Having been cut loose from its corporate parent, Harris Corp.'s former semiconductor unit last week laid out a business plan that centers entirely on the value-added side of the analog- and discrete-IC marketplace.
Using its core analog and mixed-signal technologies, the new company, called Intersil Corp., will focus its efforts on developing advanced architectures for its customers' systems.
By locking in on the high-growth segments of the communications, power, and aerospace and defense markets, where they say their manufacturing expertise delivers the greatest value, executives at Intersil, Palm Bay, Fla., expect to see significant growth during the company's current fiscal year.
"Right now, we're at $530 million coming out of the chute, and we're looking at growth this fiscal year, which ends in June, of over 10%," said Gregory L. Williams, the former president of Harris' semiconductor business, who is now Intersil's president and chief executive.
Intersil's value-focused strategy differentiates the company from most of its peers, some of which hail from similar origins. For example, Fairchild Semiconductor-which was spun off from National Semiconductor Corp. three years ago-offers a broad portfolio of "multimarket" ICs, many of which are commodity products. Motorola Inc.'s former Semiconductor Components Group-which earlier this month began doing business under the name ON Semiconductor-has taken a similar approach, offering a broad range of mostly slow-growth, commodity discretes.
"Our business model is totally different than an ON Semiconductor or a Fairchild," Williams said. "We're focused on very specific value-oriented segments of the analog and discrete market, and the wireless-data market. We don't want to be all things to all people. We're not like Home Depot or Wal-Mart. We're going to focus on very specific applications and bring value to high-growth areas that leverage our core competencies."
Specifically, Intersil has been funneling its resources into power-management ICs, A/D and D/A converters, wireless-data devices and wireless-LAN chips, fast IGBTs, and MOSFETs for the industrial automotive market.
"Those are five areas where we've hired applications engineers and are working with industry-leading partners," Williams said.
In its former incarnation, Intersil developed significant expertise in those end markets, analysts noted. However, it had never been able to cultivate its business, they added.
"As Harris, they never really showed tremendous growth, even having the strength in those areas," said Bill McClean, president of IC Insights Inc., Scottsdale, Ariz. "They were also broad based. Maybe now they'll fine-tune their focus, even within those product areas."
A primary reason for the sluggish growth was the semiconductor unit's position within the Harris organization, according to Williams. Harris decided to spin off that business as part of a broader strategy to direct its efforts exclusively on its core communications-equipment business. Intersil, which is backed by Sterling Holding Co. LLC, a Citicorp Venture Capital Ltd. investment-portfolio company, bought the unit for roughly $610 million. Harris maintained a 10% stake in the company.
Because Harris had a communications-equipment focus, the overall corporate environment was not conducive to semiconductor growth prior to the spinoff, according to Williams.
"The business model and the cultural requirement for that market is different than semiconductors," he said. "Now, we have a stand-alone, pure-play semiconductor company with the ability to create a semiconductor-oriented culture."
Indeed, some industry observers have pointed out that Intersil's prospects in its target markets may be better as an independent entity. Having complete control of all the organization's resources is a strong benefit, they said.
"If channeled correctly and given the opportunity to be more independent, that can help," McClean said. "And they definitely have a background in those areas."
On the distribution front, Intersil's Williams said a big part of the company's strategy will involve working more closely with its channel partners. Nearly 40% of Intersil's sales currently go through distribution, and the company is partnered with many of the industry's heavy hitters, including Arrow Electronics, Avnet, and Future Electronics.
Instead of using the channel in the traditional way to reach a broader customer base with a wide range of products, Intersil's distribution strategy will be aimed at selling its products to customers at the design-in stage, according to Williams.
"We see a growing relationship with our distributors, but it will be largely on the demand-creation side, which supports our value focus," he said.
Ultimately, Williams said he would like to bring Intersil public, a move Fairchild made earlier this month with some degree of success. In the midst of a broader stock market skid, and an IPO market that saw many stocks sliding from their initial offering prices, Fairchild sold 20 million shares at $18.50. Late last week, Fairchild's stock was trading in the low-$20 range.
Although he did not say specifically when Intersil might step forward with its IPO, Williams pointed out that the time for such a move may not be too far off.
"We're very interested in becoming a public company," he said. "Timing would be dependent on the overall market recovery, and all the data I'm seeing now shows that we're headed into a very strong semiconductor industry recovery."