http://www.epn-online.com/enCopyright 2007 - Reed Business InformationFri, 29 Aug 2008 08:42:09 +0200Fri, 29 Aug 2008 08:42:09 +0200EPN Onlinelchevalier@reedbusiness.frlchevalier@reedbusiness.frhttp://blogs.law.harvard.edu/tech/rsshttp://www.epn-online.com/page/new59004/with-david-bell-ceo-of-intersil.htmlnew59004Company: IntersilEstablished: 1999Headquartered: Milpitas, California, USAEmployees: 1,300Business: Analogue & Mixed Signal ICsCEO: David BellRevenue: $575 million (CY 2007) There must be many similarities in the strategy and business model employed by Intersil and Linear Technology, where you previously held the company president's role. Where would you say the differences lie, and how do you plan to exploit these moving forward?There are some similarities, but there are some big differences too. Both of us play in the high performance analogue market, but we have a large proportion of application-specific devices to complement our general purpose ones, while Linear is focussed primarily on the general purpose side. We remain engaged in many of the high growth consumer areas, such as cell phones and LCD displays, while they tend to focus on the relatively low volume telecom infrastructure and industrial markets. Though the consumer space can be very cost sensitive, we strive to produce components that will help end product manufacturers to differentiate themselves from their rivals, and this allows us to sustain good margins.The analogue market has long been a stronghold for higher margin products, but is this going to continue? With National Semiconductor reaffirming its commitment to high performance analogue in recent years, Texas Instruments also concentrating more of its efforts on this sector during that period, and now Freescale looking to do the same – not to mention new kids on the block such as Silicon Labs – is this party getting a little overcrowded? If so, isn't there a risk of increased levels of competition squeezing the value out of it, much like it has done with the DRAM and DC/DC converter sectors?No question the market has changed. Back in 1994, when I was considering joining Linear, people said I was crazy to go into analogue. They told me it was a dying market, and there wouldn't be any more innovation there. Now we know that analogue is here to stay, and because of the increasing number of ways that digital electronics has to connect with the real worlds, it is in fact a very strong area to be involved in, fuelled by constant innovation. This hasn't gone unnoticed by the big semiconductor firms, and they all want to get a piece of the action. We don't want to be left fighting over the scraps. To stay ahead of the game, we need to make sure we are more agile than our competition. We have to anticipate the trends that present the best opportunities, and from this define solutions that can address them. In addition, we must get them to market quicker than the competition, and employ higher levels integration.Do you think that you will have to up the percentage of your revenue that you plough back into R&D in order to keep ahead of the pack?We will be doing just that. Our plan is to gradually increase the proportion of our income that goes into new product development. Historically the company's operating expenses would equate to around 30% of its overall revenue, but as we grow into a larger firm many of our overheads (such as administration and logistics) will not increase as quickly. It means that we can leverage the extra money available to us, and will therefore be able to increase our R&D budget beyond our current growth projection, taking it from its historical figure of 15% up to around 17%.Although the industry seems to have been aware of the situation for several years now, there still seems to be a major shortage of analogue engineers. Why do you think this is still such a problem? Aren't the universities trying to bring more graduates through the system to complement the experienced engineers?It continues to be an issue, and I think nobody fully understands why this is the case. Analogue engineering still seems to have some sort of image problem, and not enough students are that attracted to it as a career path. To combat this shortfall, we end up hiring high-quality electrical engineering graduates, and then use our experienced analogue engineers to do additional training in the art of analogue design. Hiring good staff is more about being able to identify people who have [the right] character, intelligence, and creativity, rather than worrying too much about what specific engineering courses they studied.How does Intersil look to ensure that it gets a good share of the available engineering talent?Top-level engineers all want to work for what they perceive as a winning company. Therefore the best way to attract them is to show them that they will be working on the most cutting-edge designs, and tackling the most challenging issues that the industry faces. In recent years we have proved ourselves to be in the major league in terms of innovation, and this has meant that we are often the first choice for engineers looking to move from another firm. They can see that by joining us they have a chance to really make a difference. Mobile handsets have been a strong market for Intersil. What are the challenges that the company must face from the next generation of OEM designs? Are they much the same as they always have been; increasing battery life, saving board space and reducing heat expenditure, or are there new issues emerging as well?Those same issues you identified are still the ones that drive cell phone design – it’s all about finding more compact, power efficient solutions, that can handle an increasing number of complex features. Though the game is still the same, the stakes are rising all the time, and there is simply no room for error anymore. We have to offer the best in class performance to retain our leadership in this particular market.Are we already reaching a stage where the features on mobile handsets are simply at saturation point? If demand for such things is no longer there, won't OEMs just rely on commodity components to do the job cheaply rather than