Ixys revives Zilog amid a power trip
December 06, 2010 // Mark LaPedus
MILPITAS, CA — In 1983, several executives from General Electric's Intersil unit abruptly left that chip maker the same week and went their separate ways.
One group, led by legendary chip executive Jack Gifford, left Intersil to form analog chip maker Maxim Integrated Products Inc. Nathan Zommer, a power IC executive who reported to Gifford at Intersil, also left the company and was part of a faction that formed Ixys Corp., the same week.
Initially, Maxim focused on the lower power segments of the analog market, and later, it became one of the darlings on Wall Street. Meanwhile, Ixys decided to concentrate on the higher power semiconductor market-where it drives everything from power supplies to trains-but it has generally flown under the radar.
Early last year, Maxim acquired the 32-bit microcontroller lines from Zilog Inc. Ironically, late last year, Ixys (Milpitas, CA) entered the unfamiliar spotlight by acquiring struggling microcontroller pioneer Zilog (San Jose, CA) for $62.4 million in cash. Ixys acquired Zilog’s 8- and 16-bit lines, including the once-venerable Z8, which is now seen as a relic in the MCU world.
Now, Ixys is quietly reviving Zilog. Taking a page from Maxim, TI and others, Ixys is enabling customers to procure its power semiconductor lines and the digital control portions of the solution-Zilog’s MCUs-under the same roof. Zilog is also developing new Z8 offerings and is hoping to bring a 16-bit MCU line back from the dead. It is also mulling over plans to re-enter the 32-bit space with an ARM-based technology.
In a recent interview at the company’s headquarters here, Zommer, chairman and CEO of Ixys, said that Ixys can not only revive the Zilog brand, but it hopes to boost the unit’s sales to $1 billion- per year.
Most-if not all-are skeptical Ixys can realize its lofty goals. In any event, Ixys itself is also expanding its core power semiconductor lines. It has recently rolled out a new power package type for its bread-and-butter IGBTs and power MOSETs. It has rolled out new products based on silicon carbide and gallium nitride (GaN). And it is expanding its chip sourcing alliance with a surprising foundry partner: Samsung Electronics Co. Ltd.
Ixys remains upbeat despite a current lull in the IC market. ''We have tremendous demand for our products, while our competitors are talking about softness in the market,’’ Zommer said. A hands-on and outspoken chip veteran, Zommer owns some 22.3 percent of Ixys’ outstanding shares.
Prior to Ixys, Zommer was the director of the Power MOS division at Intersil, then owned by General Electric (GE). According to Ixys, at GE, Zommer was teamed with Jayant B. Baliga, who himself is credited with the invention of the insulated gate bipolar transistor (IGBT), a three-terminal power semiconductor device.
In 1983, Zommer left the company to co-found Ixys with $800,000 in funding from venture capitalists, according to a book entitled ''The Green Stocks Investment Book’’ (Creative Classics Inc.). The name Ixys is derived from the concept of ''integrated control systems’’ or ICS. In the 1980s, it was ''chic’’ to add an ''X’’ to a corporate name, thereby formulating Ixys, Zommer said.
Initially, the company focused on the power semiconductor market by developing and selling power MOSFETs and IGBTs. A power MOSFET is a metal oxide semiconductor field-effect transistor (MOSFET) that handles large amounts of power. The IGBT combines the advantages of MOSFETs and bipolar transistors.
The company has carved out a niche in the high-end of the business. A slew of companies devise power MOSETs, IGBTs and related products for the lower power, higher volume segments. Ixys specializes on lower-volume power semiconductors for greater than 200 watt, even kilowatt, applications. Many of these devices are single-sourced, long-life parts with few-if any-competitors. Its devices are used in electric cars, power supplies, solar inverters, trains, wind turbines and other high-power, high-voltage systems.
Ixys is not focusing on high-volume consumer products like PCs and handsets. ''We founded the company on the basis of power,’’ he said at a recent conference.
From its inception, Ixys was also influenced by the management style of former Maxim CEO Gifford. (Gifford died of an apparent heart attack in Jan. 11, 2009). Ixys has a ''low-key attitude. We don't let it go to our heads,’’ Zommer told analysts during a call to explain a previous acquisition. As before, Ixys still prefers to remain under the radar. ''We are low key,’’ he told EE Times. ‘’We just want to get the job done.’’
The Zilog buy
Over the years, Ixys made good on its promise and expanded by making a series of low-profile acquisitions. In 1989, Ixys acquired ABB’s German semiconductor unit. In 1998, Ixys simultaneously went public and acquired Paradigm Technology Inc., an SRAM maker.
In 2000, Ixys acquired Directed Energy, a supplier of laser diode drives, high voltage pulse generators and modulators. In 2002, it bought U.K.-based IGBT and power semiconductor supplier Westcode Semiconductors Ltd. In the same year, the company acquired Clare Inc., a designer and manufacturer of high-voltage ICs, solid-state relays, mixed-signal ASICs and driver ICs. In 2003, Ixys entered the RF space by acquiring Microwave Technology Inc. (MwT).
