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National Semiconductor (NSM) |
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WIKI ANALYSIS
National Semiconductor Corporation (NSM) is a semiconductor company focused on analog and mixed-signal integrated circuits and sub-systems, particularly in the area of power management. The company has a diversified product portfolio which includes power management circuits, audio and operational amplifiers, communication interface products and data conversion solutions.[1] NSM's portfolio of over 13,000 products is sold to a diversified group of end-customers from large original equipment manufacturers (OEMs) to smaller customers serviced by the company's extensive distribution network.[1] During fiscal 2009, NSM also announced its entry into the photovoltaic market with new technology designed to increase the overall energy output of solar-electric power-generating systems.
Due to weak demand for semiconductors related to the 2008 Financial Crisis NSM eliminated approximately 850 jobs worldwide. The company plans to further reduce headcount by approximately 875 and will close its manufacturing facilities in Arlington, Texas and Suzhou, China.
Company Overview
Semiconductors are integrated circuits (in which a number of transistors and other elements are combined to form a more complicated circuit) or discrete devices (such as individual transistors). In an integrated circuit, various components are fabricated in a small area or chip of silicon, which is then encapsulated in plastic, ceramic or other advanced forms of packaging and can then be connected to a circuit board or substrate.
National Semiconductor manufactures an extensive range of analog intensive and mixed-signal integrated circuits, which are used in numerous applications. The company markets its products to OEMs and original design manufacturers (ODMs) through a direct sales force. Some major OEMs include:
- Apple (AAPL)
- General Dynamics (GD)
- LG Electronics
- Sony-Ericsson Mobile
- Motorola (MOT)
- Nokia (NOK)
- Research in Motion (RIMM)
- Samsung Electronics (SEO:005930)
- Sharp Corporation (SHCAY)
- Siemens AG (SI)
The company's top ten customers combined represented approximately 60 percent of total accounts receivable.
Business and Financial Metrics
Fourth Quarter Fiscal 2010 Results[2]
National Semiconductor reported revenues of $398.5 million, up 10% from Q3 and up 42% from last year’s fourth quarter. Gross margins were 68.8%, compared to 67.3% in the prior quarter and up from 58.3% in last year’s fourth quarter. Reported GAAP earnings were $79.2 million or $0.33 cents per fully diluted share.
Products
National Semiconductor is a leading supplier of analog and mixed-signal products, serving both broad-based markets such as the consumer, industrial, medical, automotive and communications, and more narrowly defined markets such as wireless handsets (including smart phones) and other portable applications, LED lighting, renewable energy, portable medical and communications infrastructure. The company's analog and mixed-signal devices include:
- Operational and audio amplifiers
- Power references, regulators, and switches
- Analog-to-digital or digital-to-analog converters
- Communication interface circuits
- Lighting and display circuits
- Adaptive voltage scaling circuits
- Radio frequency integrated circuits
The company's product group is responsible for designing and developing a wide range of analog integrated circuits, many of which convert and regulate voltages to ensure that electronic systems operate to their fullest potential with the lowest overall power consumption or the highest energy efficiency. It also designs and develops integrated circuits that handle the requisite analog technology for information or data as it travels from the point where it enters the electronic system, is conditioned, converted and processed to the point where it is sent out. In addition to providing real world interfaces, these products are used extensively in signal conditioning, signal conversion (from analog to digital and vice versa) and high-speed interfacing applications.
Manufacturing
Following product design and development, National Semiconductor generally produces integrated circuits in the following steps:
- Wafer Fabrication: Product designs are compiled and design equipment and then transferred to silicon wafers in a series of complex precision processes that include oxidation, lithography, chemical etching, diffusion, deposition, implantation and metallization.
- Wafer Sort: The silicon wafers are tested and separated into individual circuit devices.
- Product Assembly: Tiny wires are used to connect the electronic circuits on the device to the stronger metal leads of the package in which the device is encapsulated for protection.
- Final Test: The devices are subjected to a series of rigorous tests using computerized circuit testers and, for certain applications, environmental testers such as burn-in ovens, centrifuges, temperature cycle or moisture resistance testers, salt atmosphere testers and thermal shock testers.
