Product category: Power Supply ICs and Controllers
News Release from: Fairchild Semiconductor
Edited by the Electronicstalk Editorial Team on 16 July 2004

Fairchild records best Q2
figures for three years

Fairchild Semiconductor has published results for the second quarter ended 27th June 2004

Fairchild reported second quarter sales of $414.3 million, 19% higher than the second quarter of 2003 and a 4% increase from the prior quarter. Fairchild reported net income in the second quarter of $17.0 million or $0.14 per diluted share compared with a net loss of $63.8 million or $0.54 per share in the second quarter of 2003 and net income of $13.0 million or $0.10 per diluted share in the prior quarter.

Gross margin was 29.3%, up 850 basis points from the second quarter of 2003 and 300 basis points sequentially.

Included in the second quarter 2004 results are pre-tax charges of $4.4 million, primarily associated with restructuring activities announced in 2003, and $11.0 million as a reserve for potential losses stemming from customer claims related to products manufactured with a defective mould compound purchased from Sumitomo Bakelite Singapore and affiliated companies.

Fairchild reported a sequential increase in pro forma net income to $31.7 million or $0.26 per diluted share, 734% higher than the pro forma net income of $3.8 million or $0.03 per diluted share in the second quarter of 2003, and 48% greater than the $21.4 million or $0.17 per diluted share in the prior quarter.

Pro forma net income excludes amortisation of acquisition-related intangibles, restructuring and impairments, the charge for Sumitomo mould compound-related claims, and other items.

"We continued to grow our power business and significantly improve our gross margins", said Kirk Pond, Fairchild's President, CEO and Chairman of the Board.

"We increased power product sales to $306 million, up 28% from a year ago and 5% sequentially".

"Power products represented 74% of total sales in the second quarter and their higher margins helped to drive our gross profits and earnings to the highest level in more than three years".

"Focusing on the power market has helped us to increase our total sales by more than 26% over the last three quarters and deliver excellent financial results".

"It's becoming apparent that the industry is returning to a more seasonal and typical demand pattern", explained Pond.

"Demand in the second quarter was strongest in the automotive, white goods, and handset end markets, driving above average bookings and solid backlog growth in these areas".

"We booked orders at a very strong rate through April and most of May, and then in June we started seeing some backlog rescheduling by our customers serving the display, TV and DVD end markets".

"In all other end markets, orders were also strong in the first two months of the quarter and then displayed a typical seasonal moderation in June".

"We're driving significant improvements in power sales through our strength in new products", stated Pond.

"Our R and D efforts in analogue power helped us to grow our analogue sales 11% compared with the prior quarter".

"Our VRM10 compliant power management solutions are designed into two of the three largest desktop customers for both current designs as well as the latest Grantsdale versions".

"We have also won new designs with a major PC manufacturer for our proprietary single chip power controller for DDR2 memory subsystems".

"We continue to gain design wins with our Green Fairchild power switches in a wide variety of applications requiring high efficiency power conversion".

"We have launched a new family of LED drivers for both parallel and serial LED configurations targeted to the handset and ultra-portable end markets".

"Our leading package technology allows us to offer these new, highly efficient LED drivers in ultrasmall, Pb(lead)-free packaging".

"We're winning designs and increasing gross margins with high value power products targeted to the fastest growing end markets".

"Our capacity utilisation continues to be high", said Pond.

"Lead times increased during the first half of the quarter then began to moderate in June to approximately 16-17 weeks on average".

"We expect to add sufficient capacity in the second half of 2004 to grow our power business 25 to 30% in 2004 compared with 2003", stated Pond.

"We're investing in the power business while continuing to move non-power products to a more asset-light approach".

"We anticipate this should enable us to grow our total sales approximately 20% in 2004 compared with 2003".

"We're making great progress improving our product mix to generate higher margins and earnings", said Matt Towse, Fairchild's Senior Vice President and Chief Financial Officer.

"This richer product mix helped us to increase gross profit more than 15% and drive gross margins 300 basis points higher sequentially, significantly better than our own forecast".

"During the quarter, we held inventory flat, invested $46.8 million in capital expenditures, and grew our cash and marketable investments balance to more than $664 million", stated Towse.

"We generated solid earnings and gross margin improvements through our continued focus on new power products, lower costs and better product mix".

"We forecast third quarter revenues to be flattish to the second quarter, following normal historical seasonal patterns", said Towse.

"We had about 80% of our forecasted third quarter sales scheduled to ship as we entered the quarter".

"The third quarter is typically seasonally slow during the summer months, with demand increasing in the second half of the quarter".

"We expect our turns bookings to follow a similar pattern".

"We forecast gross margin to be up 50 to 100 basis points sequentially due to a better product mix, lower costs and more new products", concluded Towse.

"Fairchild is expanding our power franchise through advanced, higher value products that drive sustainable gross margin improvements through all phases of the business cycle".

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