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Poor economy, chipset shortage drags Fairchild's sales

Posted: 26 Jul 2012 ?? ?Print Version ?Bookmark and Share

Keywords:Fairchild? power semiconductor? TSMC? Qualcomm? chipset shortage?

According to Fairchild Semiconductor's president and CEO, chip set shortages from a major vendor have hurt Q2 sales. Mark Thompson added: "We estimate our sales would have been at least $5 million higher in Q2 and $10 million higher in Q3."

Although Thompson didn't cite the vendor, three months ago, Qualcomm acknowledged that it was turning to other foundry suppliers amid a shortage of 28nm capacity at its longtime foundry partner, TSMC.

Thompson said he expects the capacity shortages to end in Q4, and that Fairchild will catch up on those platforms.

For 3Q12, the power semiconductor supplier expects sales to be in the range of $360 to $380 million. "Current scheduled backlog is nearly sufficient to achieve the low-end of this range," said Mark Frey, Fairchild's EVP and CFO.

In addition, the mobile market, which has become a relatively new growth driver for Fairchild, is expected to drive sales in 2H12. Q3 sales are expected to rise between $10 and $15 million sequentially.

"Initially we expect mobile and mid-voltage products to lead sales growth. We under-shipped consumption in high-voltage products in Q2 and expect similar trend in the third. In late Q4, we expect this business to resume growth," Thompson added.

There are ongoing efforts to transition its low-voltage MOSFET business away from low-end notebooks to mobile and mid-voltage applications. In fact, the company is ramping 100V MOSFET production to meet demand and grew backlog of these products in Q2, Thompson indicated.

In China, new incentives to purchase energy efficient appliances are driving a noticeable increase in customer inquiries and orders. Chinese air conditioning makers are increasingly shifting their efforts to transitive inverter-style, variable speed motors away from the compressor, to instead the external and internal fans. It's less costly to convert these lower-power fan motors yet it enables them to meet the efficiency standards necessary to qualify for the rebates in China, Thompson explained.

"We are shifting capacity away from the higher power modules required for compressors and to the lower power products needed for fan motors," Thompson said.

Still, the weak economy took its toll on the company's top and bottom lines.

Fairchild reported Q2 sales of $361.5 million, up three percent from the prior quarter and 17 percent lower than 2Q11. Adjusting for the extra week in Fairchild's fiscal Q1, sales grew 11 percent sequentially. Q2 revenue includes about a $4 million insurance recovery related to the Thailand flooding.

Fairchild reported Q2 net income of $11.9 million or $0.09 per diluted share compared to $1.6 million or $0.01 per diluted share in the prior quarter and $44.9 million or $0.34 per diluted share in 2Q11. Gross margin was 32.6 percent compared to 29.8 percent in the prior quarter and 37.1 percent in the year-ago quarter.

"Distribution sell-through posted a strong increase, enabling us to further reduce our weeks of inventory in the channel increased gross margin nearly three percent," Thompson said.

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