Currently headquartered in Milpitas, CA, Intersil Corporation (ISIL) is an original equipment manufacturer (OEM) of analog and mixed-signal semiconductor integrated circuits (ICs). The company has a very broad-based product portfolio that serves four broad end markets consumer, computing, communications and industrial.
Semiconductor ICs 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 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, and correspondingly increase performance and reliability. Consequently, a greater amount of functionality is being consolidated into increasingly smaller devices. Gartner expects the total semiconductor chip market to increase 10.6% to a $259.5 billion market in 2006. The SIA forecast pegs it at $248.8 billion (up 9.4% over 2005, with the analog component growing 16.8% to $37.3 billion in 2006.
Intersil serves four broad end markets. The consumer product line comprises semiconductor devices used within optical storage, video display, and hand held electronic products, as well as standard analog drivers. The consumer segment has been growing very strongly over the last three years, from the smallest segment of the company to the largest. In 2006, it remained the largest segment. Management expects the unit to continue growing, since ISIL is already the leading supplier of some consumer products, and is expanding into new markets. Product areas in which the company has a market leadership position include diode drivers for optical storage and thin film transistor (TFT) buffers for flat panel displays. The computing segment contains power management and regulation products for desktop, server and notebook computers. The communications segment includes interface products, line drivers, converters and hot plug power management products that target digital subscriber line (DSL), home gateway and voice over Internet protocol (VoIP) applications. The company is the largest provider of DSL line drivers. The industrial segment consists of operational amplifiers, data transceivers, analog switches, multiplexers, bridge power management products, and other standard analog products that target end applications such as medical imaging, energy management and factory automation. The consumer segment accounted for 26% of total revenue in 2006, computing 25%, communications 24% and industrial the remaining 25%. In 2006, these four end markets grew 21.0%, 27.2%, 27.5% and 18.6%, respectively.
Intersil has undergone a transformation, the corporate focus shifting gradually to higher margin products with good growth potential. The company acquired Elantec Semiconductor, Inc. for $1.4 billion in May of 2002 and most of the new consumer unit is composed of Elantec products. The subsequent rationalization of operations enabled it to shut down some facilities and reduce the workforce. This was followed by the sale of a production plant and the discontinuation of automotive product manufacturing from late 2002 to early 2003. In August 2003, the Wireless Networking product group was sold for $365 million. Bitblitz Communications, Inc. was acquired for $2.5 million. In July 2004, the company closed the Xicor acquisition, which was valued at $511 million. Roughly 60% of Xicor products were for the industrial market, 25% were for the communications market and the remaining 15% for the consumer market. Xicor averaged $10 million a quarter in revenue over the 10 quarters prior to the closure of the merger.
The company has recently closed another fab line as it continues the shift towards a fabless business model in which the complete manufacturing of the firm's products is outsourced. Currently, ISIL has outsourcing agreements with IBM, United Microelectronics (UMC) and Taiwan Semiconductor Manufacturing Company (TSMC). Approximately 62% of wafer production was outsourced in fiscal 2006.
Products are sold mainly to OEMs, original design manufacturers (ODMs) and contract manufacturers, which together accounted for roughly 60% of 2006 revenues. The balance of revenue was generated through distributors and value-added resellers (VARs). Three distributors and one OEM customer contributed over 8% of 2006 sales each, and one of these distributors alone generated 10% of sales. Approximately 68% of 2006 revenue was generated in Asia/Pacific countries, 22% came from North America, while the remaining 10% originated in Europe. The Asia/Pacific region has witnessed the strongest growth, followed by North America and then Europe.