Incorporated: 1960 as Microsemiconductor
NAIC: 334413 Semiconductor and Related Device Manufacturing
SIC: 3674 Semiconductors & Related Devices
Headquartered in Irvine, California, Microsemi Corporation manufactures semiconductors for several market segments, including commercial aerospace, defense, consumer electronics, medical equipment, and mobile communications. Examples of applications for the company's semiconductors include computer monitors, LCD television displays, GPS systems, set-top boxes, MRI machines, and radar systems.
According to Microsemi, close collaboration with customers and suppliers allows the company "to identify unique ways to influence future designs--beyond the scope of simple product enhancements. The resulting 'system-engineered' solutions create must-have products with competitive barriers and higher margins."
Formative Years
Microsemi's roots stretch back to 1960, when the company was formed in Culver City, California, as a power conditioning equipment manufacturer named Microsemiconductor. Among the company's founders was Richard L. Geiger, a World War II veteran who saw action in Pearl Harbor and retired as a U.S. Navy captain before becoming a partner in the venture capital firm of Geiger & Fialkov.
After a quiet start, the company was acquired by Standard Resources Corporation in 1969. Developments began to occur at a fast pace during the 1970s, at which time the company's annual sales were approximately $500,000, and most of its customers were in the defense sector. Philip Frey was named as president and CEO in 1971, and was at the company's helm as it embarked upon a period of rapid growth through acquisitions. Early deals included the acquisition of Houston, Texas-based Nano Systems, Inc., in March 1971, followed by a 50 percent stake in Standard Microsystems five months later.
In March 1972, Standard Resources adopted the name Microsemiconductor Corporation. That year, operations were relocated to Santa Ana, California. A 75 percent interest in Xtel, Inc., was secured in July 1973, followed by Globe-Union, Inc.'s, Centralab business in September 1974. The company rounded out the decade with two additional deals, acquiring Regubus Semiconductor Corporation in 1975 and Quest Engineering in 1978.
Defense Industry Focus
Notable developments continued at Microsemiconductor during the early 1980s. The company went public in 1981 and ended the year by acquiring Sound Wave Systems, Inc.
On February 10, 1983, the company changed its name once again, opting for the shorter nameplate of Microsemi Corporation. That same year, international expansion took place when Bombay, India-based Semcon Electronics PVT Ltd. was acquired. In addition, the company offered 1.5 million common shares of stock for sale via Baker, Watts & Co. and Fahnestock & Co.
In 1985, Microsemi made plans to expand and upgrade its plant in Santa Ana, California. The company received approval from the city council to issue $6.5 million in industrial revenue bonds to finance the initiative. It was around this time that the U.S. semiconductor industry faced heightened competition from overseas competitors.
A more than ample supply of semiconductors drove prices down, and the White House launched an investigation into alleged dumping by Japanese firms who, according to the January 27, 1986, San Diego Union-Tribune, saw their market share rise from 19 percent in 1977 to 38 percent in 1984. During the same time frame, the market share in the United States fell from 73 percent to 55 percent. The publication referred to comments from Intel Senior Vice-President Jack Carston, who in 1985 "said the era of all-purpose U.S. chip makers" was over.
In order to ensure their survival, U.S. semiconductor firms began to specialize. In Microsemi's case, the company remained focused on the defense industry, which came to represent approximately three-quarters of its sales. The company's capabilities in this sector would be strengthened via additional acquisitions throughout the second half of the decade, of which there were plenty.
After acquiring Microcap, Inc., in August 1985, Microsemi acquired two California companies--Torrance-based Bikor Corporation and Santa Ana-based RPM Enterprises--midway through 1986. That year, the company filed to offer 2.5 million shares of common stock through Paine Webber, Inc.
Prior acquisition activity paled in comparison to 1987, when the company spent roughly $10 million on acquisitions and revenues were approximately $50 million. That year, Microsemi snapped up Power Technology Components; General Microcircuits, Inc.; Beverly, Massachusetts-based Hybrid Components, Inc.; San Diego, California-based Cernetics Corporation; San Jose, California-based Omni Technology Corporation; and Broomfield, Colorado-based Coors Components, Inc.
Other noteworthy developments occurred in 1987. In March, Philip Frey was named chairman. About five months later, the Defense Electronics Supply Center (DESC) tapped Microsemi, National Semiconductor, Texas Instruments, and Teledyne to participate in a new initiative that enabled the companies to offer parts directly to defense contractors.