- Coating: Certain devices in the analog portfolio are designed to be used without traditional packaging. In this case, the integrated circuit is coated with a protective material to allow mounting directly onto a circuit board.
Acquisitions
In March 2009, NSM acquired ActSolar, Inc., a privately-held solar energy company that provides power optimization solutions for commercial and utility-scale solar installations. The acquisition of ActSolar is intended to expand the company's portfolio of power optimization technologies along with the acquisition of new diagnostics and panel monitoring capabilities for solar arrays.
Trends and Forces
A large proportion of National Semiconductor's revenue comes from handsets
National Semiconductor has a roster of top-shelf customers, including Nokia, Motorola, Samsung and other emerging Asian ODMs/OEMs. In the last quarter, the company increased share at all of the top five handset manufacturers. Nokia already employs National Semiconductor's power management, audio amplifier lighting and display management products and the company's flash lighting chips have enabled it to secure design wins at all of the top five handset manufacturers. National Semiconductor has also been increasing its components in 4G handsets.
In the second quarter of 2010, a 6.1% drop in overall mobile phone sales was offset by a 27% surge in the smart phone market. The smart phone segment remains the most attractive market for cell phone manufacturers as it is more resistant to the thinning margins of the low-end sector. The largest smartphone manufacturer remained Nokia, with more than double the market share of nearest competitor Research in Motion. Apple maintained third position, but grew its market share from 2.8% to 13.3% compared to the same quarter last year due to the release of the iPhone 3GS. National Semiconductor benefits from the widespread adoption of smartphones which use its chip technology.
Rising Consumer Demand for Energy Efficient Products Benefits National Semiconductor
Consumers are looking for products that save on their energy bill. National Semiconductor stands to gain much from producing components that are energy efficient. Because the company's primary sales come from power controllers, which are an essential part to power management and energy saving in end-user appliances, the "green" direction that NSM is taking stands to give it a relative competitive advantage relative to its peers.
Expansion Into Chinese Markets in Both Retail and Manufacturing Serves to Benefit National Semiconductor
China has 400 million new consumers of cell phones and other handheld devices that are being replaced more frequently than in prior cycles. The company had some recent successes in this market with handsets supporting the new 450mg CDMA and TD-SCDMA standards. It has also been designed into handsets marketed by the largest local brand. Significant opportunities are also expected in other developing markets such as India, Russia and Africa.
Competition
In the market for electronics components, National Semiconductor faces fierce competition.
- Analog Devices (ADI) is a leader in the design and production of high-performance analog, mixed-signal, and digital signal processing integrated circuits (ICs). [3] Its revenues for 2008 ending in November was $2.58 billion. Sales from the power management segment amounted to $143.7 million [4] Power management and reference products contributed 6% of total revenue in fiscal 2008 for Analog Devices. [5]
- ON Semiconductor (ONNN) is another manufacturer of semiconductors. They have a product portfolio of 29,300 products used in end-user electronics such as hybrid cars, computers, GPS devices, and automated testing equipment.[6] ON Semiconductor specializes in power management and data control semiconductors.[6] Power management semiconductors control, convert, protect and monitor the power supply to electronic components in an end-user device.[6] Data control semiconductors regulate data flow for communication systems. [6]
- Vishay Intertechnology (VSH) is a $2.8 billion (2007) semiconductor and passive components manufacturer. [7] It directly competes with National Semiconductor in MOSFET and power management chips. Vishay's IC's focus on analog signal switching and routing, power conversion, and power management. [8]
References
- ↑ 1.0 1.1 National Semiconductor 10-K 2009
- ↑ Q4FY2010 Financial Summary
- ↑ ADI 2008, 10-K Item 1: Business Pg. 1
- ↑ ADI 2008, 10-K, Item 6: Selected Financial Data Pg. 25
- ↑ ADI 2008, 10-K, Item 1: Business Pg. 3
- ↑ 6.0 6.1 6.2 6.3 ONNN 10-K 2007, Item 1: Business Overview, Pg. 3
- ↑ VSH 2007, 10-K Item 6: Selected Financial Data Pg. 30
- ↑ VSH 10-K 2007, Item 1: Business, Pg. 8
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