Based in Fremont, CA, Exar Corporation (EXAR) is a fabless original equipment manufacturer (OEM) of semiconductor integrated circuits (ICs) and devices embedded in communications network equipment. The company reports results along two segments Communications, and Video, Imaging & Other. The communications segment is further divided between the networking and transmission product group and serial communications product group.
Semiconductor devices are broadly divided into three categories: analog, digital and radio frequency (RF). Analog semiconductors condition and regulate real world information such as light, temperature, speed, pressure, power and electrical currents. Digital logic semiconductors process information in only two states. Mixed-signal semiconductors combine both analog and digital technology into a single device. Typically, an analog sensor samples real world information, and then converts the input into an electronic analog signal, which is converted into a digital format for further digital processing. The analog and mixed-signal markets tend to be more varied and specialized, with customized products that have longer life cycles than those in the digital industry segment. There is an ongoing drive to decrease the number of discrete devices, lessen power requirements and shrink the size of the existing devices, which correspondingly increase performance and reliability. Consequently, a greater amount of functionality is being consolidated into increasingly smaller devices. The Gartner Group estimated that the total worldwide semiconductor market was a $219.9 billion market in 2004. The analog market component grew 29% in 2004, to a $36.4 billion market, according to In-Stat, an industry trade group.
The company's communications product portfolio contains ICs that provide high-bandwidth physical interface and access control within communications networking gear. The products support a variety of physical interface transmission standards, such as T/E carrier, asynchronous transfer mode (ATM), synchronous optical network (SONET) and synchronous digital hierarchy (SDH). Whereas the access portion functional area exclusively contains digital logic, the interface portion contains analog and mixed-signal (analog and digital) ICs. Management believes that the company possesses specific design expertise in high-speed, low-jitter, phase-locked loops for transceivers, jitter attenuators, data aggregation mappers and clock devices. This has leveraged the firm into a strong market position in transceivers (also known as line interface units), framers and SONET aggregation devices. Other communications products include ATM user network interface (UNI), framers and physical interfaces (PHYs). These products are used within SONET/SDH add/drop multiplexers, central office switches, digital cross connects, multi-service provisioning platforms, routers and DSLAMs (digital subscriber line access multiplexers). The ultimate end users of the telecommunications equipment are telecommunication service providers that offer access, local, metro and long-haul services.
The product portfolio also includes clock distribution devices, low voltage and multi-channel universal asynchronous receiver transmitters (UARTs), as well as analog-to-digital converters (ADCs) and integrated analog front-end ICs used in various video and imaging applications. In fiscal 2006, the product revenue split was networking and transmission 36%, serial communications 59% and video, imaging and other 5%.
The products are fabricated using standard complementary metal oxide semiconductor (CMOS) IC technology. Fabless companies outsource the actual manufacturing of the ICs to a foundry. Exar uses a single foundry, Chartered Semiconductor, for wafer fabrication production. Most testing and assembly is also outsourced to various Far East subcontractors. Competitors include: Applied Micro Circuits, Integrated Device, Mindspeed, PMC-Sierra, TransSwitch and Vitesse in the communications area. OEM customers of the firm include Alcatel, Cisco, Digi International, Hewlett-Packard, Huawei, Lucent, NEC, Nokia and Tellabs. Alcatel, the largest customer, accounted for 10.5% of fiscal year 2006 revenue. No other OEM customer accounted for more than 10% of revenue. Distributors Future Electronics and Nu Horizons, contributed 24.1% and 15.9% of fiscal year 2006 revenue, respectively. The firm's principal markets are North America (49% of fiscal year 2006 revenue), China (14%), Other Asia (15%), Italy (12%), Other Europe (9%) and the rest of the world (1%).
Recently the company closed an $11 million acquisition of a portion of the Optical Networking (ON) business of Infineon Technologies AG. Exar acquired high-speed transport technology embedded in core networking equipment. Specifics include the intellectual property (IP), product set and a small technology team. The ON product set will broaden the product portfolio to include higher-speed transport semiconductor devices.
As a result of the merger Exar is now being re-organized into three distinct product groups: communications, interface and power. The communications group is made up of a networking and transmission business, as well as, the storage business. The interface group is made up of Exar's UART business and the Sipex's interface transceiver business. Finally the power group is made up of the Sipex power business.