The Brevard Technical Journal

Intersil positioned for growth
Acquisition, demands for consumer products are at the core of company's success

by Anne Straub
Brevard Technical Journal

Heavy competition in the wireless industry and a slow recovery in semiconductor sales notwithstanding, Intersil Corp. heads into the end of the year with a larger Palm Bay payroll and increased sales projections.

The company employs about 1,400 people in Palm Bay, including 125 who were hired this year. Intersil is based in Irvine, Calif., but the bulk of its employees work at its operational headquarters in Palm Bay.

The company makes integrated circuits for four primary markets: specialized power management chips in products such as desktop computers and notebook PCs; wireless local-area-networking; flat panel displays; and optical storage such as recordable CD and DVD players.

Semiconductor makers in general are experiencing a slow recovery after a 32 percent drop in semiconductor sales in 2001. That followed a strong year that led chip makers to increase inventory. "I think there was a feeling that the industry would continue to boom," said Semiconductor Industry Association spokeswoman Molly Tuttle.

Now, companies have burned off that excess inventory and are looking for improved sales. After 2001's low point of $138.9 billion in sales, SIA expects the market to rise slightly to $143.3 billion this year and continue improving by 20 percent margins or so over the following several years, hitting $213 billion in 2004.

Intersil FAB Technologist Patricia Fitzpatrick inspects a wafer for defects before putting it into another machine to check for defects. Photo by Michael R. Brown, © 2002.

Intersil closed the second quarter of the year with a loss, partly because of expenses related to its acquisition of Elantec, a high-performance analog company in the optical storage and flat-panel display markets.

Sales rose for the quarter, helped by the success of the company's wireless LAN technology. Though the cellular telecommunications aspect of wireless has been hit hard, wireless LAN is a more specialized technology that showed a 20 to 25 percent quarterly improvement for Intersil, spokesman Brent Dietz said.

The technology allows a company to make its network available to wireless users in its facility with speed similar to a wired network. "You don't have to be sitting at your desk to be creative or to gain access to network resources," Dietz said.

The company expects annual sales to grow 25 percent to about $720 million, higher than previously forecast.

Intersil's specialized approach to segments of larger markets has positioned the company for growth, Dietz said. "We're certainly not the Wal-Mart of the semiconductor industry," he said.

The markets that Intersil supplies are among those that are driving the semiconductor recovery, Tuttle said. "What's moving the industry is consumer products - DVDs, cell phones," she said. Though PC sales are down right now, Christmas sales should spark a boost during the last part of the year.

Flat panel sales hold a lot of potential as the technology develops, she said. "As they become more affordable to consumers, they'll get snatched up. Years ago, people used to buy $800 VCRs. You don't do that anymore," she said, noting that flat panel technology is new enough that it remains pricey.

Flat panel and optical storage technology, currently a down market, are two areas the Elantec purchase strengthens for Intersil. Dietz calls the acquisition complementary for Intersil and says it will enable the company to sell more to its customers.

"It makes us a more important supplier to those companies," he said.

Tuttle sees an overall trend in semiconductor companies making acquisitions to expand their product base. "The more new products you have out there, the more it helps stimulate chip sales," she said.

Intersil's Palm Bay operations formerly were Harris Corp.'s semiconductor sector. Harris sold the sector in August 1999 to a venture capital group to better focus its business on communications and equipment.

Intersil went public in February 2000 in a $575 million initial public offering that remains the largest IPO for a U.S. semiconductor company.

On the Web: www.intersil.com.