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INVESTOR PRESENTATION
April 2016
2
Notes on Forward Looking Statements and Non-GAAP Measures
• Comments in this presentation other than statements of historical fact may constitute forward looking statements and are based on Fairchild’s management’s estimates and projections and are subject to various risks and uncertainties
• These risks and uncertainties are described in the Company’s periodic reports and other filings with the Securities and Exchange Commission (see the Risk Factors section) and are available at http://sec.gov and investor.fairchildsemi.com
• Actual results may differ materially from those projected in the forward looking statements
• Some data in this presentation may include non-GAAP measures that we believe provide useful information about the operating performance of our businesses that should be considered by investors in conjunction with GAAP measures that we also provide. You can find a reconciliation of non-GAAP to comparable GAAP measures at the Investor Relations section of our web site at http://investor.fairchildsemi.com
Recent additions to our website at http://investor.fairchildsemi.com
Updated Financials (through current quarter with segment revenue/gross margin breakouts)
• Quarterly Fact Sheet with current quarter highlights
• This investor presentation
3
Fairchild Overview
4
Fairchild Today…
Fairchild Semiconductor 2015 Revenue $1.37B
Analog Power & Signal Solutions Group (APSS)
(28% of 2015 Revenue)
Mobile
Power Conversion Motion Tracking
Innovative analog power, signal and sensor solutions
Switching Power Solutions (SPS)
(58% of 2015 Revenue)
Automotive
HV MOSFET, IGBT & SPM LV & MV MOSFET
Cloud
Highly efficient discrete and integrated power management solutions
Standard Products Group (SPG)
(14% of 2015 Revenue)
Standard Discrete, Analog & Logic
Optoelectronics
Essential functions for key customers
5
• Energy efficiency, mobility and cloud mega-trends
• Power silicon content grows faster than end market sales – premium paid for efficiency
• Fairchild has deep power system knowledge to support greater integration and higher efficiency
• Company focused on delighting all customers from large OEMs to the “long tail”
Markets That Drive Our Business
6
Building a Great Leadership Team
• Promoting from within in areas of progress Automotive, Supply Chain, Assembly & Test
• Recruiting & upgrading in areas of weakness
Sales & Marketing, Fab Operations, Engineering • Opportunistically adding talent
Strategy, Finance
7
Building a Great Company
SALES & MARKETING
TECHNOLOGY
OPERATIONS
BUSINESS UNITS
• Solid operations org is key foundation • Sales & marketing as well as technology also well in place • Business units key focus now
8
Our Culture
EXCEL
ENGAGED EMPLOYEE
DELIGHTED CUSTOMER
RESPECT
SPEED
EXPLORE SIMPLIFY
PLAY
DIRECT
WORLD-CLASS
COMPANY
CHALLENGE
9
Fairchild Solutions
10
Analog Power & Signal Solutions Group
Mobility, LED and Offline Power
USB/Power/ Analog Switches Point of Load
Battery Management
Systems Travel Adapter LED Offline/Aux
Power
Fairchild is committed to the Power Conversion/Controller Market • ~ 300 Product Line personnel • ~ 30% of total Fairchild revenue • All AC-DC and Low-Power DC-DC product lines consolidated to
provide system solutions
11
Mobile System Solutions
Travel Adapter
Fuel gauge
Application processor
Audio Codec
PoL Power Battery protection
Battery charger
OVP/OCP MUS
Type-C
Analog switch Load switch
Audio jack detection
Power or Signal Control or Command
IP Leadership IP Development
Headset Accessory
Cable Communication
protocol
Sensor processor
Camera processor
Handset
12
Auto, iFET, SPG Discrete Power Solutions Group
Automotive BU iFET BU SPG BU Design PE/TE
Switching Power Solutions Group
Highly focused on core building block differentiation • > 40% of total Fairchild revenue • Combined eng. resources for discrete design & product/test engineering • Tightly connecting with TD – strategic decisions for next LV/MV/HV technologies
Discrete Power Solutions – we want customers to think 1st of Fairchild • Best-in-class discrete technologies – product definition efforts include strategic analysis • Focus on system solutions – supported by top applications & system engineering specialists
