MILPITAS, Calif. -- Intersil Corp. has taken steps to break out of the pack and
become the next $1 billion wonder in analog, but many wonder if the chip maker
is a contender or a mere pretender?
Intersil, based here, has implied that it is a contender, as the
self-proclaimed ''smallest of the 'Big 6’ analog chip makers” intends to move up
the ranks, boost its brand, and, ultimately, resolve its identity crisis.
As part of its plan, the company is moving into new markets, changing its
product mix and accelerating its acquisition strategy. However, some believe
that Intersil itself could possibly be a takeover target over time.
On the product front, it remains strong in the PC power management segments,
but it is scrambling to fill out pieces of the signal chain. It is quietly
developing a new line of data converters, LED drivers, system-level power
management ICs, among other parts. And as part of its ''asset-lite’’ or
''fab-lite’’ strategy, it is also working with its foundry partners to make its
initial foray into the 300-mm era.
Business is booming for Intersil and the rest of the analog crowd. After a
miserable downturn in 2009, ADI, Intersil, Linear, Maxim, National, On Semi, TI
and others are seeing a surprising but welcomed recovery. Since the beginning of
the year, vendors have experienced shortages and extended lead times.
In May, Intersil raised its second quarter financial outlook. Dave Bell,
Intersil’s president and chief executive, recently said the company would reach
a $1 billion revenue run rate on an annual basis by the end of 2010--a year
earlier than his original prediction. For the year ended Jan. 1, 2010, the
company’s net revenue was $611.4 million, a 21 percent decline compared with
$769.7 million reported for fiscal 2008.
''When I made predictions about us reaching a $1 billion run-rate at last
year’s analyst event--when we were in the depths of the downturn--people thought
I was certifiably insane. Not a single person believed it,’’ Bell told EE
Times at the company’s headquarters here. ''It looks like we will’’ achieve
those goals in 2010.
Still, there is much work to be done at Intersil, including an effort to
propel its brand in the same breath as ADI, Linear, Maxim, National and TI.
Intersil ''doesn’t have the brand awareness that many of our competitors have.
There is a good reason for that. The company has gone through (various changes)
in its evolution,’’ Bell said.
Thanks to the growth trends--coupled with its recent acquisition of chip
maker Techwell-- ''I think the company will succeed in their goal’’ of reaching
the $1 billion run-rate level, said Doug Freedman, an analyst with Gleacher
''We continue to believe that Intersil has been able to capture share,
particularly within power management, through this current cycle, as
competitors' lead-time issues (i.e. Texas Instruments and On Semiconductor) have
yet to meaningfully reverse course,’’ Freedman wrote in a recent report.
But others appear to be taking share away from Intersil in some segments. For
example, Linear Technology Corp.’s ''low lead times (four to six weeks) likely
drove share gains, versus tighter competitors like Maxim and Intersil,’’ said
Craig Berger, an analyst with FBR, in a recent report.
According to Freedman, here are just some of the challenges facing Intersil:
1) Can it contain its costs amid an acquisition spree?; 2) Can the company make
its recent acquisitions work?; 3) Will its asset-lite strategy continue to
work?; 4) Can it fill out its product portfolio?; and 5) Can it remain
''I think (Intersil) is on a list of companies that (could potentially) get
acquired by Texas Instruments or someone else,’’ Freedman told EE Times
but the chances of a takeover ''are low’’ right now.
Intersil claims to be world’s sixth largest analog player. But according to
Databeans Inc., the company was ranked eighth in the arena last year, with sales
of $329 million, down 17 percent over 2008. In the rankings, Intersil was behind
TI ($2.436 billion), ADI ($1.69 billion), National ($1.098 billion); Maxim
($1.037 billion); Linear ($894 million); ST ($497 million) and On Semi ($368
million), according to Databeans.
Databeans recently raised its projections for the general purpose analog
market, which is expected to go well over $16 billion in 2010, up 29 percent
from 2009. In March, the firm said this market was poised to grow 15 percent to
reach more than $15 billion in 2010. Last year, the general purpose analog
market posted just over $13 billion in sales, down 15 percent from 2008,
according to Databeans.
Analog remains a steady market complete with a cast of colorful competitors.
For example, Intersil boast a long and complex history. In 1895, Harris
Automatic Press Co., a printing press hopeful, was formed. In the 1950s, that
company, renamed Harris Corp., expanded into electronics. And in 1967, it
acquired Radiation Inc., a manufacturer of space and military electronics
located in Florida.
On another front, in 1954, General Electric Co. moved into the semiconductor
business with the formation of GE Solid State. Also in 1967, a new and separate
chip maker called Intersil was formed by executives from Fairchild Semiconductor
in Cupertino, Calif.
Then, in 1980, GE Solid State acquired Intersil. And in 1988, Harris acquired
GE Solid State, which included RCA Solid State and Intersil. In 1999, Harris
implemented a restructuring program and spun-off its semiconductor business into
a new company called Intersil.
Then, in 2000, Intersil filed for an initial public offering (IPO). Needless
to say, the chip maker has undergone a series of changes, which has prompted a
major question: Who is Intersil?
At times, Intersil has suffered from an identity crisis. Over the years, it
has focused on various markets, making it difficult to track the company and its
strategy. For example, Intersil was a pioneer in ICs back in the 1960s. As part
of Harris, it was once the undisputed leader in wireless LAN chips. (In 2003,
Intersil sold these lines to Globespan, which was later bought by Conexant.). In
more recent times, Intersil has acquired no less than nine companies.
For years, though, Intersil has been a player in analog. And it moved to
expand that focus via acquisition. It acquired op-amp maker Elantec
Semiconductor Inc. in 2002, and smart battery and data conversion specialist
Xicor Corp. in 2004.
Three years ago, Intersil acquired Planet ATE Inc., a privately-held, fabless
semiconductor supplier to the automated test equipment (ATE) market. In 2008,
Intersil acquired D2Audio Corp., a supplier of digital audio power amplifiers.
In the same year, Intersil acquired Kenet Inc., a supplier of low-power data
converters. Also in 2008, Intersil acquired Zilker Labs Inc., a privately-held,
fabless semiconductor company. Zilker Labs' so-called Digital-DC technology is a
mixed-signal power conversion and management architecture.
Last year, Intersil acquired Rock Semiconductor, a privately-held, fabless
semiconductor company that develops integrated power management ICs. Continuing
its buying spree, Intersil last year acquired Quellan Inc., a supplier in the
design of high-performance analog signal processing integrated circuits.
In March, Intersil acquired Techwell Inc. for approximately $370 million.
Techwell is a fabless semiconductor company that designs and sells mixed signal
video solutions for the security surveillance and automotive infotainment
markets. In 2009, Techwell posted a profit of $3.496 million on sales of $63.174