Actel (ACTL)

technology provided by our nonvolatile Flash-based FPGAs: exponentially lower power consumption, faster response times, unparalleled reliability, and uncompromising security.

 

• Antifuse

 

The one-time programmability of our antifuse-based FPGAs is desirable in certain system-critical military and aerospace applications, but commercial customers generally prefer reprogrammable solutions, such as SRAM- or Flash-based FPGAs. In addition, we are the only sizeable company that uses antifuse technology, which means we bear the entire burden of developing and proving antifuse processes (including yields and reliability) and products (including switching elements and architectures). It also means that our FPGAs using antifuse technology are typically one or two generations behind competitive SRAM-based solutions manufactured on standard processes.

 

• Strategy

 

Our strategy is to offer FPGAs to markets in which our nonvolatile Flash- and antifuse-based technologies have an inherent competitive advantage. Our strategy involves considerable risk as unique technologies and products can take years to develop, if at all, and markets that we target may fail to emerge. However, in addition to single-chip, live-at-power-up, security, and neutron-immunity benefits, we believe that our nonvolatile FPGA solutions offer substantial low-power advantages over volatile devices based on SRAM technology and we plan to exploit those advantages.

 

• Key Indicators

 

Although we measure the condition and performance of our business in numerous ways, the key quantitative indicators that we generally use to manage the business are bookings, design wins, margins, yields, and backlog. We also carefully monitor the progress of our product development efforts. Of these, we think that bookings and backlog are the best indicators of short-term performance and that design wins and product development progress are the best indicators of long-term performance. Our design wins were lower in 2008 when compared with 2007. Flash design wins were up slightly but this was more than offset by decreases in design wins for our antifuse products. Our bookings (measured as end-customer orders placed on us and our distributors) were higher during 2008 than during 2007 contributing to higher revenues in 2008. However our backlog (which may be cancelled or rescheduled by the customer on short notice without significant penalty) was lower at the end of 2008 than at the end of 2007.

 

The purpose of this overview is to provide context for the
discussion and analysis of our financial statements that follows
by briefly summarizing the most important known trends and
uncertainties, as well as the key performance indicators, on
which our executives are primarily focused for both the short
and long term.

 

Actel Corporation is the leading supplier of low-power FPGAs,
mixed-signal FPGAs, and system-critical FPGAs. Attacking power
consumption from both the chip and the system levels, the
Company’s innovative programmable logic solutions enable
power-efficient design. In support of our nonvolatile Flash- and
antifuse-based FPGAs, we offer design and development software
and tools to optimize power consumption; power-smart IP cores,
including industry-standard processor technologies; small
footprint packaging; programming hardware and starter kits; and
a variety of design services. We target a wide range of
applications in the aerospace, automotive, avionics,
communications, consumer, industrial, medical, and military
markets that require low power or other attributes of our
nonvolatile Flash and antifuse-based technologies that have an
inherent competitive advantage.

 

• Semiconductor
Industry

 

According to the Semiconductor Industry Association
(“SIA”), global sales of semiconductors were severely
impacted by the world-wide economic turmoil in 2008 resulting in
the first
year-on-year
drop in sales since 2001. Total sales for 2008 were
$248.6 billion compared with $255.6 billion reported
for 2007. Weakening demand for the major drivers of
semiconductor sales — including automotive products,
personal computers, cell phones and corporate information
technology products resulted in a sharp drop in industry sales
that affected nearly all product lines. SIA projects that 2009
sales will decline by 5.6 percent to $246.7 billion
before resuming growth in 2010.

 

• Logic
Market

 

The logic market is highly fragmented and includes ASICs and
PLDs. FPGAs are one type of PLD. Price, performance,
reliability, power consumption, security, density, features,
ease of use, and time to market determine the degree to which
PLDs compete for specific applications. Unlike ASICs, which are
customized for use in a specific application at the time of
manufacture, PLDs are manufactured as standard components and
customized “in the field,” allowing the same device
type to be used for many different applications. Using software
tools, users program their design into a PLD, resulting in lower
development costs and inventory risks, shorter design cycles,
and faster time to market.

 

• Technology

 

To a great extent, the characteristics of an FPGA are dictated
by the technology used to make the device programmable. Devices
based on nonvolatile Flash or antifuse programming elements
offer significant power, single-chip,
live-at-power-up,
security, and neutron-immunity advantages over volatile FPGAs
based on SRAM technology.

