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IC vendor watch: Who's got cash?

Posted: 05 Oct 2009 ?? ?Print Version ?Bookmark and Share

Keywords:semiconductor? IC firm? R&D?

The biggest semiconductor companies by revenue rank not only among the best in their respective industry segments but are also more likely to have huge piles of cash that can be used to fund acquisitions, R&D and product development, according to a review of financial filings by EE Times.

The top cash-rich IC vendors also consistently garner higher valuations in equity markets than rivals with limited liquidity, putting them in an even stronger financial position relative to their peers in the industry.

Our rankings are based on IC makers' cash and other short-term investments at the end of Q2. Long-term debt was stripped out of the calculations in determining current cash position.

Not surprisingly, Intel Corp. leads the pack, followed by Qualcomm, Taiwan Semiconductor Manufacturing Co. Ltd, Texas Instruments Inc. and Broadcom, in that order. The stock valuation of Intel, Qualcomm and TSMC revealed that investors place a high premium on chip manufacturers' ability to generate huge cash flow, which can be returned to shareholders through share repurchases or be used to fund strategic acquisitions.

Not all the top revenue generators in the semiconductor market can lay claim to huge cash piles, however. STMicroelectronics NV, which market researcher IC Insights earlier this year ranked as the world's fifth-largest IC vendor by sales, did not crack our list of cash-rich chipmakers. After adjusting for long-term debts, ST ended the June quarter with negative cash balance of $41 million.

ST is not alone. Many other major chipmakers owe more than they have in the kitty. The group includes memory maker Micron Technology Inc., which wrapped up its fiscal quarter ended June 4, with $1.3 billion in cash and short-term investments and $2.8 billion in long-term debts, leaving it with net debt of $1.5 billion.

Intel rival Advanced Micro Devices Inc. is in an even more precarious position despite recent efforts to shore up the company's balance sheet. The graphics IC and microprocessor vendor reported available cash and short-term investments rose to $2.5 billion in the June quarter while long-term debts fell a tad to $5.2 billion. AMD's net cash position was minus $2.7 billion.

Freescale Semiconductor Inc.'s struggle with a boat-load of long-term debts, coupled with declining sales and the resulting hit on cash flow, knocked it out of our rankings. The company had negative cash position of $6.2 billion in Q2. It reported cash and short-term investments of $1.3 billion and $7.5 billion in long-term debt.

NXP Semiconductor isn't too far behind Freescale. The Dutch IC vendor has been trying to renegotiate or retire long-term debts with some success, but it still ranks high among the most debt-laden companies in the chip industry with total long-term debts of $5.4 billion and only $1.3 billion in cash and short-term investments.

Some of the industry's leading companiesthe ones that typically rank among the Top 20 by revenueare either weighed down with huge debts or were excluded from our rankings due to cross-holding ownership structures that make it difficult to determine how much of their available cash can be attributed to the components business.

In this category are many Asian companies, including Toshiba Corp and Samsung.

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