Value Line has initiated coverage of Freescale Semiconductor, Ltd. (FSL) in its flagship product, The Value Line Investment Survey. The company is a global leader in microcontrollers and digital networking processors, commonly referred to as embedded processors. These devices are the backbone of electronic systems, providing essential control and intelligence, while enhancing performance and power efficiency. Freescale combines its embedded processors with complementary analog, sensor, and radio frequency (RF) devices, as well as a full suite of software and design tools. The items provide highly integrated embedded processing solutions that streamline customer development efforts, lower their costs, and shorten their time to market. For the year ended December 31, 2013, the business’s revenues were $4.2 billion, compared to $3.9 billion for the year ended December 31, 2012.
The company is organized around five principal product groups: Microcontrollers, Digital Networking, Automotive MCUs, Analog and Sensors, and RF. Freescale provides its customers embedded processing solutions for the automotive, networking, industrial, and consumer markets. A number of trends are driving growth across various end markets, including advances in automotive safety and electronics, the expansion of cloud computing, the build out of next generation communications infrastructure, and the Internet of Things. The latter refers to an emerging network of smart devices designed to help make individuals’ lives safer and more productive. Its product and strategic focus is on serving the need for increased connectivity and enhanced intelligence critical to these fast growing semiconductor applications.
The company leverages its intellectual property portfolio, deep customer relationships built over many years of close collaboration, extensive suite of software and design tools, and technical expertise to introduce innovative new products and platform-level solutions for its target markets. Freescale attempts to leverage its intellectual property across product lines and target markets, enabling it to be early to market with a host of products. As a result, FSL has established leadership positions in many of its core markets. In 2013, the company derived approximately 80% of its net sales from products where it held the #1 or #2 market positions.
The semiconductor industry is highly competitive and characterized by constant, rapid technological change, short product life cycles, significant price erosion, and evolving standards. Freescale’s competitors range from large, international companies offering a full range of products to smaller companies specializing in narrow markets within the semiconductor industry. The competitive environment is also changing as a result of increased alliances among its peers and through strategic acquisitions, joint ventures, and other alliances. Many of the businesses FSL squares off against may have greater financial, personnel, and other resources than it possesses.
The company competes in its different product lines primarily on the basis of technology offered, application features, quality & availability of service, time-to-market, reputation, and price.
A list of Freescale’s direct competitors include: Analog Devices Incorporated (ADI), Applied Micro Circuits Corporation (AMCC), Atmel Corporation (ATML), Broadcom Corporation (BRCM), Intel Corporation (INTC – Free Intel Stock Report), STMicroelectronics (STM), and Texas Instruments Incorporated (TXN).
Although Freescale has not registered a profit since its inception in 2011, a number of positive factors should enable it to do so in the near future. Many large original equipment manufacturers and distributors have expressed interest in its latest 32-bit microcontrollers. Furthermore, demand for the company’s updated application processors has been strong, as automakers seek to take advantage of higher fuel efficiency and greater electronic content. Moreover, FSL has focused on boosting overall profitability via higher utilization, streamlining operations, and procurement savings. Too, its earlier acquisition of Mindspeed, a multi-core communications developer, should help drive higher-margin sales, expand market share, build better economies of scale, and increase cost savings.
All told, subscribers interested in this microcontroller and networking processor producer are advised to consult Value Line’s quarterly reports for Freescale Semiconductor, Ltd., as well as any supplemental reports and relevant articles as important news items arise.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.