Microsemi diversifies as DoD budget cuts loom

NEW YORK -- There’s no better example that reflects Microsemi Corp.’s position as a high-reliability semiconductor player than its relationship with NASA and its role as a supplier of mission-critical components for the Curiosity rover that landed on Mars on Aug. 6.

Microsemi (Irvine, Calif.) has been supplying hi-rel parts to U.S. space programs for more than 50 years, including radiation-hardened parts ranging from discrete components, to highly integrated  SoCs, FPGAs and ASICs as well as cryptography technology.

Nevertheless, hi-rel markets can be fickle, especially as government budgets fluctuate. For example, unless a compromise is reached, automatic spending cuts that would kick in at the beginning of 2013 could result in $500 million in military budget reductions over the next decade. Microsemi derives 28 percent of its revenue from the military and security sectors.

Hence, the company is looking to diversify.

“We are starting to leverage the breadth of capability that we now have and the engagement we have with our [military] customers,” Steven Litchfield, Microsemi’s chief strategy officer, told a recent conference. “We are sitting down with system architects today talking with customers about next-generation systems and applications, things that we never did historically.”

Microsemi, which forecast that mil-aero and security sales would grow approximately 10 percent this year, supplies millimeter-wave transceivers in the whole-body scanners at the security checks in airports.

Litchfield estimated that sales would be cut by as much as 2.5 percent per year if DoD cuts happen. “That’s what could happen. But the budget dilemma didn’t pop up yesterday. We’ve seen push-outs. We’ve seen orders cut,” adding that competition in some markets has virtually disappeared over the last few years.

“We are engaging with them and taking on more of the system architectures and defining new products in their systems. Where they don’t have the engineering expertise and manpower, we are willing to put up in exchange for revenue,” he added.