Silicon Labs (chipmaker) acquires Sigma Designs (Zwave)

One of the reasons that Z wave devices have generally had good interoperability is that the technology was owned by a single company, Sigma designs, then other manufacturers bought their chips to include in their own devices. Although they sometimes describe themselves as an open standard, that’s debatable. They’re a proprietary standard with an open API.

Anyway…people who use Z wave devices, including most SmartThings customers, tend to think that Zwave is the dominant home automation technology. It’s not. But because it doesn’t run into Wi-Fi interference, it has tended to be the dominant off-the-shelf home automation technology for low cost do it yourself projects.

But that has changed over the last two years, with more and more Zigbee, Wi-Fi and Bluetooth devices available. The recent decision by Amazon to use only zigbee technology for their echo plus hub, with no Z wave support at all, was seen as astonishing and shortsighted by many people who use Z wave in their own home, but perfectly understandable by most industry analysts. And the Z wave alliance has noted that 2/3 of Zwave devices are professionally installed, mostly by big cable companies like Comcast or security companies like ADT as home automation add-ons to their security systems.

Anyway, Sigma Designs has been trying to figure out what to do for the last two years. They’ve been playing catch-up as far as the complexity of installing a single device, and have had increasing difficulties maintaining shelf space at retailers. They’ve also had increasing financial losses.

So now they go on a completely different path – – the company is being sold to silicon labs, a big chipmaker who already produces zigbee, Bluetooth, and Wi-Fi chips. Zwave will become one more protocol in their portfolio. SiLabs has a market cap of 3.8 billion. Sigma designs has a market cap of around 280 million. The purchase will be for just about the same value as the current market cap.

Lots and lots of guesses about what this is going to mean, with no one knowing for sure. It could mean the market expands, it could mean it shrinks, it could mean it becomes more focused on Europe… there’s just no telling.

But it does mean the industry analysts, and Amazon, were right: zwave by itself is not positioned to dominate home automation in the future.

And for those who like to read financials, Sigma Designs has had increasing losses over the last few years. They needed to do something major.