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Analysis: Can Intersil make it big in analog?

Posted: 12 Jul 2010 ?? ?Print Version ?Bookmark and Share

Keywords:Intersil analog market? power management? mixed-signal product? ADC? LED?

Intersil Corp. has made some moves to break out of the pack and become the next $1 billion wonder in analog, but many wonder if the chipmaker is a contender or a mere pretender?

The company has implied that it is a contender, as the self-proclaimed "smallest of the 'Big 6' analog chipmakers" intends to move up the ranks, boost its brand, and, ultimately, resolve its identity crisis.

As part of its plan, the company is moving into new markets, changing its product mix and accelerating its acquisition strategy. However, some believe that Intersil itself could possibly be a takeover target over time.

On the product front, it remains strong in the PC power management segments, but it is scrambling to fill out pieces of the signal chain. It is quietly developing a new line of data converters, LED drivers, system-level power management ICs, among other parts. And as part of its "asset-lite" or "fab-lite" strategy, it is also working with its foundry partners to make its initial foray into the 300mm era.

Business is booming for Intersil and the rest of the analog crowd. After a miserable downturn in 2009, Analog Devices, Intersil, Linear Technology, Maxim Integrated, National Semiconductor, On Semiconductor, Texas Instruments and others are seeing a surprising but welcomed recovery. Since the beginning of the year, vendors have experienced shortages and extended lead times.

In May, Intersil raised its Q2 financial outlook. Dave Bell, Intersil's president and CEO, recently said the company would reach a $1 billion revenue run rate on an annual basis by the end of 2010!a year earlier than his original prediction. For the year ended Jan. 1, 2010, the company's net revenue was $611.4 million, a 21 percent decline compared with $769.7 million reported for fiscal 2008.

"When I made predictions about us reaching a $1 billion run-rate at last year's analyst event!when we were in the depths of the downturn!people thought I was certifiably insane. Not a single person believed it," Bell told EE Times at the company's headquarters here. "It looks like we will" achieve those goals in 2010.

Still, there is much work to be done at Intersil, including an effort to propel its brand in the same breath as ADI, Linear, Maxim, National and TI. Intersil "doesn't have the brand awareness that many of our competitors have. There is a good reason for that. The company has gone through (various changes) in its evolution," Bell said.

Thanks to the growth trends!coupled with its recent acquisition of chipmaker Techwell!"I think the company will succeed in their goal" of reaching the $1 billion run-rate level, said Doug Freedman, an analyst with Gleacher & Co.

"We continue to believe that Intersil has been able to capture share, particularly within power management, through this current cycle, as competitors' lead-time issues (i.e. TI and On Semi) have yet to meaningfully reverse course," Freedman wrote in a recent report.

But others appear to be taking share away from Intersil in some segments. For example, Linear's "low lead times (four to six weeks) likely drove share gains, versus tighter competitors like Maxim and Intersil," said Craig Berger, an analyst with FBR, in a recent report.

According to Freedman, here are just some of the challenges facing Intersil: 1) Can it contain its costs amid an acquisition spree?; 2) Can the company make its recent acquisitions work?; 3) Will its asset-lite strategy continue to work?; 4) Can it fill out its product portfolio?; and 5) Can it remain independent?

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