Here’s why Cypress bought Cirrent

Cypress, the chip firm that purchased Broadcom’s Wi-Fi business back in 2016, has now purchased a startup that makes connecting devices to a home Wi-Fi network easier. Cypress said it has purchased Cirrent for an undisclosed sum. Cirrent’s, CEO Rob Conant told me the deal was all-cash, but declined to disclose how much Cypress paid.

Cirrent makes software that helps connected product device makers get advanced Wi-Fi capabilities onto their devices and that helps buyers of those devices connect them to their home Wi-Fi networks. From the end user perspective, if they purchase a device that used Cirrent’s software, their product would connect out of the box to a Wi-Fi network and then let them transfer the credentials over to their own network. Bose and Electrolux are using this functionality.

Cirrent also creates software that helped companies deal with the complexity that the internet of things brought to the Wi-Fi market. Product makers have to deal with new standards such as WPA3, Easy-Mesh and general upgrades from the Wi-Fi Alliance. They also have to work with Apple’s HomeKit, Amazon’s Wi-Fi Simple Setup and whatever standard Google plans to use to make it easier to connect its Assistant to devices. Conant says that some of his clients say they are spending 60% of their time addressing Wi-Fi complexity as opposed to actually building features that differentiate their products.

This deal will enable Cypress to “move up the stack” having a separate software business and a revenue stream that will hopefully be less commodified than the Wi-Fi chip business. In general chip companies are working hard to find ways to make money outside selling their silicon. Last year, Silicon Labs purchased Zentri and Intel has purchased several software startups as well as wearable startups.

The challenge for chip firms is that much of the software build is associated with differentiating their silicon, and all of the investment they put into that line of work still is associated with their chips. When companies buy their chips, they demand the software for free. Additionally, customers don’t want to integrate chips from a specific vendor too deeply into their products, because they want the freedom to replace the chips (or at least be able to credibly threaten to replace the chips) when negotiating for their next product design.

Cypress will solve this dilemma with Cirrent by keeping it a separate business. Conant becomes the general manager of a new business unit that will stay separate from Cypress’ chip business. The Cirrent business unit will continue working with device makers, ISPs and other chip firms to embed their software in devices, chips, and routers. It will also continue its efforts with rival Wi-Fi chip firms so it can ensure its software is embedded on their silicon. It needs this to continue offering some of the features that make it easy to connect to any Wi-Fi router on the market.