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Why Silicon?

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Silicon Laboratories Inc. (SLAB)

Often overlooked due to its small-cap size, Silicon Laboratories, Inc.'s (SLAB) inclusion as a core constituent in the Kensho Intelligent Infrastructure Index provides investors exposure to a potential high growth company well positioned to drive the intelligent infrastructure aspect of the New Economy in the years ahead.

SLAB provides silicon, software and solutions for the Internet of Things (IoT), internet infrastructure, industrial control, consumer and automotive markets. Management refers to connectivity and the IoT as core components of the company, the "Opportunity of our Lifetime" that could represent $11.1 trillion in economic value per year by 2025.1 Needham Research believes SLAB has the most comprehensive IoT portfolio and expects its wireless business to become a larger part of the IoT.2

Part of SLAB's diverse product offering includes home automation solutions. This includes connected lighting to be more energy efficient, home security that involves contact sensors, connected door locks to provide peace of mind and smart thermostats to monitor energy consumption and control an environment.3 Needham Research projects SLAB's intelligent infrastructure business to grow from $1.46B in 2016 to $2.26B in 2020 (14% CAGR).4

Figure 1: Silicon Laboratories Inc. [SLAB]

Market Cap ($M) $4,016
GICS Sector Technology
GICS Industry Semiconductors

Source: Bloomberg Finance L.P., as of April 30, 2018.

Xylem Inc. (XYL)

With an estimated $500 billion needed annually to meet the world's water infrastructure needs through 2030,5 the need for innovation and greater efficiency in this market presents an enormous opportunity. Kensho's ability to identify forward-thinking companies in this space may provide an advantage for investors to capture higher growth companies in a traditionally slower growth area such as water.

Xylem Inc. (XYL) is a designer, manufacturer, and equipment and service provider for water and wastewater applications addressing the full-cycle of water. With customers around the world, the company's products include water and wastewater pumps, testing equipment and filtration systems. Xylem was also named the 2017 Water Technology Company of the Year at the 2018 Global Water Awards for their significant contribution to the field of water technology.6

The company's acquisition of Sensus Inc. in 2016 added to its portfolio of connected water systems and metering technology. Sensus addresses issues such as leaks that plague the world's water infrastructure. US homeowners lose an estimated 1.25 trillion gallons of water each year due to failure to detect or repair leaks,7 and Sensus provides acoustic sensors that use sound waves to monitor distribution lines and localize leaks. This allows homeowners to react quickly to damage and fix the problem before most would be aware a leak exists. Acoustic monitoring exemplifies how XYL innovates to make the water industry more efficient.

Figure 2: Xylem Inc. [XYL]

Market Cap ($M) $13,116
GICS Sector Industrials
GICS Industry Machinery

Source: Bloomberg Finance L.P, as of April 30, 2018.

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Other Stock Stories

  • 1 Silicon Laboratories Corporate Overview, March 2018.
  • 2 Needham Research, "Silicon Laboratories Inc. [SLAB]", February 1, 2018.
  • 3 Silicon Laboratories Corporate Website, March 2018.
  • 4 Needham Research, "Silicon Laboratories Inc. [SLAB]", October 25, 2017.
  • 5 McKinsey & Co, "Bridging global infrastructure gaps", June 2016.
  • 6 BusinessWire, "Xylem recognized as Water Technology Company of the Year at Global Water Awards", April 17, 2018.
  • 7 Sensus Corporate Website, April 2018.

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