13
iFET Market Solutions DC to AC Integrated
Energy Inversion
Power Tools, Pumps, Fork lifts, small e-vehicles, Solar
and UPS
MV FETs MV Gate Driver+FET
DC to DC Integrated
Power Delivery
Telecom, Computing, Industrial Automation,
Mass Market
LV & MV SPS, PoL, Load Switch
World Class LV and MV FETs
N-Channel P-Channel
Singles Duals
Extended Temp
Efficient Fast Switching
Lowest RDS
14
Automotive Power Solutions
FCS Engine Management: Ignition, Glow Plug Injector control and supply
HID Lighting
Brake Systems (ABS, ESC) Electric Pumps (Water, Fuel, Oil) Traction Inverters, DC/DC in HEV / EV
FCS Electric Power Steering
El. Parking Brake
Transmission and Gearbox
Engine Cooling
Body load control
Already worldwide leading solution
Market Trend: More stringent CO2 emissions regulations & favorable incentives Fairchild Mission: Making the world a cleaner and smarter place by providing solutions in support of energy efficient applications
15
High Voltage
Motor Control System
Major HA, HVAC, Indus. Inverter, Fan Motor, Pump and
Power Tool
Industrial Power System 1
Renewable Energy, UPS, ESS and Other Industrial Markets
Industrial Power System 2
IH/MWO, Welding Lighting, EV Charger, Small
HA and Consumer
Power Supply System
Telecom, Server, Other Computing and
Charger/Adapter
High Voltage Business Unit
HV BU is competitive and streamlined organization • 81 Product Line direct and dedicate personnel • 27% of corporate revenue • 42% of corporate NPI # Key market segments of HV inverter, HV AC/DC and MV DC/DC are addressed by our technology of SPMs, Solar HPMs, FS IGBTs, SJ MOSFETs and diodes.
16
Air-Conditioner System Solutions
Microprocessor Power Supply
IP Leadership
PFC (PFC SPM)
Inverter for Compressor
(Motion SPM)
Inverter for Fan (Motion SPM)
Motor Drive IC
PFC Control IC
Current, Voltage Sensor
AC Input
BLDC Motor (Fan)
BLDC Motor (Compressor)
Power or Signal Control or Command
17
PV Inverter System Solutions
DC-DC DC-AC
Power or Signal Control or Command
IP Leadership
DC Input
AC Output / Grid
Gate Driver
Controller/ DSP
String Combiner Box
Energy Storage System
Gate Driver
Junction Box
Aux PS
18
Welding Power System Solutions
Inverter
LS driver
2nd Rectifier PFC Bridge Rectifier
Power or Signal Control or Command
AC Input DC
Output
Aux PS
PFC Controller
PWM Controller / DSP
PWM Controller
2nd Inverter
AC Output
PWM Controller
IP Leadership
19
AC-DC Power System Solutions
DC-DC
LS driver
SR PFC Bridge Rectifier
Power or Signal Control or Command
AC Input DC
Output
Aux PS
PFC Controller / DSP
LS driver
SR Controller / DSP
HVIC
PWM/PFM Controller
/ DSP
PWM Controller
IP Leadership
20
Key Product Verticals
• Automotive • Cloud & Telecom • Renewable Energy
• Lighting • Mobile Power & Interface • Motor Control
• Motion Tracking • Wall-To-Battery • Portable Consumer
21
• Technology Leading products and processes development to address worldwide power trends in energy, mobility and the cloud
• System Integration Packaging, multi-chip, feature-rich devices/modules
• Design Tools Full library of growing system reference designs and robust online design simulation suite
• Expert Resources Power systems technologists, Factory trained Power FAEs, regional Power Solution Centers to complete your design
Fairchild’s Design Pillars
Tech
nolo
gy
Syst
em
Inte
grat
ion
Des
ign
Tool
s
Expe
rt R
esou
rces
22
Focused on fast-growing trends in wireless, energy convergence, cloud, and mobile for greater energy efficiency in key areas:
AUTOMOTIVE
Pioneering Efficient Energy Consumption
ALTERNATIVE ENERGY
CLOUD LIGHTING MOBILE
TRAVEL ADAPTERS MOTOR CONTROL
23
• Innovative “source-to-system” power technologies
• Discretes, IC’s, SoC’s and PSiP’s • Battery powered (Li ion) to 1700V
(wind turbine) applications • 24/7 access to easy-to-use web
design tools • Advanced packaging options
1 kW 1 mW
Unique Design Options For LV to HV Products
24
• Shortest time from idea-to-silicon • Customizable functions,
packaging, form factor options • Power Solution Centers • Regional design teams,
local FAEs • Web-Based Design Tools • Focused Application Seminars
Fairchild helps customers optimize, qualify and complete designs
for a time-to-market advantage.