After snapping up Mooresville, North Carolina-based General Microcircuits, Inc., and Orange, California-based Distributed Microtechnology, Inc., in 1988, Microsemi rounded out the decade by acquiring Sertech Labs, Inc., and Microsemi Assembly and Test, Inc., in 1989. That year, sales reached a record $104 million. The company also acquired Garland, Texas-based Varo Quality Semiconductor, Inc., in 1989 and changed Varo's name to Micro Quality Semiconductor, Inc.
It also was in 1989 that Microsemi sold three unprofitable subsidiaries in the wake of its first quarterly loss in eight years. After losing $707,000 in the third quarter, the company sold Universal Microtechnologies to Great Britain-based Dowty Electronics and Universal Microelectronics to Taiwan-based Yubo International. Then Vitarel Microelectronics was sold to a group of managers in a leveraged buyout.
Diversification
Microsemi continued to grow via acquisitions during the 1990s. In 1992 the company acquired the Semiconductor Products Division of Unitrode Corporation in an $8.5 million deal. In addition to facilities in Watertown, Massachusetts, Unitrode also had operations in Ennis, Ireland.
Around this time, Microsemi was struggling with a cash shortfall. In March, the company failed to make a payment on a $33 million loan. This situation led Microsemi to announce a number of cost-cutting measures, including a workforce reduction and the sale of certain assets. The company sold its Bikor and Micro-CeramX units in mid-1993. Midway through the following year, Microsemi sold its Omni Technology Corporation subsidiary in a deal with Technology Marketing, Inc.
Heading into the mid-1990s, Microsemi struck a deal with Mountain View, California-based Telcom Semiconductor, Inc., and acquired its High Noise Immunity Logic product line. A positive development occurred early the following year when the DESC awarded Microsemi with a $55,000 contract for the supply of semiconductor devices. That October, the company acquired a diode assembly product line from National Semiconductor Corporation, and part of SGS Thomson Microelectronics' Montgomeryville, Pennsylvania-based Radio Frequency Semiconductor business.
Despite difficult conditions within the larger semiconductor industry, things were going well for Microsemi in 1996. In the third quarter, the company earned $5.6 million on sales of $116 million, up 40 percent and 21 percent from the same period in 1995, respectively. An important shift was under way at this time, as the company was focusing less on the defense industry and more on the transportation, medical, telecommunications, and computer sectors.
Compared to the early 1990s, when some 70 percent of sales were generated within the defense industry, by 1996 that figure had declined to 30 percent. In addition to diversifying the markets it served, CEO Philip Frey revealed that no one customer accounted for more than 4 percent of sales, according to the November 11, 1996, issue of the Orange County Business Journal. It was around this time that the company began to search for a potential successor to Frey, who was 69.
Microsemi headed into the late 1990s with domestic operations in Arizona, California, Colorado, and Massachusetts. In addition, the company had established international locations in Shanghai, Hong Kong, Ireland, and India. With high-profile customers like Nokia and Motorola, Microsemi faced off against notable competitors, including AT&T, Motorola, and National Semiconductor.
After selling Mooresville, North Carolina-based General Microcircuits, Inc., in a $7 million deal, Microsemi finished out the 1990s with a steady stream of acquisitions. BKC Semiconductors, Inc., was acquired in 1998, followed by Linfinity Microelectronics, Inc., in 1999. That same year, the company also acquired the semiconductor business of Narda Microwave for $5 million.
Building on some of its acquisitions in 1999, Microsemi kicked off the new millennium by focusing on chips for cell phones and other types of handheld devices. The company also began targeting markets for high-speed wireless Internet gear, as well as medical devices like pacemakers and defibrillators. In early 2000, the company acquired Los Angeles-based HBT Products Group, which made chips for wireless devices, from Infinesse Corporation for $17.9 million. Midway through the year, the company shuttered plants in Lawrence, Massachusetts, and Riviera Beach, Florida. Microsemi ended the year by naming former Linfinity President James J. Peterson as president and CEO.
In 2001, Microsemi acquired New England Semiconductor for $9.1 million and Compensated Devices, Inc., for $11.5 million, bolstering its aerospace and military business. Despite its diversification, the company's military experience was of great benefit in the wake of the terrorist attacks against the United States on September 11, 2001, and the country's substantial military presence in the Middle East. Microsemi's chips were employed in everything from laser-guided missiles and antimissile devices to electronic bomb fuses and warship radar systems.
