netrashetty
Netra Shetty
Cypress Semiconductor Corporation makes the processors and chips that go into computers, phones, and other integrated electronic devices. Cypress' product portfolio has two segments. First, there are commodity products for timing and communication - an example is a USB controller integrated into a mouse or a digital camera, allowing communication between the device and a computer. Cypress also sells newer programmable chips that can conduct multiple tasks at lower cost since they combine functionalities spread across multiple chips.[1] These newer devices can compute and communicate for devices such as mp3 players, laptop computers, and other household appliances. The majority of Cypress' revenues still come from the legacy business, although the company's focus is to develop the higher-margin programmable chip business.
While CY was a majority holder of SunPower (SPWRA), it completed a spin-off of the company in late 2008.[2]
From a manufacturing standpoint, the majority of Cypress' work is conducted in-house, with only a small portion outsourced to foundries, in contrast with many competitors such as QUALCOMM (QCOM) or Broadcom (BRCM) that have switched to "fabless" outsourcing to foundries. This leads to a higher cost structure for Cypress, since it must handle its own manufacturing. However, it also means it does not have to invest capital into designing processes and products that meet foundry requirements for outsourcing.
Business Overview
Business & Financial Metrics[3]
Contents
1 Business Overview
1.1 Business & Financial Metrics[3]
1.2 Business Segments[4]
1.2.1 Consumer and Computations Division (41.2% of total revenues)
1.2.2 Data Communication Division (14.5% of total revenues)
1.2.3 Memory Product Division (43.2% of total revenues)
1.2.4 Emerging Technologies and Other (1.2% of total revenues)
2 Key Trends & Forces
2.1 Trend of device integration will grow the programmable chip business
2.2 Semiconductor cyclicality is a constant risk for Cypress
2.3 Silicon Prices are a major input to CY's cost structure
3 Competition
3.1 Semiconductor Firms
4 References
In 2009, CY incurred a net loss of $150.4 million on total revenues of $667.8 million. This represents a 47.2% reduction in net loss on a 12.8% decrease in revenues from 2008, when the company lost $284.9 million on revenues of $765.7 million.
Business Segments[4]
The company is organized into three main segments and SunPower (a majority-owned subsidiary offering solar power products).
Consumer and Computations Division (41.2% of total revenues)
This segment makes general purpose timing products, USBs and programmable systems on chips (PsoCs). [5]
Data Communication Division (14.5% of total revenues)
This segment makes data communications devices for wireless handsets and video systems. [6]
Memory Product Division (43.2% of total revenues)
This segment offers SRAM memory and image sensors. [7]
Emerging Technologies and Other (1.2% of total revenues)
This segment incorporates the operations of Cypress Envirosystems, AgigA Tech, Optical Navigation Systems, Chinese operations, and various corporate operations.[8]
[4]
Key Trends & Forces
Trend of device integration will grow the programmable chip business
Management has been attempting to shift the product mix of the semiconductor business towards programmable chips which can do the work of several non-programmable chips. For example, the Programmable System on a Chip system (PSoC) allows for as many as 100 functions on one chip, saving customers design time, space, power consumption, and system cost.[9] The Programmable Radio on a Chip system (PRoC) integrates PSoC with a wireless USB radio. As consumers demand more sophisticated devices, with better battery life and smaller size, manufacturers are turning to innovative products such as CY's to offer advanced capabilities in smaller devices. For example, many of Apple's iPod Nano's components are sourced from Cypress.[10] However, this market segment is still relatively immature and fragmented, and a number of other companies are offering competing integrated systems.
Semiconductor cyclicality is a constant risk for Cypress
Semiconductors underpin many of the consumer electronics in the industrialized world. These range from smartphones and mp3 players, to smart appliances like newer TV's and laundry machines. This correlation with the macro-economy makes Cypress susceptible to economic boom and downturn. This is compounded by the significant capital expenditure required to create the product, as well as a short product life due to R&D making old parts obsolete. The vast majority of Cypress' semiconductor business are considered commodity products, with the exception of the PSoC business mentioned above, which accentuates the company's vulnerability to lower-priced competitors. For more information on semiconductor chips, see the Semiconductor Cyclicality article.
Silicon Prices are a major input to CY's cost structure
Rising prices of silicon have fueled a search for alternative materials in both the semiconductor and solar photovoltaic industries.[11] While there is no immediate alternative to silicon for semiconductors, thin-film's rise has fueled growth expectations for competitors such as First Solar (FSLR). Cypress' margins have not been significantly dented by the price inflation, but continued price inflation will put pressure to either hurt margins or raise prices.
Competition
Semiconductor Firms
Altera (ALTR) - pioneering "System-on-a-programmable-chip technology, with a similar premise to PSoC.
Applied Micro Circuits (AMCC) - A diversified chip company with some System-on-a-Chip design processes purchased from IBM.
Freescale Semiconductor, Inc. (FSL) - Chief provider of integrated circuits to the automotive industry bought-out by a consortium of Private Equity companies led by Blackstone.[12]
National Semiconductor (NSM) - Large diversified semiconductor company now focusing on analog devices.
