Broadcom Launches A New Platform To Benefit From Mexico’s Analog-to-Digital TV Transition

Earlier this week, Broadcom (NASDAQ:BRCM) launched a new digital-terrestrial video platform (BCM7543) for Mexico. The new BCM7543 system-on-chip (SoC) offers a cost-effective and featured-optimized device for new HD converter boxes and set-top box (STB) platforms, providing a wider choice of content and value-added features. Mexico is in the process of transitioning from analog-to-digital television broadcast, with conversion scheduled for completion by December 2015. The country faces the need to rapidly increase DTV penetration, and counting on DTV receiving options for the public  (such as low-cost televisions and set-top boxes) is an important issue for the continuity of service, in Broadcom’s view. Broadcom believes that the digital TV transition in the region will foster growth of more HDTV programming, as well as the development of new content offers.

Latin America reported 63.73 million legal users of Pay TV services by the end of Q1 2014. With a total of 15.56 million subscribers, Mexico is the second largest region (after Brazil) in the pay TV market in Latin America. ((According to Dataxis, Latin America reached 63.7 million Pay TV subscribers, NexTV Latam, June 30, 2014)) An estimated 40% of households in Mexico have access to cable at present.

Broadcom derives over 20% of its revenue from its Home Entertainment & Broadband business. Its set-top box business continues to grow and the company claims to have gained market share in emerging markets in Q3 2014 as it deployed new HD designs, particularly in Latin America. Broadcom is a global leader in the set-top-box market and has a full suite of mid- and high-end set-top box platforms providing a number of solutions for operators to offer to their subscribers. It offers a host of solutions for the cable industry and specific to emerging markets.

The company benefits from the rising digital penetration in emerging markets and a ramp to richer features, including multi-stream transcoding, more tuners and a stronger mix of MoCA-enabled platforms. Driven primarily by rising demand from emerging markets, the global set-top box shipments are forecast to grow at a CAGR of 9.7% through 2016. We believe that the digitization drive in many emerging economies will benefit Broadcom in the future. (Read: Why Broadcom Will Benefit From The Digitization Drive In India)

Another long-term growth driver for the set-top box market is the transition to HEVC and Ultra HD. Broadcom claims that the industry is still in the early transition (to Ultra HD) phase and sees this strength as a powerful product cycle that will contribute growth over the coming years.

Our price estimate of $41 for Broadcom is almost in line with the current market price.

See Our Complete Analysis for Broadcom Here

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