NEW YORK — Microsemi Corp.'s management likes to say M&A is in the company's DNA, and it continues to make strategic investments to prove it.
The semiconductor company recently acquired Mingoa, a private venture capital funded company in Cork, Ireland, that develops IP, that enables customers to add Ethernet OAM (operations, administration, and maintenance) and/or test functionality to their Ethernet equipment. Terms of the deal were not disclosed. Albeit small, Mingoa highlights Microsemi's aggressive efforts to gain more penetration in communications applications, its fastest growing segment.
Microsemi supplies mixed-signal RF and timing products across multiple communications infrastructures, including Carrier Ethernet, mobile/small-cell backhaul applications, and datacenter interconnect. Communications revenue jumped 48% in its third fiscal quarter ended June 2014, exceeding $100 million for the first time. The company credited a double-digit rise in the LTE ramp in China, as well as robust demand from gateway applications.
With an already strong position serving the communications sector, Microsemi recently started to look at the other interfaces required in those applications, Russ Garcia, Microsemi's executive vice president of Worldwide Marketing, told EE Times. And Mingoa was the right fit.
"We are starting to fill those gaps -- Mingoa fills one of those gaps," says Garcia. "Our FPGA product portfolio allows us to take those IPs and rapidly move product into those areas."
FPGAs: an area of focus
The Mingoa deal also demonstrates Microsemi's push to gain market share in the FPGA industry, which the company entered when it acquired Actel Corp. in 2010. Over the last few years, Microsemi has made significant investments to tailor its FPGA product roadmap and increase logic densities for mainstream applications, particularly in the communications and industrial segments. Today, FPGAs account for 23% of sales.
"There's two large competitors in that market -- Xilinx and Altera," Garcia says. "There's some key areas that they have not been filling efficiently."
According to James Peterson, Microsemi's CEO, during its earnings call with analysts, the company has expanded its SAM (serviceable available market) from $1 billion to $2.5 billion. It recently went into volume production with its fourth-generation products, which include SmartFusion2 SoC FPGAs and IGLOO2 FPGAs, and it is currently in design for its fifth-generation parts. It also signed a foundry deal last year with Intel that allowed Microsemi to begin designing FPGAs and SoCs using Intel's 22 nm FinFET process technology. Product delivery is scheduled for 2015. The company wouldn't give any more details.
"It's the fastest ramping that we've ever had," says Garcia, adding that 40 percent of the new design wins are new customers. "We are starting to increase our position of served available market, and we are taking some of that market share."
Although its FPGA business is approaching $300 million annually, it still has a long way to go. Both Xilinx and Altera generate approximately $3.5 billion in revenue on a yearly basis.
After the Actel acquisition, Microsemi went on a spending spree. In October 2013, it paid more than $200 million to buy Symmetricom Inc., which boosted its position in the high-value communications timing markets. In early 2012, it acquired the telecom clock generation, synchronization, packet timing, and synthesis business from Maxim Integrated Products Inc. for an undisclosed amount. Maxim's product lines complemented the synchronization and timing products Microsemi obtained through its $525 million acquisition of Zarlink Semiconductor Inc., a mixed-signal IC provider. Zarlink helped it expand its reach in the communications and medical markets.
In its third fiscal quarter of 2014, Microsemi recorded a 20.5% rise in sales, which reached $292.3 million from a $242.6 million a year ago. However, it posted a net loss of $4.3 million that reflected $19.1 million in restructuring-related charges, as well as the effect of non-cash-purchase accounting entries of $2.2 million.
Mixed-signal RF generated 26% of revenue, while timing products garnered 20%. Legacy products made up the remaining 31%.
— Ismini Scouras is a freelance writer who covers the electronics industry for EE Times.