STMicroelectronics N.V. (STM) - French-Italian company focusing on memory chips.
Texas Instruments (TXN) - Largest manufacturer of analog chips in the world.
The semiconductor market is crowded, with several specialty and commodity players. Competitors pursing a similar programmable chip strategy include Applied Micro Circuits (AMCC) and Altera (ALTR).
While CY was a majority holder of SunPower (SPWRA), it completed a spin-off of the company in late 2008.[2]
From a manufacturing standpoint, the majority of Cypress' work is conducted in-house, with only a small portion outsourced to foundries, in contrast with many competitors such as QUALCOMM (QCOM) or Broadcom (BRCM) that have switched to "fabless" outsourcing to foundries. This leads to a higher cost structure for Cypress, since it must handle its own manufacturing. However, it also means it does not have to invest capital into designing processes and products that meet foundry requirements for outsourcing.
Business Overview
Business & Financial Metrics[3]
Contents
1 Business Overview
1.1 Business & Financial Metrics[3]
1.2 Business Segments[4]
1.2.1 Consumer and Computations Division (41.2% of total revenues)
1.2.2 Data Communication Division (14.5% of total revenues)
1.2.3 Memory Product Division (43.2% of total revenues)
1.2.4 Emerging Technologies and Other (1.2% of total revenues)
2 Key Trends & Forces
2.1 Trend of device integration will grow the programmable chip business
2.2 Semiconductor cyclicality is a constant risk for Cypress
2.3 Silicon Prices are a major input to CY's cost structure
3 Competition
3.1 Semiconductor Firms
4 References
In 2009, CY incurred a net loss of $150.4 million on total revenues of $667.8 million. This represents a 47.2% reduction in net loss on a 12.8% decrease in revenues from 2008, when the company lost $284.9 million on revenues of $765.7 million.
Business Segments[4]
The company is organized into three main segments and SunPower (a majority-owned subsidiary offering solar power products).
Consumer and Computations Division (41.2% of total revenues)
This segment makes general purpose timing products, USBs and programmable systems on chips (PsoCs). [5]
Data Communication Division (14.5% of total revenues)
This segment makes data communications devices for wireless handsets and video systems. [6]
Memory Product Division (43.2% of total revenues)
This segment offers SRAM memory and image sensors. [7]
Emerging Technologies and Other (1.2% of total revenues)
This segment incorporates the operations of Cypress Envirosystems, AgigA Tech, Optical Navigation Systems, Chinese operations, and various corporate operations.[8]
[4]
Key Trends & Forces
Trend of device integration will grow the programmable chip business
Management has been attempting to shift the product mix of the semiconductor business towards programmable chips which can do the work of several non-programmable chips. For example, the Programmable System on a Chip system (PSoC) allows for as many as 100 functions on one chip, saving customers design time, space, power consumption, and system cost.[9] The Programmable Radio on a Chip system (PRoC) integrates PSoC with a wireless USB radio. As consumers demand more sophisticated devices, with better battery life and smaller size, manufacturers are turning to innovative products such as CY's to offer advanced capabilities in smaller devices. For example, many of Apple's iPod Nano's components are sourced from Cypress.[10] However, this market segment is still relatively immature and fragmented, and a number of other companies are offering competing integrated systems.
Semiconductor cyclicality is a constant risk for Cypress
Semiconductors underpin many of the consumer electronics in the industrialized world. These range from smartphones and mp3 players, to smart appliances like newer TV's and laundry machines. This correlation with the macro-economy makes Cypress susceptible to economic boom and downturn. This is compounded by the significant capital expenditure required to create the product, as well as a short product life due to R&D making old parts obsolete. The vast majority of Cypress' semiconductor business are considered commodity products, with the exception of the PSoC business mentioned above, which accentuates the company's vulnerability to lower-priced competitors. For more information on semiconductor chips, see the Semiconductor Cyclicality article.
Silicon Prices are a major input to CY's cost structure
Rising prices of silicon have fueled a search for alternative materials in both the semiconductor and solar photovoltaic industries.[11] While there is no immediate alternative to silicon for semiconductors, thin-film's rise has fueled growth expectations for competitors such as First Solar (FSLR). Cypress' margins have not been significantly dented by the price inflation, but continued price inflation will put pressure to either hurt margins or raise prices.
Competition
Semiconductor Firms
Altera (ALTR) - pioneering "System-on-a-programmable-chip technology, with a similar premise to PSoC.
Applied Micro Circuits (AMCC) - A diversified chip company with some System-on-a-Chip design processes purchased from IBM.
Freescale Semiconductor, Inc. (FSL) - Chief provider of integrated circuits to the automotive industry bought-out by a consortium of Private Equity companies led by Blackstone.[12]
National Semiconductor (NSM) - Large diversified semiconductor company now focusing on analog devices.
STMicroelectronics N.V. (STM) - French-Italian company focusing on memory chips.
Texas Instruments (TXN) - Largest manufacturer of analog chips in the world.
The semiconductor market is crowded, with several specialty and commodity players. Competitors pursing a similar programmable chip strategy include Applied Micro Circuits (AMCC) and Altera (ALTR).