Power Integrations holds its breath on coronavirus

Business news | January 31, 2020

By Nick Flaherty

The chief executive of Power Integrations, Balu Balakrishnan (above right, at the opening of a packaging plant in Malaysia) has highlighted the risks of the coronavirus outbreak in China. The outbreak may reduce the number of staff available to make end products, and the demand for them.

“As far as the coronavirus goes, it’s still happening in real time so we don’t have a very good understanding of what the full impact would be,” said Balu Balakrishnan, President and CEO of Power Integrations. “Our Chinese vendors who do the packaging assembly and test for us, they are saying that they will be only shut down in one case for one additional week that is next week. The other two suppliers they are going to be up and running as of next Monday, but not the full rate because they don’t have all of the employees coming back.”

CORONAVIRUS, WUHAN AND THE DISPLAY INDUSTRY

“But to the best we can determine at this point, our ability to supply will not be limited unless this shutdown continues for a longer period of time. What is harder to predict is whether the demand will change because our customers can’t either get other components or they don’t get enough production workers coming to work to build the products. That’s something we are unable to predict at this time,” he said.

“Because it is still the Chinese holiday is there they won’t come back until Monday is whether there is any impact on the demand itself. And there could be multiple reasons, one is that they don’t get enough production workers to build products. That’s our customers I’m talking about.”

“The second potential impact would be that they can get our parts, but they can’t get some other component and so they can’t build the end product. Those are the two things we cannot take into account. We don’t know whether that is going to be a problem. And also it depends upon how long the shutdown lasts,” he pointed out.

“What we are hearing from our vendors is that the Chinese government is planning to shut down until end of next week, which happens to be like 14 days, which they say is the gestation period for this virus. And their thinking is if it doesn’t spread any more or if the number of people infected goes down that would be the end of it. That is there won’t be no more shutdowns. But that’s just speculation at this time. If they continue to shut down, it will have an impact but I don’t know how to quantify it.”

Balakrishnan was speaking as the company saw a 1 percent rise in sales in 2019 to $420m and is backing its move into GaN technology for high power chargers in the 65W to 100W range. “So far we have two big OEMs [Anker and RaAVpower] using us in high end of their charger designs. And we have several other OEMs we are working with,” he said.

It also plans to expand its UK site in Cambridge. “We expect to spend approximately $35 million in 2020 for capital equipment, as we add general manufacturing capacity and build out our manufacturing capabilities for GaN,” said Sandeep Nayyar, Chief Financial Officer.

“We also plan to invest $25 million this year in new facilities for our high-power business in Europe, as well as updates to our US facilities and an expansion of the solar array at our headquarters, which will pay for itself through energy savings.

“While our revenues grew just 1% in 2019, we outperformed the analog semiconductor industry by a wide margin and we are entering 2020 with momentum following a strong fourth quarter,” said Balakrishnan. Revenues grew 23 percent year-over-year in the fourth quarter driven by our continued success in rapid-charging for mobile devices and a return to growth in consumer appliances. While sales for the analog semiconductor industry fell in 2019, we delivered positive growth for the year, and we’re entering 2020 with momentum fueled by innovative products such as our InnoSwitch3 ICs – including our latest devices incorporating GaN technology.”

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