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The feedback surrounding Synaptics' (SYNA +5%) collaboration with Google (GOOG) on edge AI today is overwhelmingly positive, helping the touchpad and fingerprint manufacturer kick off 2025 on the right foot. SYNA is best known for inventing the laptop touchpad and smartphone touch display sensors. However, in recent years, SYNA has largely focused on the IoT (internet-of-things) market, flipping its roughly 60% exposure from the mobile industry to IoT. The drastic shift produced considerable revenue growth and margin expansion. Unfortunately, it did not last long as a sharp slowdown in global demand during the end of 2022, lasting through the past two years, caused inventories to pile up, squeezing revenue and profitability.

While trying to bounce back, headwinds have lingered for SYNA, resulting in a 30% correction in 2024. Management mentioned in November that inventory is still being worked down across certain products, such as its video interface portfolio, which remains 40% or more below the normal run rate. Likewise, the PC market, while stable, is not growing as expected.

However, IoT has been a silver lining, recently boasting a 55% surge in revs yr/yr in Q1 (Sep). At the same time, several encouraging trends have cropped up, leading to SYNA holding a glass-half-full view for 2025.

• The AI wave is expected to continue in 2025. SYNA's collaboration with GOOG showcases the company's product appeal, bringing AI capability to edge devices at competitive price points. The partnership aims to integrate GOOG's machine learning (ML) core on SYNA's Astra hardware -- an AI-native IoT processor platform -- accelerating AI development to support vision, image, voice, and sound processing for a host of IoT devices, including smart home and appliances, wearables, and industrial systems.
• The PC market may not have grown as SYNA anticipated last year. However, the company is optimistic about 2025 being a growth year for the industry, pointing to Windows 10 end-of-life (the operating system will no longer be supported this October) and new AI PCs. Dell (DELL) commented in November that it was noticing an indication that customers were lining up their upgrade cycles with new AI PCs in 1H25. Given SYNA's dominance with fingerprint sensors and touchpads, it directly benefits from an uptick in PC sales.
• In mobile, SYNA's touch controllers, aligned with the premium end of the Android market, have recently enjoyed increasing strength. SYNA noted that it continues winning replacement designs and sees opportunities down-market with some OEMs.

There is a nagging problem for SYNA. The automotive market deteriorated last quarter. SYNA cautioned that, due to a broader market slowdown and delays in adopting new technologies, this sector could drag its feet in mounting any noticeable recovery in 2025. However, with IoT experiencing resilience in recent quarters, SYNA capturing market share in high-performance Wi-Fi, and enterprise product sales, such as PCs, showing signs of growth, SYNA is poised for a comeback in 2025.