BRISTOL, UK — The power semiconductor industry has seen two key announcements this week, highlighting some serious consolidation. After 35 years of years of fierce independence, International Rectifier Inc has agreed to a $3 billion takeover by Infineon Technologies AG, creating an even stronger global power giant. At the same time, Fairchild Semiconductor Inc is cutting back on its capacity, closing some of the 5- and 6-inch manufacturing lines that were part of its reboot into the power business in 1999.
Why the dramatic moves? Perhaps today's analysis of the consumer white goods market by IHS Technology throws some light on this. The white goods market has been seen as a key driver for power devices, creating a huge volume demand from air conditioning, washing machines and induction hobs (cooktops). As more of these devices become connected, so the power semiconductors are a more important element in the control loop.
Worldwide shipments of home appliances are projected to reach 611 million units by year-end, up 4.8% from 2013 according to IHS Technology, up from 4.5% last year. Revenue growth is forecast to be even higher, set to climb 7.1% in 2014, up from 5.9% last year.
As well as growing, the market is consolidating across the globe with deals in the US, Europe, and Asia. With consolidation in the end markets driving the purchasing power of the customer, the chip makers are positioning themselves for the hit on average selling price.
Despite the mantra that making power devices makes use of cost effective amortized fab capacity, Fairchild is shutting its 5-inch and all but one of its 6-inch lines in Bucheon, Korea to focus on its 8-inch capability in Bucheon, South Portland, Maine, and Pennsylvania. This is all about driving volume.
After 35 years of years of fierce independence, International Rectifier Inc (above) has agreed to a $3bn takeover by Infineon Technologies AG, creating an even stronger global power giant.
"Recent acquisitions within the home appliance market show that the world's leading and largest home appliance producers hope to become even bigger, enlarging their footprint by moving into new territories and market segments," said Dinesh Kithany, senior analyst for home appliances at IHS, in a statement. "Production is also relocating to increase efficiency and to cut down costs, while being closer to their addressable regional markets."
Infineon, with 11% of the power market and a focus on higher power devices, doesn't see much overlap with IR's power lines such as the HEXFET, instead seeing two "exciting" product lines coming together. IR has been closing some sites and was expecting to be back in profit this quarter. The deal is expected to close by the end of the year, and the consolidation opportunities will become clearer. The deal gives Infineon power manufacturing in Villach, Austria as well as the IR fab in Newport in Wales, UK. These are older plants where the future is uncertain in a drive to larger volumes. Instead it is the 8-inch lines in Dresden that will potentially drive the future of power at Infineon to meet the market demand.