January 10, 2022
Photo: Manuel Geissinger/Pexels
Initial public offerings from semiconductor companies are so rare that when networking chip designer Credo Technology filed its prospectus with the Securities and Exchange Commission, it’s worth taking note.
The San Jose-based chip company elected to file its S-1 the first business day of 2022, Jan. 3. It has yet to announce a share price, or exactly how much it will raise — using the standard placeholder value of $100 million, which it will update as it gets closer to listing day. As a private company it has raised more than $200 million from investors such as BlackRock, Samsung, Cisco, and Walden International.
Founded in 2008, Credo makes chips and components that help hyperscale data center operators like AWS and Microsoft as well as 5G wireless network operators that move large amounts of data around at high speed inside their facilities. In its prospectus the company describes itself as serving the data infrastructure market, which increasingly demands more bandwidth capacity while consuming less power.
Specifically, Credo designs application-specific integrated circuits, or ASICs, and optical display signal processors. Beyond chips, Credo also sells active electrical cables for intra data center connections.
Credo said in the S-1 that the large and growing amounts of data and network traffic generated every year require increased bandwidth, and “we expect rising demand for our products as speed requirements increase over time. Additionally, we intend to continue to develop new offerings that will expand the capabilities of our portfolio and address a broader section of the total wired connectivity market.”
Even though the products Credo makes fit into the increasingly complex data center infrastructure market, the business itself is straightforward. The company makes money primarily in two ways: selling its various networking chips and components, and licensing some of its technology to customers. The company said it sells products to both vendors and customers directly.
Credo disclosed that it sells its active electrical cables to Amazon and Microsoft. And it said that it was “engaged with” five of the top seven hyperscale data center operators — in the U.S. the largest are Amazon, Microsoft, Google and Facebook.
Credo is a fabless company, meaning that it relies on chip manufacturers to fabricate chips and doesn’t build or own manufacturing facilities of its own. In the prospectus, Credo said the approach allows it to focus on engineering and design as its core business, and dole out less cash for capital spending. Fabless companies have come into favor on Wall Street, as they reduce the risk of running into manufacturing stumbles like the setbacks that have damaged Intel.
Credo has turned a modest profit in the past.