Streamlining Operations
In 2002 Philip Frey retired as Microsemi's chairman, ending his long tenure with the company, and was succeeded by Nick Yocca. That year, the company shuttered its plant in Watertown, Massachusetts, as part of a continued effort to reduce expenses. The company also sold its Montgomeryville, Pennsylvania-based Microsemi RF Products, Inc., subsidiary to Bend, Oregon-based Advanced Power Technology, Inc. Microsemi's Semcon Electronics Private Limited subsidiary and Carlsbad design center were also sold. After seven consecutive years of profitability, Microsemi recorded a $4.7 million loss for the fiscal year ending September 2002.
More plant closures were announced in 2003 as Microsemi moved to boost capacity at each of its facilities. By this time, the company's factories were operating at 35 percent of capacity, compared to 20 percent only three years before. The shutdown of the Microsemi factory in Santa Ana, California, was expected to save the company up to $12 million annually and boost its per-factory capacity to 50 percent, furthering a goal to have each factory running at 70 percent capacity by 2006, according to the October 21, 2003, issue of the Orange County Register.
In 2004 Dennis Leibel succeeded Nick Yocca as Microsemi's chairman. The following year, plans were made to close the company's plants in Broomfield, Colorado, and Ennis, Ireland. The two closures were in addition to eight plants Microsemi had already shuttered since 2001. In addition, the company had managed to trim its workforce from 2,600 jobs to 1,398 during the same time frame, based on figures cited in the April 28, 2005, issue of the Orange County Register.
Focused Growth
In April 2006, Microsemi acquired the Bend, Oregon-based semiconductor company Advance Power Technology, Inc. (APT). Upon completion of the $139 million deal, APT became part of Microsemi's Power Products Group. Six months later, Congress awarded the group a $1.8 million appropriation for its efforts to develop semiconductors made of silicon carbide. With greater capacities for power and heat, semiconductors made of this material were of great interest to customers such as Northrop Grumman for military avionics purposes. Other applications included power grids and shipbuilding. As evidence of the product line's potential, in November Microsemi announced it was devoting $3.7 million to remodel the Bend, Oregon, plant.
Several other significant developments occurred in 2006. In October, Microsemi agreed to acquire Israel's PowerDsine Ltd. in a $245 million cash and stock deal that was completed the following January. In December the company announced the opening of a new design center in Taiwan in order to be closer to customers throughout Asia.
Microsemi began 2007 with a market capitalization of $1.3 billion. Progress continued that year, and in November the company announced it would acquire Lowell, Massachusetts-based Microwave Device Technology. The $7.8 million cash deal allowed Microsemi to expand into the sensor market, furthering a pattern of growth that had continued for almost 50 years.
Principal Subsidiaries
Microsemi Corp. Santa Ana; Microsemi Corp. Scottsdale; Microsemi Corp. Colorado; Microsemi Corp. Massachusetts; Microsemi Corp. Analog Mixed Signal Group; Microsemi Corp. Analog Mixed Signal Group Ltd. (Israel); Microsemi Corp. Power Products Group; Microsemi Corp. RF Power Products; Microsemi Corp. Montgomeryville; Microsemi Corp. Advanced Technology Center; Microsemi Power Module Products SAS (France); Microsemi Corp. International (Cayman Islands); Microsemi Corp. Holdings (Cayman Islands); Microsemi Corp. Israel Ltd.; Micro WaveSys, Inc.; Microsemi Real Estate, Inc.; Micro Ltd. (Bermuda); Microsemi Comercial Offshore de Macau Limitada (Macao).
Principal Competitors
Maxim Integrated Products, Inc.; Texas Instruments, Inc.; Vishay Intertechnology, Inc.
Further Reading
Berger, Dan, "Specialization, Dumping Probe May Rescue Semiconductor Firms," San Diego Union-Tribune, January 27, 1986.
Detar, James, "Military Helps Chipmaker Microsemi March Ahead; Also in Consumer Electronics; The Company Stuck with Defense When Others Left Market, Now Key Supplier," Investor's Business Daily, October 6, 2005.
------, "Specialty Semiconductors Power Chips Spark Turnaround Small Firm Microsemi Was Fading Fast Until It Targeted Cell Phone, PDA Field," Investor's Business Daily, July 6, 2001.
Finkle, Jim, "Chip Maker to Shut Factory in Santa Ana, Calif.," Orange County Register, October 21, 2003.
Galvin, Andrew, "Microsemi's Cost-Cutting Pays Off in Profit," Orange County Register, April 28, 2005.
Lyster, Michael, "Do or Diode: Microsemi Converts from Defense," Orange County Business Journal, November 11, 1996.
"Microsemi Corp.," Mergent Online, December 5, 2007, http://www.mergentonline.com.
— Paul R. Greenland