 

• Flash

 

We believe that our long-term future lies with Flash technology,
which permits us to make FPGAs that are both nonvolatile and
reprogrammable. Perhaps the single biggest benefit of a
nonvolatile Flash-based FPGA array is significantly reduced
power consumption. Even though our Flash technology is unique,
the process is very similar to the standard embedded Flash
memory process, so we are able to share with others most of the
burden of developing and proving the process. While we were the
first company to sell Flash-based FPGAs, several suppliers of
SRAM-based FPGAs claim to offer “single-chip,
Flash-based” solutions. However, these “hybrid”
solutions are merely combinations of Flash memory components
with the underlying SRAM FPGA technology — either
integrated with the FPGA die into a single package or,
alternatively, stacked or placed
side-by-side.
The FPGA array is still SRAM, so it is still subject to
drawbacks associated with that technology. These
“hybrid” approaches mitigate some of the limitations
of traditional SRAM-based solutions by providing a smaller
footprint, a minor reduction in power consumption, and small
advances in
power-up
time and security, but they are only incremental improvements
over pure SRAM-based FPGAs. Since the embedded Flash memory
controls only the initial configuration of “hybrid”
devices during
power-up,
these solutions cannot offer the full advantages of Flash

technology provided by our nonvolatile Flash-based FPGAs:
exponentially lower power consumption, faster response times,
unparalleled reliability, and uncompromising security.

 

• Antifuse

 

The one-time programmability of our antifuse-based FPGAs is
desirable in certain system-critical military and aerospace
applications, but commercial customers generally prefer
reprogrammable solutions, such as SRAM- or Flash-based FPGAs. In
addition, we are the only sizeable company that uses antifuse
technology, which means we bear the entire burden of developing
and proving antifuse processes (including yields and
reliability) and products (including switching elements and
architectures). It also means that our FPGAs using antifuse
technology are typically one or two generations behind
competitive SRAM-based solutions manufactured on standard
processes.

 

• Strategy

 

Our strategy is to offer FPGAs to markets in which our
nonvolatile Flash- and antifuse-based technologies have an
inherent competitive advantage. Our strategy involves
considerable risk as unique technologies and products can take
years to develop, if at all, and markets that we target may fail
to emerge. However, in addition to single-chip,
live-at-power-up,
security, and neutron-immunity benefits, we believe that our
nonvolatile FPGA solutions offer substantial low-power
advantages over volatile devices based on SRAM technology and we
plan to exploit those advantages.

 

• Key
Indicators

 

Although we measure the condition and performance of our
business in numerous ways, the key quantitative indicators that
we generally use to manage the business are bookings, design
wins, margins, yields, and backlog. We also carefully monitor
the progress of our product development efforts. Of these, we
think that bookings and backlog are the best indicators of
short-term performance and that design wins and product
development progress are the best indicators of long-term
performance. Our design wins were lower in 2008 when compared
with 2007. Flash design wins were up slightly but this was more
than offset by decreases in design wins for our antifuse
products. Our bookings (measured as end-customer orders placed
on us and our distributors) were higher during 2008 than during
2007 contributing to higher revenues in 2008. However our
backlog (which may be cancelled or rescheduled by the customer
on short notice without significant penalty) was lower at the
end of 2008 than at the end of 2007.

medical, and military markets that require low power or other attributes of our nonvolatile Flash and antifuse-based technologies that have an inherent competitive advantage.

 

• Semiconductor Industry

 

According to the Semiconductor Industry Association (“SIA”), global sales of semiconductors rose to a record $255.6 billion in 2007, an increase of 3.2% from the previous record of $247.7 billion reported for 2006. Sales growth was driven primarily by consumer products such as mobile handsets, PCs, and consumer electronics, which have proliferated as semiconductor technology has improved performance and functionality at lower cost. According to the SIA report, industry growth is expected to be 7.7% in 2008.

 

• Logic Market

 

The logic market is highly fragmented and includes ASICs and PLDs. FPGAs are one type of PLD. Price, performance, reliability, power consumption, security, density, features, ease of use, and time to market determine the degree to which PLDs compete for specific applications. Unlike ASICs, which are customized for use in a specific application at the time of manufacture, PLDs are manufactured as standard components and customized “in the field,” allowing the same device type to be used for many different applications. Using software tools, users program their design into a PLD, resulting in lower development costs and inventory risks, shorter design cycles, and faster time to market.

