Silicon Valley Nation
Silicon Valley Nation: Maxim confronts new challenges
Brian Fuller
11/27/2012 2:45 PM EST
Acquisition binge
Some of those customers may be attracted by the new integration strategy that's been backed up by smart investments. Before 2007, Maxim had done almost no acquisitions, save for acquiring a Tektronix wafer fab. It preferred to build everything in house. Since 2007, it's acquired a dozen companies, including
It's a well-framed story, and the actions Doluca and his team have taken since 2007 make logical sense. But challenges abound, especially because pursuing an component-integration strategy requires a completely different mindset about engineering, according to Steve Ohr, analog analyst at Gartner.
"They need to figure out the best balance between standard analog products (multi-market building blocks) and application-specific analog (like cell phone power management ICs or smart meters). The product lines require totally different engineering processes, and offer quite different revenue streams and margins," he said.
Traditional analog parts are usually designed by a single engineer, require little promotional outlay and can be sold for decades. The gross margins can be as high as 70 percent, Ohr said.
"With application-specific parts, you’re talking about a specialized, more integrated part type, put together with a short time-to-market window, and often for a specific model consumer product with a 12- or 18-month life cycle," Ohr said. "Engineering-wise, this is a coordinated team effort. But an ASIC/ASSP purchaser like Apple will know what your cost structure is, and will beat you up on pricing."
A company may reap hundreds of millions in revenue on an ASIC/ASSP product but with little margin, he added.
"The reality is that very few companies are equipped to do both types of analog--standard and custom application-specific," Ohr said.
There are old maxims about company transformation: One is "time will tell." Another is "Don't count your chickens before they hatch."
Related stories:
--Maxim SoC targets smart-grid security
--Maxim-SensorDynamics Deal Eyes Shift to MEMS Combination Sensors
--Silicon Valley Nation: Intel's next CEO? Warrior-poet
Some of those customers may be attracted by the new integration strategy that's been backed up by smart investments. Before 2007, Maxim had done almost no acquisitions, save for acquiring a Tektronix wafer fab. It preferred to build everything in house. Since 2007, it's acquired a dozen companies, including
- SensorDynamics AG for $130 million plus $34 million in debt. SensorDynamics focuses on low-power wireless interfaces to MEMS sensors and is best known for inertial MEMS sensors and automotive smart-key chips.
- Genasic, which makes a 65-nm CMOS transceiver IC for HSPA and LTE applications.
- Phyworks, which makes transceivers and transimpedance amplifiers span the entire spectrum of data rates, from 1- through to 10-Gbps.
- L&L, a small firm that was developing and licensing digital control technology based on ''state-space."
- And, the biggest acquisition, Teridian Semiconductor Corp., for approximately $315 million in cash.
It's a well-framed story, and the actions Doluca and his team have taken since 2007 make logical sense. But challenges abound, especially because pursuing an component-integration strategy requires a completely different mindset about engineering, according to Steve Ohr, analog analyst at Gartner.
"They need to figure out the best balance between standard analog products (multi-market building blocks) and application-specific analog (like cell phone power management ICs or smart meters). The product lines require totally different engineering processes, and offer quite different revenue streams and margins," he said.
Traditional analog parts are usually designed by a single engineer, require little promotional outlay and can be sold for decades. The gross margins can be as high as 70 percent, Ohr said.
"With application-specific parts, you’re talking about a specialized, more integrated part type, put together with a short time-to-market window, and often for a specific model consumer product with a 12- or 18-month life cycle," Ohr said. "Engineering-wise, this is a coordinated team effort. But an ASIC/ASSP purchaser like Apple will know what your cost structure is, and will beat you up on pricing."
A company may reap hundreds of millions in revenue on an ASIC/ASSP product but with little margin, he added.
"The reality is that very few companies are equipped to do both types of analog--standard and custom application-specific," Ohr said.
There are old maxims about company transformation: One is "time will tell." Another is "Don't count your chickens before they hatch."
Related stories:
--Maxim SoC targets smart-grid security
--Maxim-SensorDynamics Deal Eyes Shift to MEMS Combination Sensors
--Silicon Valley Nation: Intel's next CEO? Warrior-poet
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truekop
11/27/2012 8:23 PM EST
"Maxim shares have begun to outperform some key competitors." I dont think that is the case.
Atleast a cursory look at yahoo finance comparing Maxim, LTC and ADI for the past year it shows equal or slightly weaker performance of the Maxim stock...thus depending on when you start the comparison the results will change :)
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danlutes
11/28/2012 6:00 PM EST
"Before 2007, Maxim had done almost no acquisitions, save for acquiring a Tektronix wafer fab. It preferred to build everything in house. "
What about Dallas Semiconductor in 2001 for $2.5 Billion in stock?
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Brian Fuller2
11/29/2012 11:41 AM EST
@truekop and @danlutes... points well taken. I should have altered the phrasing a bit, especially on point #2 (a focus on ramping of acquisitions in the past five years)...
Thanks for commenting!
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Bob109
11/29/2012 12:11 PM EST
The problem I have always had with Maxim is getting any production parts at all. Parts were always available for prototyping but when it came time for production the parts were never available. Designing a Maxim part into a design was the equivalent to cutting you own throat.
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Andy P
12/18/2012 2:38 PM EST
"Designing a Maxim part into a design was the equivalent to cutting you own throat."
Exactly. Maxim is blackballed by any company that's not ordering 100k parts a month.
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Frank DeFelice
12/4/2012 7:24 PM EST
Never base your design on parts not in production. You're asking for trouble. If you need prototype parts to tweak your design, you're asking for trouble. Never promise more than you can deliver.
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Andy P
12/18/2012 2:40 PM EST
"Never base your design on parts not in production. You're asking for trouble. If you need prototype parts to tweak your design, you're asking for trouble. Never promise more than you can deliver."
Maxim's problem has always been that they have a lot of devices listed as "in production," yet you can't actually order them in anything but huge quantities.
This is why we always get purchasing to confirm availability of anything before it gets designed in, but one can also use the old rule of thumb: "don't design with it if you can't buy it from DigiKey or Mouser."
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