choosing devices that can differentiate but come at a premium? Are the electronic component companies and the handset manufacturers basically placing their whole livelihoods on mobile TV really taking off?I don't see any slowing in the demand for new features in the short or medium term. For the foreseeable future, there will be plenty of new challenges that need to be dealt with, and this means that demand for high performance analogue solutions, from display drivers to power management chips, will continue to be strong. Mobile TV will be the main focus of a lot of the innovation we are going to witness in this space over the next few years, but there are related application areas, like pico-projectors for example, that are also likely to need the support of high-level analogue design. The cell phone has proven that it will be the mobile platform of choice for the generations to come, while other candidates like PDAs are essentially dead. There will be a whole series of features that therefore need to be integrated into handset design to keep pace with consumer demand.Your FlexiHash+ cell phone battery authentication ICs have a clone prevention feature to protect OEMs against the increasing threat of after-market replacements. Do you expect this sort of thing to become popular throughout the consumer electronics sector? Are you already seeing interest elsewhere?We have seen a lot of interest in this type of product. I think there are likely to be two main motivations in the battery market that will drive its sales. OEMs are clearly worried that battery replacements that aren't properly manufactured will have poor performance, or might possibly be a safety risk, and could thus have serious damage to their own brand's reputation. It is of course also a highly profitable sideline for the OEMs and they want to protect it fully. There are likely to be other business areas that have similar issues to deal with that could see the benefit of this type of product. Ink jet printer cartridges would certainly be one that I imagine would consider using this technology. I think it will prove a growth area for us in the near future.The LCD display sector is one of Intersil's largest cash cows, and is also an area where you are seeing very strong revenue growth. But with such a highly volatile economic situation at the moment, combined with such large unit volumes, is there a big risk that a sudden turndown in demand could leave you holding a lot of inventory? How do you make sure you can meet your orders on time, without leaving yourself at risk in this way?Playing in high-growth, high-volume markets, like the LCD display sector, tends to be something of a double-edged sword. These sectors offer attractive revenue streams, but as you pointed out, they can also be very unstable. If there is slowdown in demand, then there is the risk of being lumbered with a lot of dead inventory. We have tried to tackle this on two fronts: Firstly we have built very close ties with the OEMs we serve and work together with them to create accurate forecasts so that we can make sure that there isn't an overload in stock. Also we make sure our products are as versatile as possible, so that they aren't locked in to any one market. Even with our ASSP solutions we attempt to include a degree of flexibility in their designs, so if needed, we can configure for other related applications.Selling the components is no longer enough of course, as you serve a sector that relies on innovative OEM design, providing adequate engineering support must be vital. How do you make sure that you can engage with customers' development teams (Internet, FAEs, distribution)? What new ways are you finding to do this?Absolutely true, the time to market is critical, and performance demands of our client base mean that we have to give them solid support. It's a two-way situation, our application engineering staff based close to the OEM clients in sites like Tapei and Seoul work closely with the design teams of the manufacturers in the PC and cell phone arenas, at the same time our own designers are consulting with the OEMs to help them in defining the next generations of products that we will produce. We spend a lot of time working with our distribution partners training their FAEs in the intricacies of devices, but obviously the level of knowledge that can be transferred is not as great as that held by our in house staff.Intersil famously pulled out of the Wi-Fi business, despite being Number 1 in the market there, as its management could see that there was just going to be increased commoditisation. Do you feel there are other areas in the company (such as ones that came from the Xicor acquisition) that are struggling to add value, and may need to be shed in the future?The company culture is a very pragmatic one, and this has meant that Intersil's management team has never backed away from making tough decisions. As you mentioned, in the past the firm pulled out of the WLAN sector, as it became clear that this would be an increasingly difficult one to stay in, in terms of product differentiation, and in addition it wasn't that good of a match with our skill set. That culture still remains and we are brutally honest about what we think the future will hold for the various product areas that make up our portfolio. We must ensure we use our available development resources in those areas that are likely to bring the greatest rewards, otherwise that investment will be wasted. We review the situation of all our 47 product families regularly, and though, as you would expect, I can't give any specifics, if we reach a point where we feel a particular product type is no longer a viable option for us, just like we have in the past, we will act upon this. It's an ongoing process. Equally important is that we still keep an eye out for areas where we might need to strengthen ourselves through acquisition. The industry has seen how well Intersil managed to integrate the operations of Elantec (in 2002) and Xicor (in 2004) into its fold. We will continue to look for opportunities that will help us to grow, both organically and through sensible acquisition.Wed, 27 Aug 2008 02:00:00 +0200