Harris Corp. has completed the sale of its analog and mixed-signal semiconductor business, which is now operating under the name Intersil Corp.
Executives at Intersil, Palm Bay, Fla., said the company will focus on developing products for the communications, power, and aerospace and defense markets. It was spun off as part of Harris' broader effort to focus exclusively on its core communications-equipment business. The company also plans to sell its suppression and photomask operations in separate transactions.
Intersil-which is owned by Sterling Holding Company LLC, a Citicorp Venture Capital, Ltd. investment portfolio company-bought the group for $520 million in cash and a promissory note of $90 million. Harris is maintaining a 10% stake in the company.
Over the past 18 months, Harris Semiconductor has been focusing on its value added-businesses and streamlining its manufacturing processes. Now, Intersil will be able to better develop advanced architectures based on its core analog and mixed-signal technologies, according to Gregory L. Williams, the former president of Harris Semiconductor, who is now Intersil's president and chief executive.
In a statement, Williams said Harris, as a dedicated semiconductor operation, is "positioned to move new designs to market faster than ever before through aggressive marketing, risk-taking, and quicker decision-making and deployment of resources."
Some industry observers pointed out that Intersil's prospects in its target markets may indeed be better as an independent company. Despite its strong analog and mixed-signal technology, Harris had never been able to cultivate its business in those markets, noted Bill McClean, president of IC Insights, Scottsdale, Ariz.
"As Harris, they never really showed tremendous growth, even having the strength in those areas," McClean said. "They were also broad based. They really needed a change anyway. Maybe now they will fine-tune their focus, even within those product areas."
Indeed, a focus on the value-added side of its business could prove quite lucrative, said Danny Lam, an analyst at Fischer Holstein Inc., Scottsdale, Ariz. Freed from its primary role as an in-house supplier to Harris, Intersil will have more opportunity to pursue revenue growth.
"The value-added of semiconductors has been flowing into areas like design, architecture, and systems-that's where the money is," Lam said. "So spinning it off and letting them take on more business by grabbing outside contract customers is generally a good thing. You don't have to own everything to control it."
By splitting from Harris, Intersil is entering a market that, though dominated on the high-end by a few big players, is still fragmented. With $2.27 billion in analog sales last year, Texas Instruments Inc. ranked first in the market, garnering 11.9% of the $19 billion analog market, according to IC Insights. TI was followed by Philips Semiconductor which had $1.9 billion in sales, and STMicroelectronics Inc., which had $1.85 billion in analog sales last year.
All but the top six companies competing in the analog space last year had sales of less than $1 billion and together made up 42.3% of the total market.
Even so, the wide range of end markets that require analog ICs provide Intersil with plenty of room to grow, according to McClean. "The end use is fragmented as well, and there are a lot of suppliers targeting these different niches," he said. "So as they pare down and hone their target markets, they have a chance to grow more than they have in the past-if they pick the right areas and can compete."