, or even some microcontrollers or small kind of ASICS, you name it?

Are they finding that they can use FPGAs to do that?

And if so, is some of that -- are you guys a near-term beneficiary of this change?

And if you're not a near-term beneficiary, do you expect to be, if this persists?

Yes.

That's a great question, Chris.

I would say, yes, definitely.

I think we're doing a good job supporting our customers and our customers see that and they appreciate that, and they definitely factor that into their decisions moving forward on what parts and what companies they're going to rely on moving forward.

So I think we will see some benefit further out in time.

And then I also do think that there's advantages that our FPGAs have, given their power efficiency, their flexibility, their ease of use, all the software content that we've build that make it compelling for a customer that's used an ASSP or a microcontroller in the past to switch over to our FPGAs.

We can usually offer them better power efficiency and better performance as well, as well as I mentioned, a complete software stack.

So I think there's opportunities there as well.

So you mentioned automotive, in particular.

We're happy to see any of our automotive customers switch from their $2 microcontrollers over to a Lattice FPGA.

We're happy -- we will happily facilitate that switch.

And I would say, yes, we are having discussions with customers like that.

I think that's not a near-term benefit that we'll see because it does take time for customers to switch over from one device to another.

But that is something that we can see a benefit from in the future quarters.

And I definitely do think that customers take that into account, and I think we'll see some benefit moving forward.

And congrats to you and your team again.

Your next question comes from the line of Hans Mosesmann from Rosenblatt Securities.

Great.

Congrats, guys, fantastic execution.

Sherri or Jim, in terms of the outlook, are you constrained?

Is there sales -- are there sales that you're leaving on the table?

So we think, Hans, that we're doing a good job supporting our customers.

I think the supply chain team did a good job supporting them in Q1, and I'm anticipating they do the same great job in Q2 as well.

I think it helped, as I had mentioned earlier, I think it helped a lot that we built inventory last year and we kind of got ahead of the curve in terms of supply chain tightness.

And we exited last year in a good inventory position and in the most recent Q1 we have higher levels of inventory exiting in Q1 than we did a year ago.

And I think that, combined with the work that we're doing with our customers in terms of planning demand, as well as with our suppliers, making sure that we have the right capacity, I think we feel good about supporting our customers moving forward.

Okay.

So does that mean that your lead times have not changed?

Yes.

Our lead times -- yes, good question.

Our lead times have been relatively stable for the vast majority of our parts.

There may be some particular parts that happen to be a particular silicon package combination where we're seeing a little bit longer lead times than normal, but the vast majority of our parts are within the normal lead times.

And I think, again, more importantly, we're working very carefully with our -- especially with our big strategic customers -- to make sure that we understand their demand needs going forward, and we're matching that to the supply to make sure we've got capacity.

Okay.

And then one last one maybe for Sherri.

Your expenses are growing a bit faster than top line in Q2.

Is that a function of costs that are maybe going up?

Some players have been talking about costs that have been going up for supplies certain products or packaging.

Yes.

Thanks, Hans.

So from an OpEx perspective, I'll kind of give you a perspective on that, and then I'll come back to cost at the end of that.

So our OpEx was up sequentially versus Q4, as we expected.

It was towards the higher end of our guide.

But if you note there are the areas where it's higher, it's in R&D.

Our R&D spend increased 7% sequentially, as we continue to invest in our product portfolio.

And so you're going to continue to see more of that as you see our guide for Q2, which is up again at the midpoint versus Q1.

And again, that increase is due to investment in R&D.

I'd mentioned last quarter that we're in a growth mode, so that's really reflective of that as well as we continue to invest in the long-term growth of the company.

The other thing on OpEx I'll just point out is that our guide -- or rather our target that we put out at our 2019 Investor Day was 35%.

And for Q1, we're still below that.

So while we're investing in the business.

We're still managing our SG&A to our target of 15%.

We're just a tad bit above that, but we're managing to that target.

And then separately, with respect to cost, our costs, we are hearing a lot about that in the industry.

In general, our costs are relatively stable.

We might have seen a little bit of increase in areas like shipping cost, for example, in the supply chain.

But where we're able to manage that is through our pricing optimization programs, for example, that Jim talked about earlier, where we've been able to really get the value for our product.

And as you've seen in Q1, we increased our gross margin by 10 basis points.

And year-over-year, that was an increase of 190 basis points.

So we'll continue to execute on our pricing optimization program and really utilize our key relationships with our suppliers to help make sure that we can continue to increase our gross margin to the midpoint of our guide for Q2, which is 62%.

Your next question comes from the line of Matt Ramsay from Cowen.

I think this question is probably for both of you guys.

Different companies in the semiconductor supply chain right now are obviously facing demand outstripping supply.

And some have chose to keep more inventory on books versus the channel.

Some have chose, I guess, to support the channel versus sort of draining their on-books inventory.

If you look across both of those metrics, Sherri, how are you guys thinking about the inventory levels, both that you have and that you have in the channel versus target levels and what that might mean for visibility of revenue as you look forward into the back half?

Thanks, Matt.

I think let me take that one, and I can ask Sherri to add if she has something to add.

But we talked a little bit already about the Lattice inventory and the fact that we had chosen to build, proactively build Lattice inventory last year, and we're in a good inventory position at the end of this most recent Q1 versus a year ago.

In terms of distributor inventory, I would say, on distributor inventory, it's -- if you look at where we ended Q1, it was within the range of what we've seen over the last few years, so the normal range of what we've seen, but on the lower end.

So our distributor inventory is sitting on the lower of our range, right?

So I think that where we've chosen to make sure we have the inventory is more on the Lattice side to give us the flexibility to allocate the supply and direct the supply where we see demand.

