RF Micro Invests $60M in Jazz Semi
By ANDREW SIMONS
A $60 million investment in Newport Beach-based Jazz Semiconductor Inc. implies a hefty valuation for the recent spinoff.
The contract chipmaker, which Newport Beach-based Conexant Systems Inc. spun off six months ago, last week inked a deal with Greensboro, N.C.-based RF Micro Devices Inc. RF Micro will invest $60 million for a minority stake in Jazz believed to be in the 10% to 15% range, according to sources. The agreement also calls for Jazz to manufacture RF Micro’s chips at a guaranteed lower rate and co-research wireless chip technology.
Jerry Neal, co-founder of RF Micro Devices, will join Jazz’s board of directors.
The deal conservatively values Jazz at about $400 million, much higher than the $90 million valuation when Conexant sold 55% of Jazz to Washington, D.C.-based The Carlyle Group in March for $50 million. Conexant’s market value, at recent check, was $240 million. RF was likely factoring in its supply deal with Jazz when it made the investment.
The stakes of Carlyle, a private equity investment firm, and Conexant, which kept a 45% share of the company, are expected to fall. Neither firm would disclose their new stakes, although Carlyle is still the majority shareholder.
“We’re excited about the investment,” said Conexant spokeswoman Gwen Carlson. “It really affirms Jazz.”
Though Jazz has signed about 30 chip-making deals this year, the RF Micro pact marks the first major investment from a customer. Such deals are normal in the industry because securing capacity is critical for chipmakers.
Jazz counts $150 million in yearly sales, and officials suggest the company could grow at a 25% to 45% annual clip in the coming years. The company was profitable in the June quarter, its first as an independent company, Carlson said.
The deal could also mark a shift in sentiment among Conexant’s competitors who are concerned about Jazz’s close ties with its former parent: Conexant owns a big stake in the company and its offices are just 50 yards away from Jazz’s facilities.
Conexant and Jazz officials have said their relationship is a concern for potential customers.
Even so, Jazz says its facility is state-of-the-art. The plant can make 20,000 chips a month, produce test versions of the industry’s smallest chips and features 100,000 square feet of clean room space.
Jazz hopes to ride an industry trend of outsourcing chip production since plants require huge cash infusions to maintain equipment, update processes and keep them running at full capacity.
The company is banking on its silicon germanium production process, which yields faster chips than those made using the processes employed by Taiwan’s dominant contract chipmakers.
Conexant has moved away from in-house production. In 2000, it invested $150 million in Taiwan Semiconductor Manufacturing Co. to ensure production capacity. That same year, it also inked separate production deals with United Microelectronics and Chartered Semiconductor Manufacturing Ltd.