 

• Technology

 

To a great extent, the characteristics of an FPGA are dictated by the technology used to make the device programmable. Devices based on nonvolatile Flash or antifuse programming elements offer significant power, single-chip, live-at-power-up, security, and neutron-immunity advantages over volatile FPGAs based on SRAM technology.

 

• Flash

 

We believe that our long-term future lies with Flash technology, which permits us to make FPGAs that are both nonvolatile and reprogrammable. Perhaps the single biggest benefit of a nonvolatile Flash-based FPGA array is significantly reduced power consumption. Even though our Flash technology is unique, the process is very similar to the standard embedded Flash memory process, so we are able to share with others most of the burden of developing and proving the process. While we were the first company to sell Flash-based FPGAs, several suppliers of SRAM-based FPGAs claim to offer “single-chip, Flash-based” solutions. However, these “hybrid” solutions are merely combinations of Flash memory components with the underlying SRAM FPGA technology — either integrated with the FPGA die into a single package or, alternatively, stacked or placed side-by-side. The FPGA array is still SRAM, so it is still subject drawbacks associated with that technology. These “hybrid” approaches mitigate some of the limitations of traditional SRAM-based solutions by providing a smaller footprint, a minor reduction in power consumption, and small advances in power-up time and security, but they are only incremental improvements over pure SRAM-based FPGAs. Since the embedded Flash memory controls only the initial configuration of “hybrid” devices during power-up, these solutions cannot offer the full advantages of Flash technology provided by our nonvolatile Flash-based FPGAs: exponentially lower power consumption, faster response times, unparalleled reliability, and uncompromising security.

 

• Antifuse

 

The one-time programmability of our antifuse-based FPGAs is desirable in certain system-critical military and aerospace applications, but commercial customers generally prefer reprogrammable solutions, such as SRAM- or Flash-based FPGAs. In addition, we are the only sizeable company that uses antifuse technology, which means we bear the entire burden of developing and proving antifuse processes (including yields and reliability) and products (including switching elements and architectures). It also means that our FPGAs using antifuse technology are typically one or two generations behind competitive SRAM-based solutions manufactured on standard processes.

• Strategy

 

Our strategy is to offer FPGAs to markets in which our nonvolatile Flash- and antifuse-based technologies have an inherent competitive advantage. Our strategy involves considerable risk as unique technologies and products can take years to develop, if at all, and markets that we target may fail to emerge. However, in addition to single-chip, live-at-power-up, security, and neutron-immunity benefits, we believe that our nonvolatile FPGA solutions offer substantial low-power advantages over volatile devices based on SRAM technology and we plan to exploit those advantages.

 

• Key Indicators

 

Although we measure the condition and performance of our business in numerous ways, the key quantitative indicators that we generally use to manage the business are bookings, design wins, margins, yields, and backlog. We also carefully monitor the progress of our product development efforts. Of these, we think that bookings and backlog are the best indicators of short-term performance and that design wins and product development progress are the best indicators of long-term performance. Our bookings (measured as end-customer orders placed on us and our distributors) were higher during 2007 than during 2006, and our backlog (which may be cancelled or rescheduled by the customer on short notice without significant penalty) was significantly higher at the end of 2007 than at the end of 2006.

 

 

The purpose of this overview is to provide context for the
discussion and analysis of our financial statements that follows
by briefly summarizing the most important known trends and
uncertainties, as well as the key performance indicators, on
which our executives are primarily focused for both the short
and long term.

 

Actel Corporation is the leading supplier of low-power FPGAs and
PSCs. Attacking power consumption from both the chip and the
system levels, the Company’s innovative programmable logic
solutions enable power-efficient design. In support of our
nonvolatile Flash- and antifuse-based FPGAs, we offer design and
development software and tools to optimize power consumption;
power-smart IP cores, including industry-standard processor
technologies; small footprint packaging; programming hardware
and starter kits; and a variety of design services. We target a
wide range of applications in the aerospace, automotive,
avionics, communications, consumer, industrial,

medical, and military markets that require low power or other
attributes of our nonvolatile Flash and antifuse-based
technologies that have an inherent competitive advantage.

