National Semiconductor: The Potential in Energy

| About: National Semiconductor (NSM)

By Ken Nagy

Opportunity in several verticals

National Semiconductor's (NSM) management strategy appears to be focused on energy, specifically, in energy generation, consumption and storage. Energy savings in each of these areas will be an important driver of growth over the next decade, in not just developing but developed countries as well.

To date, the company has been focused on its core strength in power management products. It is now extending these capabilities in power management to alternative energy areas, such as powering for solar panels and LED lighting products.

Energy generation:

In June 2008, management announced a solar product, which it refers to as the SolarMagic power optimizer module. The product incorporates National's new PowerWise power management technology, and works on both thin film and crystal line glass panels. It significantly increases the efficiency of solar panels, recouping up to 50% of the power lost in shady areas and when the panels are mismatched, or become old, or accumulate debris and bird droppings.

The opportunity for growth is expected to be significant, both in new and retrofit markets. Management stated that approximately 25 million panels were sold in 2008 by around 10 vendors, including Kyocera (NYSE:KYO), Sanyo, Sharp, Suntech, Wushi, SunPower (NYSE:STP), Conergy and First Solar (FSLR).

Management estimates that there are a total of around 75 million panels in the market, which also makes for an attractive retrofit market. SolarMagic is being field-tested at a number of potential customers. The product entered production in March, and first revenue is expected in the fourth quarter of fiscal 2009.

Energy consumption:

The company's adaptive voltage scaling (AVS) technology lowers energy loss in devices during use. Management estimates LED lighting to be a $6 billion market. The company has introduced its LED driver ICs for street lights, backlighting, automotive, and increasingly, general lighting.

National recnetly launched the TRIAC dimmable LED driver based on its AVS technology that enables direct replacement of incandescent or halogen bulbs with LED bulbs. The product enables flicker-free full range dimming of LED lights and maximizes light output.

The company has also introduced LED backlighting solutions. Display Search estimates that 13% of laptops shipped in Q4 of 2008 were LED backlit, double the percentage that was LED backlit in Q3. Therefore, this is another growing market. Management stated that National is also the leading supplier of flash lighting drivers in the mobile phone market. In the last quarter, the company's flash drivers brought design wins in new phone models at four large mobile phone makers.

Energy storage:

This is essentially the battery management area, where National's new PowerWise technology is already being used in automotive electronics. Management is optimistic that the company's technology will help to make electric cars and HEVs more viable, driving growth opportunities in this area.

Other areas of management focus include sensing and detection (security), medical and infrastructure. Management is redirecting R&D spending into these areas.

Sejuti Banerjea contributed to this post.