Product category:
Power Supply ICs and Controllers
News Release from: Fairchild Semiconductor
Edited by the Electronicstalk Editorial
Team on 23 July 2003
Fairchild to focus on buoyant power
market
Fairchild Semiconductor has reported results for the second quarter ended 29th June 2003.
Fairchild Semiconductor has reported results for the second quarter ended 29th June 2003 Second quarter sales were $347.1 million, down slightly from the previous quarter and down 3.7% from second quarter 2002
This article was originally published on Electronicstalk on 28 Feb 2001 at 8.00am (UK)
Related stories
Dual-output buffer for DDR SDRAM modules
Fairchild Semiconductor has introduced a dual-output registered buffer for 184-pin, 2.5V PC200/PC266, 72bit-wide registered double data rate (DDR) SDRAM modules.
Bus hold makes logic more predictable
Fairchild Semiconductor has made a number of additions to its LCX family, the logic industry standard for 3.3V applications.
Fairchild reported a net loss in the quarter of $63.8 million, or $0.54 per share, compared with a net loss of $13.0 million, or $0.12 per share reported in the second quarter of 2002.
Included in the second quarter 2003 results are pretax charges for restructuring, impairments and debt refinancing totalling $77.0 million.
On a pro forma basis, which excludes amortisation of acquisition-related intangibles, restructuring and impairments and other items, Fairchild reported second quarter net income of $3.8 million, or $0.03 per diluted share, compared with pro forma net income of $7.5 million, or $0.07 per diluted share in the second quarter of 2002.
Further reading
Controller and switch combine to cut PSU chipcount
New from Fairchild Semiconductor, the FSDH0165 power switch combines a voltage-mode PWM controller and SenseFET power switching element in a single 8-lead package.
PLL clock drivers target high-speed clocking
Two low voltage PLL clock drivers designed for use in high-speed memory clocking applications are now available from Fairchild Semiconductor.
MOSFET is ready for high-voltage car batteries
The new FDB06AN08A1 UltraFET trench MOSFET from Fairchild Semiconductor is designed for 42V automotive battery applications requiring full device capability at low gate drive voltages.
"We're executing significant restructuring and debt refinancing initiatives to lower our costs from the second quarter baseline", said Kirk Pond, President, CEO and Chairman of the Board.
"We expect these steps to generate pretax savings of roughly $53-58 million annually.
We expect to realise the impact of these savings starting in the third and fourth quarters of 2003 with the full benefit realised in the first half of 2004".
"In the second quarter, we adapted well and executed effectively to meet our sales goals despite the SARS impact on demand in Asia and especially in China, our fastest growing market, as well as continued pricing pressure", commented Pond.
"This demand slowdown was widely discussed by many electronics manufacturers and addressed in our mid-quarter guidance.
There is still some excess inventory in the Asian distribution channel and we expect this will have some impact on the third quarter 2003.
We're encouraged by stronger bookings activity in early July and we currently believe the SARS impact on demand to be a short term issue".
Underscoring continued momentum for Fairchild's strategic focus on power markets, Pond continued.
"The power market we address has grown more than four times the rate of the overall semiconductor industry during the last five years, and is forecasted by World Semiconductor Trade Statistics (WSTS) to continue to significantly outpace the market.
During these five years Fairchild has expanded its power business over fifteen fold, from less than 10% to 70% of our total revenues.
Notably, we're now the top supplier of power discrete worldwide and have climbed to the number-two market share position in power analogue according to the latest Gartner data for 2002.
In order to focus even more effectively on this fast-growing segment of our business, we're restructuring operations and reducing our costs and investment in non-core businesses.
This will free additional resources, improve our overall cost structure, reduce our capital spending needs, and demonstrate our commitment to strengthening our position as the market leader in the power semiconductor business".
Fairchild has also announced a restructuring primarily focused on consolidating manufacturing and reducing costs in non-core, non-power businesses.
These restructuring activities involve primarily the closure or sale of the Kuala Lumpur, Malaysia, Wuxi, China and Loveland, Colorado manufacturing sites; exit from the nonvolatile memory and hybrid businesses; consolidation of fab lines and phase out of the 4in fab in South Portland, Maine; and additional workforce reductions in non-core businesses.
