CEO interview: Exar’s ‘reboot’ almost done, says DiNardo

CEO interview: Exar’s ‘reboot’ almost done, says DiNardo

Interviews |
By eeNews Europe

Q1: Exar has been on steady corporate acquisition program over the last couple of years. Was it a case of consolidate or be consolidated?

Louis DiNardo: The company pursued a lot of strategies between 2005 and 2012 and when I took over as CEO, January 3 2012, we were a relatively small company. There is latency between spending on R&D and return on investment so acquisition is a way to speed that up.

We’ve been able to pick up assets: Althior in software, Cadeka high performance analog products and talent. And the Stretch acquisition has given us end-to-end video surveillance technology and products. We also picked up some revenue along the way but the Integrated Memory Logic Ltd. (IML) acquisition is much more transformative. It gives us bulk – an additional $60 million in annual sales – and brings us into the sustainable category at around $200 million annual sales (see Exar buys Taiwanese display, lighting chip company).

Q2: How much did you pay for Stretch.

LD: We only paid $10,000 for the Stretch assets and paid off $7 million to $10 million of debts. So the venture capitalists took a hit on this but Stretch had $12 million in annual sales so that is a good purchase from our point of view.

Q3: Exar provides high-performance mixed-signal and power chips into such markets as storage, networking, communications infrastructure and industrial. These are not high growth markets. Does Exar need to get into higher growth markets?

LD: Not including IML, about 60 percent of our business is industrial which, in terms of growth, is always going to be GDP plus a little bit. I think we can outperform that, but it is never going to be 20 percent per annum. In networking there has been some uncertainty over standards for data warehousing and customers are waiting for the dust to settle.

Which is why there is great value in the IML acquisition. As we grow up we have to play in the consumer sector one way or another. IML is a Taiwan-listed company, which makes acquisition more complex, but they have this great position in programmable gamma correction for displays and common-mode voltage IC to drive rows and columns in displays.

The other place they operate is LED lighting where they have a means of using ac to drive the LEDs, which eliminates a second board for ac-dc conversion that is usually present in LED light bulbs. This can take the price of a LED light bulb down from $1 to 40 to 45 cents.

Q4: With the Stretch acquisition you also brought in some experienced Silicon Valley executives. Is this a re-invention of the company that moves it towards systems?

LD: The whole process is definitely a reboot of the company. Prior to the acquisition of Stretch early in 2013 I promoted Parviz Ghaffaripour to senior vice president and general manager of the components business and Craig Lytle coming in from Stretch was made senior vice president of systems solutions. Ghaffaripour actually began his electronics career at Exar in 1984 and spent time in technical and executive management roles at Maxim Integrated Products and National Semiconductor. People who come from great companies bring best practises.

I had too many direct reports and now we’ve got a great team.

Q5: Application specificity is coming to analog, mixed-signal and power just as it came to digital ICs 20 years ago. Do you agree and, if you do, what the implications?

LD: Yes. As the semiconductor industry matures things become more specific to the use case. Although some companies still seek out the building-block approach because it can provide volume across multiple applications.

So Linear [Linear Technology Corp.] will dominate the building block business and we need to provide a tailored solution. Power management is a prime example. Why jump in versus Linear, Intersil, On Semi, Maxim, Texas Instruments and China Inc. with 50 to 200 PMIC companies? We’ve seen a 3A synchronous regulator go from an ASP of $2 in 2001 to 25 cents today in China. So we provide a module with four channels, output caps and inductors all on a 12mm by 12mm module. This makes use of packaging knowledge to produce a specialized solution we can sell at $12.

Q6: You are fabless. Who do you use and what happens if foundry supply comes comes in to short supply?

LD: Globalfoundries probably has the most mask sets followed by TSMC. We also deal with a Shanghai foundry called Silan [Hangzhou Silan Microelectronics Co. Ltd.]. We are shopping for a good high-voltage foundry.

As to difficulties of supply; I think it is more of an issue for smaller digital companies. For our suppliers on 0.13-, 0.18-, 0.25-micron it hasn’t seemed to be a problem. Of course we all go into periods when we’re on allocation but those are temporary.

Q7: You benchmark sales by regions and Germany was responsible for 10 percent of sales in the 2012 financial year. In the same year Europe excluding Germany was just 4 percent and Japan 5 percent. Is Europe excluding Germany falling behold a threshold of relevance?

LD: We have about 13 or 14 percent of our business in Europe. It isn’t enough. This is an issue with our profile not with Europe’s. My view was that we should put more effort into Germany and UK, Scandinavia but I have had a lot of push-back. I am being told not to overlook France and Italy.

Q8: What trends do you see across the industry? Do you believe in wearables and the Internet of Things?

LD: IoT is interesting but we do tend to put labels on things that are hard to define but that are happening already.

What I do see is a proliferation of transducers and sensors of all kinds, in industrial, automotive and consumer. It’s more than exponential, if that is possible. A few years ago only one or two companies provided ICs to perform signal conditioning on sensors, Analog Devices and Burr Brown. Now everything is being measured, digitized. That is the most significant trend; sensor conditioning and what you do with the data.

Exar is on the big data side with networking, and at the transducer end. I think we could be on the leading edge of a nice 10 to 15 year run.

Related links and articles:

News articles:

Exar buys Taiwanese display, lighting chip company

Exar acquires configurable processor pioneer

Exar acquires Cadeka Microcircuits

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