In 2008, Ixys made an unsolicited proposal to acquire all the outstanding shares of Zilog. Zilog had also been approached by two other firms about an acquisition. By the end of last year, Ixys finally bought Zilog. Also last year, Ixys acquired the LED driver IC and LCD display driver IC business units from now-defunct Leadis Technology Inc. for about $4 million.
In October, Ixys reported record sales amid strong demand. Net revenue in the quarter ended Sept. 30, 2010 was $89.9 million, an increase of 67.3 percent from the same period in the prior fiscal year and up 6 percent from the previous quarter. Net income for the quarter was $6.9 million, or $0.22 per diluted share, as compared to a net loss of $1.2 million, or minus $0.04 loss per share, for the same quarter in the prior fiscal year.
Of its total sales for the quarter, power ICs represented 68.1 percent, ICs were 24.8 percent and systems and RF were 7.1 percent. Its largest market is industrial (50 percent of sales), followed by communications (20 percent), medical (9 percent), consumer (9 percent) and transportation (4 percent), according to Needham and Co. LLC.
For the current quarter, Ixys expects flat sales. For fiscal 2011, the company is projected to earn $0.90 a share on sales of $351.3 million, according to Needham. This compares to a loss of $0.03 a share on sales of $243.2 million for fiscal 2010, which ended March 31, 2010.
The company has a ''strong, diversified portfolio,’’ said Vernon Essi, an analyst with Needham & Co. ''If you look at the company, they’ve done a great job. They are not on a gee-whiz marketing campaign. They prefer to be under the radar.’’
The company continues to face stiff competition. In the fragmented, niche power semi markets, Ixys competes against Fairchild, Hitachi, IR, Infineon, Microsemi, Mitsubishi, NXP, On Semi, Vishay, among others.
''Going forward, the challenges for Ixys will be to navigate the softer microeconomic environment and juggle the backlog levels appropriately,’’ he said. Another challenge for Ixys is to secure more capacity to keep up with demand in the up cycles, he added.
''The real challenge (for Ixys) is to continue to innovate and come out with new products,’’ said Andy Peurifoy, sales manager for Fusion Technical Sales, a manufacturers’ representative firm that sells products from Ixys, VTI, NJR, Ramtron and others.
Ixys continues to develop ''rock solid’’ products for niche power semi markets, Peurifoy said. Ixys’ Clare unit has a ''solid-state relay line that is second to none. Overall, Ixys has a great future. That’s a company we don’t want to lose’’ on Fusion’s line card.
Most are still scratching their heads about Ixys’ acquisition of Zilog. Zilog was founded in 1973 by Federico Faggin, who co-invented the microprocessor while at Intel Corp. In 1976, Zilog rolled out the Z80, an 8-bit processor said to be binary compatible with Intel’s 8080 chip. Many of the early PCs, including those from Kaypro, Osborne, Radio Shack, Televideo, Xerox and others, were based on the Z80.
In the 1980s, Zilog began to lose its momentum. It became a subsidiary of Exxon in 1980, but the management bought it back in 1989. Zilog was acquired by the Texas Pacific Group in 1998, and in 2001, it filed for bankruptcy.
Over the years, Zilog cut jobs, lost money and sold its fabs. It continued to sell the Z80, now called the Z8, in the embedded MCU space. Laughably, it also attempted to sell a 16- and 32-bit line-with little success. In the 1990s, Zilog’s annual sales were as high as $223 million. After years’ of losses, the company posted a net of $3.2 million on sales of $32.2 million in fiscal 2009.
Then, Ixys saved Zilog by buying the firm. Clearly, Zilog’s future was in doubt. The Z8 was an old and tired brand that could not compete against those from Atmel, Freescale, Microchip, Renesas, among others.
But by buying Zilog, Ixys suddenly found itself competing against the 8-bit MCU giants. But there was little risk in buying Zilog. Ixys could gain some intellectual property (IP) and make inroads into a new customer base. At the time of the acquisition, the power semiconductor firm said it would preserve the Zilog brand. Ixys said the combination of the two companies will allow it to leverage analog power management with digital control.
''Ixys already supplies components to end users systems that incorporates Zilog’s MCU architecture,’’ Essi said in a research note. ''Now the supply chain has a turnkey supplier that can fulfill a larger portion of the reference design for the end product. This strategy (MCU + power IC) is also followed at larger analog vendors Maxim and Texas Instruments, though Ixys will be using this strategy on a much smaller scale in lower volume markets.’’
''This might be the approach being taken at Ixys, but they are not the only ones that are doing it,’’ agreed analyst Tom Starnes, who follows the microcontroller market for Objective Analysis.
Starnes said there has been an ongoing trend to ''bolt on’’ more analog and mixed-signal capabilities onto the MCU. But the problem with Zilog is obvious: It continues to live in the past.
