Microsemi Corp. Chief Executive Jim Peterson has laid out the company’s next growth market.
The super-speedy computing processing chips are called field-programmable gate arrays. They’re used mainly to control systems and manage data, and carry two key characteristics: They can be programmed by customers after production, and the software burned on them can’t be duplicated after use—a safeguard against security breaches.
Those are attractive benefits for Aliso Viejo-based company’s long list of defense contractors and aerospace clients, which include Northrop Grumman, Boeing Co. and Airbus.
The FPGA segment is dominated by a couple of San Jose-based companies: Xilinx Inc., which posts sales of more than $2.1 billion annually, and Altera Corp., which has revenue of about $1.7 billion.
Peterson, known for his off-the-cuff and colorful commentary, singled out the heavyweights in a recent conference call with analysts.
“It might sound bold, but my plan in that market space is to help Altera and Xilinx not have to worry about being a duopoly,” he said.
Microsemi is Orange County’s second-largest chipmaker in revenue, with some $975 million in annual sales.
It’s the sector’s third-largest employer here, with about 280 workers locally.
Microsemi isn’t concerned about the highly competitive commercial FPGA market. It has its eyes set on the defense, communications and industrial sectors, where it has a history that dates back to its origin in 1960.
The company is showing early signs in gaining market share in those sectors, which combine for about $1.2 billion in spending on FPGA chips annually.
It recently landed design wins on Boeing’s 787 Dreamliner and Airbus’ wide body jetliner A380, which carry some 1,000 FPGAs on each aircraft, according to Russ Garcia, executive vice president of worldwide corporate marketing for Microsemi.
“We have mainstream applications where we can go to toe to toe with Xilinx and Altera but beat them with power, performance and security capabilities,” he said. “We are expecting strong growth in our FPGA business.”
The chips, which are a few millimeters to a half an inch in size, are costly to produce, with orders of tens of thousands costing upward of $20 million. The addition of the FPGA chips make Microsemi a steady supplier that can offer other components to potential customers.
“What they’re selling now is really brainy applications,” said Harsh Kumar, an analyst in the Memphis, Tenn., office of Little Rock, Ark.-based Stephens Inc. “That allows you to sell a bunch of other stuff around this.”
Microsemi acquired the technology in 2010 when it bought Mountain View-based Actel Corp. for $430 million, its largest deal at the time.
The company has heavily invested in bringing Actel’s technology to market and beefing up the engineering teams behind it in San Jose, India and the East Coast.
“We bought Actel in order to enter that market,” Garcia said. “We’ve put a lot of dollars to shape and size that organization to allow it to innovate at a much higher pace.”
Microsemi also has boosted its sales outlets for FPGAs, increasing the number of certified engineers at two of its largest distributors—Englewood, Colo.-based Arrow Electronics Inc. and Avnet Inc. in Phoenix, according to Peterson.
“We have a very aggressive program,” he said.