And so hopefully, that answers your question, Matt.

Yes, Jim, that's great.

Obviously, there's a lot of questions that will get answered next week at the Analyst Day, but I wanted to ask about a recent partnership announcement that you guys announced with Rambus for sharing technology around security in a number of end markets.

Jim, if you could give us a little bit of detail into what that partnership entails, what IP you might be supplying, and what you might be getting and what that partnership may do to enhance the security features of the portfolio as you go forward.

Yes.

Thanks, Matt.

Yes, we were really happy with that announcement.

We're happy to be partnered with Rambus.

We view Rambus as an IP partner for us, so both an IP supplier to us but also to our customers.

And so that partnership is specifically around IP related to security.

And we've been, as you certainly know, we've been investing in our own products and capability around security, both in a hardware perspective, but a software as well.

We've launched 2 devices to date that are sort of security optimized: our MachXO3D product and our Mach-NX product, so 2 generations of security optimized FPGAs.

And then we've also been developing software stack on top of that.

And there's some additional IP that Rambus has that we want to make sure that IP runs on Lattice devices as well, so that if our customers choose to use some of that Rambus security IP that that runs seamlessly on Lattice devices as well.

So it's really about making sure that our customers have everything they need to build out a really secure system.

And we'll probably talk -- we can talk a little bit more about it next week during the Investor Analyst Day as well.

Your next question in queue comes from the line of Sam Peterman from Craig-Hallum Capital.

Sam on for Richard here.

I wanted to ask quick about your industrial and auto segment, you had another quarter where industrial automation drove a lot of strength.

Obviously, you've seen that over the last years, the pandemic accelerated digital transformation across the board.

I'm curious, now that we've lapped a year of that strong growth in that area in particular, what's your read on demand in industrial automation going forward?

Is it still growing, but maybe we should expect the rate of growth to slow to a more normalized rate beyond this quarter?

Or how should we think about that?

Yes.

We see industrial and automotive segment as one of our key growth drivers for the long-term as well.

If you look at, for instance, last year for 2020, industrial automotive grew, I think it was 11% year-over-year.

So it was good growth contributor last year.

Most recent quarter, Q1 grew 20% year-over-year.

What we're seeing within that segment and what's particularly driving it for Lattice is things like industrial automation and robotics.

Lattice devices and along with the software that go on top of our devices, are just a really good natural fit for industrial automation and safety and robotics.

The combination of the power efficiency, the flexibility, the performance, just make us a great fit.

And so we've got a number of good systems that were already designed into in a very healthy design win pipeline as well.

And I think the interesting thing is pre-pandemic we were already seeing high levels of engagement around industrial automation and robotics.

But I think that the experience of COVID-19 and that pandemic has really accelerated our end customers' plans in terms of driving faster automation of their industrial facilities, more usage of robotics, et cetera.

And that's great, and we're really well positioned to benefit from what I think is a long-term secular growth trend.

And so we do see industrial and automotive as a long-term growth driver for the company as well.

Okay.

That's great.

And then one more quick one from me.

You said before you got a healthy design win pipeline in automotive, but haven't given a ton of color on that.

Is there any way you characterize, I guess, what area of the car, those design wins are in and when auto might become a more material portion of that industrial and auto segment?

Yes.

Thanks, Sam.

So we were pleased with our automotive segment in Q1.

It did grow sequentially and year-over-year.

That is still within that segment, a relatively small portion of the industrial and automotive segment.

But as you mentioned, we've said before, we do have a very healthy design win pipeline.

We will, next week, talk a little bit more in detail about what are some of the specific automotive applications that were both designed into today that are growing, but also some of the ones that are in the pipeline as well.

So expect to hear more about that next week at our Analyst Day.

(Operator Instructions) Our next question comes from the line of Derek Soderberg from Colliers Securities.

Congrats on the results.

Just one question from me.

Jim, I'm curious sort of high-level to what degree are some of the product enhancements you bring to market, helping expand the unit opportunity out there in the industry.

Clearly, there are opportunities with higher ASPs, bundling software.

But sort of to what degree is -- should some of that growth start to come from just unit volume?

I'm just trying to get a sense for how the industry is growing.

Yes.

That's a good question.

I think we do see some significant unit volume opportunities.

Let me point out one or two.

One in particular that I would point out is client computing.

Client computing is -- that's a really large market.

It's roughly 300 million units a year.

In client computing, we include laptops and tablets and desktop computers.

Big market, big unit opportunity and we had a couple of platforms in that segment start to ramp last year, and ramp into good healthy volume and that will help contribute to growth this year.

But we see a lot more opportunity in that segment for Lattice products.

We can bring some really interesting functionality to those devices, whether that's human presence detection, gesture recognition, signal aggregation.

And so we're pretty excited about that segment as an opportunity for unit volume moving forward.

And then I think there's also segments in parts of industrial that we see some good unit opportunity growth with, for instance, robotics, et cetera.

But the other thing that I would point out is beyond unit volume growth which we're always happy to see, we have been driving ASP growth as well.

Our ASPs have had steady growth over the last couple of years.

And so we're really focused on both driving higher ASPs as well as unit growth.

There are no further questions in queue.

I will turn back the call to Lattice CEO, Jim Anderson, for closing remarks.

Yes.

Thank you, operator, and thanks, everybody, for joining us on today's call.

As you can tell, we're really excited about the progress that we've made, but even more excited about where we're headed from here and the future of Lattice and some of the opportunities ahead of us.

So we look forward to talking to all of you next week at the Investor Day, and thanks again for the time.

Operator, that concludes today's call.

Thank you so much.

This concludes today's conference call.

Thank you for participating.

You may now disconnect.