Today, Zilog suffers from old offering and an ‘’antiquated ecosystem,’’ Starnes said. ''There is nothing wrong with the Z8 technology,’’ he said. ‘’It was great in its day. In 1981, they were a formidable competitor.’’
In the late 1980s, Zilog lost the footrace,’’ he said. ''In the last five to 10 years, there have been a lot more competitors’’ in the MCU space.
When Zilog was an independent company three years ago, the company moved to ''revitalize the brand,’’ said Steve Darrough, director of marketing for Ixys’ Zilog unit. Now, under the Ixys umbrella, Zilog is accelerating those efforts and ''Zommer plans to take us to the next level,’’ Darrough said.
In April, Ixys made good on its promise to combine the advantages of MCUs and select power/analog lines, by rolling out the first in a series of reference designs. One reference design features Zilog’s Z8 and Ixys’ brushless DC motor. Also demonstrated for advanced LED lighting control is the Z8 and Ixys’ LED driver.
Generally, Zilog’s Z8 is being positioned into niche markets, such as battery charging, motor control, motion detection, communications and energy management. Recently, Zilog introduced the ZMotion modulel for motion detection applications. The solution combines Zilog’s Z8FS040 series of microcontrollers with motion detection capabilities.
Zilog has a handful of new products on the drawing board. It is quietly devising a yet-to-be-announced Z8 device, which supports a radio-frequency (RF) module for 900-MHz wireless applications.
It is also attempting to resuscitate Zneo, a 16-bit CISC microcontroller. Zilog rolled out Zneo several years ago, but the product never took off and was ''forgotten,’’ Darrough said. Zilog is still selling Zneo, but over time, it will roll out a ''trimmed down version’’ of Zneo, he said.
In 2009, amid a plan to gain profitability, Zilog sold its 32-bit, ARM-based product to Maxim. Under the terms, Zilog was not allowed to sell a 32-bit line for a two-year period. The two-year grace period has nearly lapsed. Zilog is now looking at the 32-bit, ARM-based market-again, but the company has yet to re-enter that fray.
Chances are that Zilog will gain modest ground in the short term. Over time, Zilog will likely fall way short of Zommer’s $1 billion annual run-rate goal. There is simply too much competition in MCUs.
The Samsung card
Ixys will likely see more gains in its core power semiconductor market. Alternative energy, industrial, medical, telecommunications and transportation are among its key markets. In alternative energy, the company sells power ICs for solar inverters and solar-based battery charging systems.
Another emerging market is power ICs for wind farms. In a recent article from WindTech International, Ixys urged European wind turbine makers to upgrade their high-voltage IGBTs plastic models, which are less efficient. Instead, Ixys is pushing medium voltage 4.5-kV ceramic IGBTs to boost efficiencies.
For years, Ixys has sold product into the transportation sector. The company’s U.K. subsidiary, Westcode, recently received follow on orders for power semiconductor assemblies for the planned expansion of the London Underground, Sub-surface Railway (SSR) and Network Rail’s South East Infrastructure development. Westcode’s power semiconductor assemblies will be implemented on the land side power supply substation, providing megawatts of increased power.
Ixys is also expanding its IGBTs and power MOSFET lines. One of the most recent and significant announcements involves the packaging front. Ixys recently rolled out its existing GenX3 IGBT product line with a new proprietary power package called the SMPD. It also recently rolled out a 75-volt/500-A power MOSFET based on the SMPD package.
The SMPD power package incorporates a direct copper bond (DCB) ceramic isolator, which provides electrical isolation between the die and heatsink. The power package features nearly one-fourth the weight and one-third the volume of conventional isolated high-power packages such as SOT-227.
On the fab front, Ixys has four plants. Two fabs are located in the U.S., including a plant that is part of Clare. That fab makes high-voltage ICs. The company also owns a gallium-arsenide (GaAs) fab in Fremont, Calif. Meanwhile, it has a 6-inch, bipolar fab in Chippenham, England, as well as a 6-inch bipolar fab in Lampertheim, Germany.
Ixys relied on external foundries for approximately 38.8 percent of its wafer fabrication requirements in fiscal 2010. Over time, Ixys will have 50 percent of its output handled by foundries, said Uzi Sasson, president of the company.
Its ''principal external foundry’’ for power semiconductors is Samsung Electronics’ facility located in Kiheung, South Korea. The foundry relationship with Samsung has been in place for 25 years.
For its proprietary products, Ixys uses its own fabs. With Samsung, Ixys will have access to more advanced processes and 8-inch capability. Samsung builds a ''fab faster than most companies can retire them,’’ Zommer said at a recent conference. ''Besides (the leading-edge fab capacity at ) Intel, I can’t top that.’’
Like Ixys, Maxim is also expanding its foundry efforts as it continues to grow at a fast clip. Ixys is growing slower than its sister company and may never be the darling of Wall Street. Zommer may be too outspoken for many tastes, but without a doubt, the company continues to soar-under the radar.
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