 

• Semiconductor
Industry

 

According to the Semiconductor Industry Association
(“SIA”), global sales of semiconductors rose to a
record $255.6 billion in 2007, an increase of 3.2% from the
previous record of $247.7 billion reported for 2006. Sales
growth was driven primarily by consumer products such as mobile
handsets, PCs, and consumer electronics, which have proliferated
as semiconductor technology has improved performance and
functionality at lower cost. According to the SIA report,
industry growth is expected to be 7.7% in 2008.

 

• Logic
Market

 

The logic market is highly fragmented and includes ASICs and
PLDs. FPGAs are one type of PLD. Price, performance,
reliability, power consumption, security, density, features,
ease of use, and time to market determine the degree to which
PLDs compete for specific applications. Unlike ASICs, which are
customized for use in a specific application at the time of
manufacture, PLDs are manufactured as standard components and
customized “in the field,” allowing the same device
type to be used for many different applications. Using software
tools, users program their design into a PLD, resulting in lower
development costs and inventory risks, shorter design cycles,
and faster time to market.

 

• Technology

 

To a great extent, the characteristics of an FPGA are dictated
by the technology used to make the device programmable. Devices
based on nonvolatile Flash or antifuse programming elements
offer significant power, single-chip,
live-at-power-up,
security, and neutron-immunity advantages over volatile FPGAs
based on SRAM technology.

 

• Flash

 

We believe that our long-term future lies with Flash technology,
which permits us to make FPGAs that are both nonvolatile and
reprogrammable. Perhaps the single biggest benefit of a
nonvolatile Flash-based FPGA array is significantly reduced
power consumption. Even though our Flash technology is unique,
the process is very similar to the standard embedded Flash
memory process, so we are able to share with others most of the
burden of developing and proving the process. While we were the
first company to sell Flash-based FPGAs, several suppliers of
SRAM-based FPGAs claim to offer “single-chip,
Flash-based” solutions. However, these “hybrid”
solutions are merely combinations of Flash memory components
with the underlying SRAM FPGA technology — either
integrated with the FPGA die into a single package or,
alternatively, stacked or placed
side-by-side.
The FPGA array is still SRAM, so it is still subject drawbacks
associated with that technology. These “hybrid”
approaches mitigate some of the limitations of traditional
SRAM-based solutions by providing a smaller footprint, a minor
reduction in power consumption, and small advances in
power-up
time and security, but they are only incremental improvements
over pure SRAM-based FPGAs. Since the embedded Flash memory
controls only the initial configuration of “hybrid”
devices during
power-up,
these solutions cannot offer the full advantages of Flash
technology provided by our nonvolatile Flash-based FPGAs:
exponentially lower power consumption, faster response times,
unparalleled reliability, and uncompromising security.

 

• Antifuse

 

The one-time programmability of our antifuse-based FPGAs is
desirable in certain system-critical military and aerospace
applications, but commercial customers generally prefer
reprogrammable solutions, such as SRAM- or Flash-based FPGAs. In
addition, we are the only sizeable company that uses antifuse
technology, which means we bear the entire burden of developing
and proving antifuse processes (including yields and
reliability) and products (including switching elements and
architectures). It also means that our FPGAs using antifuse
technology are typically one or two generations behind
competitive SRAM-based solutions manufactured on standard
processes.

• Strategy

 

Our strategy is to offer FPGAs to markets in which our
nonvolatile Flash- and antifuse-based technologies have an
inherent competitive advantage. Our strategy involves
considerable risk as unique technologies and products can take
years to develop, if at all, and markets that we target may fail
to emerge. However, in addition to single-chip,
live-at-power-up,
security, and neutron-immunity benefits, we believe that our
nonvolatile FPGA solutions offer substantial low-power
advantages over volatile devices based on SRAM technology and we
plan to exploit those advantages.

 

• Key
Indicators

 

Although we measure the condition and performance of our
business in numerous ways, the key quantitative indicators that
we generally use to manage the business are bookings, design
wins, margins, yields, and backlog. We also carefully monitor
the progress of our product development efforts. Of these, we
think that bookings and backlog are the best indicators of
short-term performance and that design wins and product
development progress are the best indicators of long-term
performance. Our bookings (measured as end-customer orders
placed on us and our distributors) were higher during 2007 than
during 2006, and our backlog (which may be cancelled or
rescheduled by the customer on short notice without significant
penalty) was significantly higher at the end of 2007 than at the
end of 2006.