Expert Technical Assistance & Design Support
25
• Fabs • South Portland, Maine, USA • Mountaintop, Pennsylvania, USA • Bucheon, South Korea
• Test & Assembly • Cebu, Philippines • Suzhou, China
Global manufacturing, test and assembly sites support your need for flexibility, quality, service and consistent supply.
Manufacturing Control = Reliable Delivery
26
Quality That Exceeds Expectations
• Major focus on reliability development
• Certified I6949 factories • Laser focus on customer
delight • In-region customer
quality engineering & FA support
Philosophy
Implementation
Continuous Improvement
EXCELLENCE
27
WW Manufacturing, Sales, R&D and Support
Corporate HQ San Jose, CA
Product Design, Support Irvine, CA
Power Solutions Center Dallas, TX
Fab S Portland, ME Product Design Support Bedford, NH Fab Mountain Top, PA
R&D Kista, Sweden
Assembly & Test Suzhou, China
Sales, R&D Seoul, Korea
Sales Tokyo, Japan
Sales, R&D Taiwan
Head of Greater China Sales Shanghai, China
Assembly & Test Cebu, Philippines
Asia Pacific Sales Hong Kong
Power Solutions Center, Sales Shenzhen, China
Xsens The Netherlands
Fab Bucheon, Korea
EMEA Sales & Apps Munich, Germany
Sales Osaka, Japan
28
• Worldwide distribution • Design & supply chain excellence • Order parts, samples, eval kits online • Expedited shipping and service • Technical seminars, training, events
Distribution—Critical Fairchild Partner Strong focus on emerging broad market customers
29
One plan – capacity, materials, inventory, resource planning linked to one integrated plan – customer success
Supply Chain Excellence
• Speed Responsiveness & Transparency • Contingency plans, risk resiliency • IT connected to external partners • Cost-effective transportation management • Inventory programs, scenario planning
30
Speed Responsiveness Industry Leading Lead Times
• Record-level and industry leading on-time delivery due to speed, transparency, flexibility and collaboration
• Reduced 50% from 1 year ago • 85% of Fairchild products ship
within 6 weeks
31
• Best-in-class “no obsolescence” policy • Secures supply in legacy designs
• If required to discontinue production • Enhanced lifetime supply • 12 months after EOL notice to place orders • Plus 12 months to take delivery
Fairchild’s No EOL Policy
32
Marketing & Sales Overview
33
Sales Strategy Foundation
• DEMAND CREATION - Design In/Win — shift coverage to R&D - System approach — understand the application - Customer empathy — fill a latent need, solve a problem
• CLOSER TO CUSTOMERS
- Proximity — quick response - Adaptive — fragmented customer base - Agile — early engagement with emerging customers
• ACCOUNTABILITY - Revenue accountability moved to design origin - Pay on results — new sales bonus on design-in, revenue growth
34
Resources Best Deployed
• Increase investment on most significant markets - China - Germany - Silicon Valley
• Shift resources to most promising opportunities
- Generated revenue vs. transacted revenue locations - Invest where the growth will be vs. where revenue is today - Aligned company focus segments
• Expand customer base
- More in fragmented markets: (i.e. Industrial, Auto) - Emerging segments and customers: (i.e. Wearables) - Mass market
35
Resources Go-to-Market
ASSIGNED ACCOUNTS
MASS MARKET
LONG TAIL
Growth Potential
• Biggest growth opportunity • Focus, depth — 80% of
resources • Demand creation
• More customers • Leveraging distribution