The total cost of these actions, including the remaining charges for the previously announced closure of the Mountaintop, Pennsylvania 6in fab, is expected to be approximately $70 million, of which $53.6 million is included in the second quarter results.
The remaining charges are expected to be taken over the next few quarters.
"We're restructuring the business to tighten our focus on the power markets", explained Hans Wildenberg, Executive Vice President and Chief Operating Officer.
"These actions allow us to consolidate our presence in Malaysia, optimise our optoelectronics business, significantly reduce costs and increase our emphasis on our core power business.
These manufacturing consolidations show that we are transitioning the company to be a power analogue and power discrete business with a decreasing presence in non-core markets".
"In addition to the restructuring activities, our new Suzhou, China assembly and test facility began shipping production this month which we expect to also improve our cost structure beginning later this year", stated Wildenberg.
"After initial ramp up costs in third quarter, we expect to see more significant savings starting in the fourth quarter 2003 and continuing through 2004 and beyond.
Also, the closure of the Mountaintop, Pennsylvania 6" fab is running ahead of schedule and will now be completed by mid-fourth quarter this year".
"In our major market segments, orders from automotive, game consoles and portable power adapters were particularly strong", said Wildenberg.
"Bookings from computing including notebooks, desktops, and storage as well as televisions were down sequentially.
In our distribution channels, currently accounting for approximately 65% of our total sales, inventories increased to about 15 weeks, driven almost exclusively by a two week increase in our Asian channel".
"We also continue to win key designs at major customers in our focus power applications", stated Wildenberg.
"Our power solutions for the VRM10 specification desktop and server designs are winning new business opportunities at a major PC manufacturer.
This new power supply controller combined with our industry leading drivers and mosfets comprise a complete power management solution capable of handling the most demanding microprocessor power requirements.
We continue to win new business with our IGBT products in ignition control and induction heating applications.
Our IGBT business is up 20% from last quarter on the strength of design wins at several major customers such as Visteon, Siemens and Bosch.
We also won new designs at a number of major consumer electronics customers with our analogue power switch products which integrate mosfet and analogue power controllers into a single solution.
Fairchild is generating many exciting new products and now offers more complete power solutions to customers than ever before".
"In the second quarter we maintained our focus on cost control, cash generation and balance sheet management", said Matt Towse, Fairchild's Senior Vice President and Chief Financial Officer.
"We again generated positive operating cash flow, cut operating expenses by 3%, and used the proceeds from our new credit facility to refinance existing debt which we expect will save us more than $18 million annually in interest expense.
We remain committed to our long-term strategy of delevering our balance sheet.
This refinancing represents another significant step forward".
Also included in the second quarter results are charges of $23.4 million associated with the previously announced write-off of the financing charges for the previous credit facility, the call premium for redeeming the company's 10.375% senior subordinated notes, and other related costs.
"Historically, the third quarter is seasonally down and we expect similar softness this year with revenues to be 4-6% lower than the second quarter", said Towse.
"Our entering backlog for the third quarter was down more than 10% from a quarter ago and at slightly lower margins, due mostly to cancellations and slower order rates as the SARS-related inventory build is being worked off.
Overall, we expect the cost cuts associated with our restructuring plans will help keep operating margins in the range of flat to down 100 basis points in the third quarter.
Net interest expense should drop to about $16 million in the third quarter.
We believe a tighter focus on our core power business will enable us to lower our capital budget to 8-10% of revenue going forward.
"Beyond the third quarter, we expect to grow at or above the power market growth rate driven by the strength of our new products and a leaner, even more focused organisation", said Towse.
"Combining our savings from refinancing with our restructuring cost reductions we expect to generate pretax savings of $53-58 million in 2004.
We plan to build on our success in the power market and continue to strengthen our balance sheet".
• Fairchild Semiconductor: contact details and other news
• Email this article to a colleague
• Register for the free Electronicstalk email newsletter
• Electronicstalk Home Page
Search the Pro-Talk network of sites