• More engineers • Leverage the web & catalog
distributors • Build brand awareness
36
New Customer Engagement
• CUSTOMERS DRIVE PRODUCT DEFINITION - System expertise provides unique insight - FAE conduit of customer pain points
• INCREASE COMPLETE RECEIVED VALUE
- Product to solution, design expertise - Supply chain excellence - No EOL policy
• RELATIONSHIPS MAKE A DIFFERENCE
- Attention to every customer - Focus on customer empathy
37
• CLOUD & TELECOM - Move to IC & System approach - More strategic engagement - Growth acceleration
• MOBILE POWER & W2B - Full end-end solution - Huge value to customer - Major ASP increase YR13 Y14 $M Y15 $M Y16 $M
Others
Mobile Power & W2B
Cloud & Telecom
Source: Fairchild Internal Data
Execution Customer Showcase Relationship, Focus, System Approach Drives Growth
38
Finance Overview
39
Highlights of the Quarter – Q1 2016
Sales were $327M, +3% QoQ and -8% YoY
Order rates improved in Q1 and remain strong in the first weeks of Q2
Demand was higher in the automotive, appliance, enterprise computing and industrial end markets. Mobile demand was affected by a short-term inventory correction at one customer offset by strength in others. We expect strong mobile demand in Q2
Adjusted gross margin was down 190 bps to 31% due to lower factory loadings as we reduced internal inventory by $20M QoQ
OPEX was $85M, down 1% QoQ due to the impact of OPEX expense reduction program announced in late Q3 partially offset by seasonal increases in higher payroll taxes and less vacations
Free cash flow was a 4M and net cash was $75M
Lead times remain short and supply chain is well positioned to support turns business
40
Adjusted Revenue & GM%
0.0%
7.0%
14.0%
21.0%
28.0%
35.0%
42.0%
200.0
250.0
300.0
350.0
400.0
450.0
500.0
Reven
ue ($M
)
Revenue Adj GM%
41
Adjusted EPS
$0.19
$0.17
$0.27
$0.06
($0.32)
($0.03)
$0.12
$0.23 $0.25
$0.40
$0.42
$0.45
$0.39
$0.41
$0.34
$0.15
$0.06
$0.14
$0.25
$0.10
($0.02)
$0.01
$0.17
$0.11
$0.04
$0.20
$0.28
$0.10 $0.11
$0.12
$0.20
$0.11
$0.10
($0.40)
($0.30)
($0.20)
($0.10)
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
Adj E
PS $
Includes Equity Comp
42
4 Qtr Rolling Adjusted EPS
$0.23
$0.24 $0.24
$0.17
$0.05
$(0.01)
$(0.04)
$0.00
$0.14
$0.25
$0.33
$0.38
$0.42 $0.42
$0.40
$0.32
$0.24
$0.17
$0.15 $0.14
$0.12
$0.09
$0.07 $0.07
$0.08
$0.13 $0.16
$0.16 $0.17
$0.15
$0.13 $0.13
$0.13
$(0.10)
$-
$0.10
$0.20
$0.30
$0.40
$0.50
Adj E
PS $
43
Disciplined Asset Management
• Balance sheet summary:
• Cash and investments exceed debt by $75m
• Internal inventory reduced by $20m QoQ
• DSO in normal seasonal range at 42 days
• Days of payables decreased QoQ to 37 days
• FCF was $4m
• Primary focus remains investing in our business
44
Free Cash Flow
($40)
($20)
$0
$20
$40
$60
$80
$100
Free C
ash Fl
ow ($
M)
45
4 Qtr Rolling FCF % Revenue
(2.0%)
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
($10)
$0
$10
$20
$30
$40
$50
$60
% of
Reven
ue
4 Qtr R
olling
Free
Cash
Flow (
$M)
4Qtr Rolling Avg % to Revenue
46
Debt Composition
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1997 1999 2001 2007 2008 2009 2010 2011 2012 2013
Drawn Revolver Term Loan Convert High Yield
47
Net Debt and Interest Trend
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
-$700.0
-$600.0
-$500.0
-$400.0
-$300.0
-$200.0
-$100.0
$0.0
$100.0
$200.0
$300.0
Net Cash Interest % of Revenue
48
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THANK YOU