Exar Corporation and its subsidiaries (“Exar” or “we”) is a fabless semiconductor company that designs, sub-contracts manufacturing and sells highly differentiated silicon, software and subsystem solutions for industrial, datacom and storage applications. Our comprehensive knowledge of end-user markets along with our underlying analog, mixed signal and digital technology has enabled innovative solutions that meet the needs of the evolving connected world. Our product portfolio includes power management and interface components, datacom products, storage optimization solutions, network security and applied service processors. Applying both analog and digital technologies, our products are deployed in a wide array of applications such as portable electronic devices, set top boxes, digital video recorders, telecommunication systems, servers, enterprise storage systems and industrial automation equipment. We have the unique ability to provide customers with a breadth of component products and subsystem solutions based on advanced mixed signal silicon integration.
On April 3, 2009, Exar completed the acquisition of Hifn, a fabless semiconductor company that was founded in 1996, spun off from Stac, Inc. in 1999 and traded on the NASDAQ under the symbol “HIFN” since 1999. The acquisition of Hifn expands and complements our product offering in the enterprise storage, networking and telecom markets where we have had a significant base of business for more than 10 years. The Hifn technology adds world class compression and data deduplication products used in storage applications to optimize data and speed up data backup and retrieval. Hifn has also been a leading provider in security acceleration technology by providing encryption and compression products to the leading networking and telecom system manufacturers. The Hifn products complement the existing Exar connectivity solutions and provide us with a more significant product offering to our customers.
On August 25, 2007, we acquired Sipex Corporation (“Sipex”), a fabless semiconductor company that designed, manufactured and marketed high performance, analog Integrated Circuits (“ICs”) used by Original Equipment Manufacturers (“OEMs”) in the computing, consumer electronics, communications and networking infrastructure markets. As a result of the acquisition, we have combined product offerings and increased technical expertise, distribution channels, customer base and geographic reach.
We believe our core competencies include:
Commitment to Connectivity—We remain steadfast in our commitment to connectivity—a strategic direction that drives our product strategies and serves as a foundation for customer engagements. Our connectivity solutions span a range of applications that serve industrial networking, storage and telecom applications. These solutions facilitate and optimize the virtual handshake between systems and across networks.
Leading Analog and Mixed-Signal Design Expertise—We have over 35 years of proven technical competency in developing analog and mixed-signal ICs. As a result, we have developed a deep understanding of the subtleties of analog and mixed-signal design and a comprehensive library of analog core blocks. For example, our high-speed, low-jitter Phase-Locked-Loop (“PLL”) capability plays a key role in our mixed-signal line interface units, transceivers, timing recovery, jitter attenuators and mapper products. As a result, we can provide our customers with solutions that typically exceed standard specifications and allow them flexibility in designing other system elements.
Comprehensive Solutions to Enhance System Integration—The combination of our design expertise, diverse technology and system-level expertise allows us to provide comprehensive solutions that encompass hardware, software and applications support. For example, we have developed many digital blocks and engines that are used in data aggregation, transmission, acceleration and compute offload. We believe that by using our solutions, OEMs can develop higher performance systems, better leverage their development resources and reduce their time-to-market.
Compelling Performance Solutions—We use our systems expertise and our analog, digital and mixed-signal design techniques to architect high-performance products based on standard Complementary Metal Oxide Semiconductor (“CMOS”) process technologies. The diversity of our technology allows us to integrate in order to develop further unique and differentiated solutions for our customers.
Conscious Preservation Initiative—Environmental concerns are having a direct impact on all electronic components and products. We are committed to reducing the impact that the end use and manufacturing of our products may have on the environment. We have taken the initiative to offer a portfolio of products that is truly “green” by transitioning our manufacturing processes such that we are able to offer parts which go beyond simply meeting Restriction of Hazardous Substances Directive (“RoHS”) requirements and are halogen-free.
We strive to be a leading provider of highly differentiated silicon, software and subsystem solutions for industrial, datacom and storage applications. To achieve our long-term business objectives, we employ the following strategies:
Leverage Analog and Mixed-Signal Design Expertise to Provide Integrated System-Level Solutions—Utilizing our analog and mixed-signal design expertise, we integrate mixed-signal physical interface devices for a broad range of silicon solutions. This capability continues to be the backbone of our integration strategy and enables us to offer optimized solutions in datacom, interface and power management. Our customers depend on analog and mixed signal integration for power reduction, size optimization and signal integrity.
Expand Product Portfolio—We have developed a strong presence in the broad industrial, datacom and storage markets where we have industry leading customers and proven technological capabilities. Our design expertise has enabled us to offer a diverse portfolio of both industry standard and proprietary products serving a range of connectivity and power management needs. Our extensive product portfolio provides the framework for customers to work with many of our products on a single board design. Our ability to serve the various needs of a customer’s design enables us to meet our customers’ procurement and support needs by reducing their number of vendors and providing a single point of contact for applications support and supply chain management for multiple components.
Grow Market Share with System Solutions—We create systems solutions by coupling system expertise, software and advanced silicon integration to provide an optimized solution that is designed to be technically compelling and cost effective, resulting in distinctive products like Tethys™, 10G Sonet Multiplexer (“Mux”)/DeMux, Flowthough® Security Processors, Bitwackr®, data deduplication solutions, XRP7704 and digital power management. These solutions and others provide platform engagements that involve software and hardware integration at the system level resulting in a cohesive bond with customers.
Strengthen and Expand Strategic OEM Relationships—To promote the early adoption of our solutions, we actively seek collaborative relationships with strategic OEMs during product development. We believe that OEMs recognize the value of our early involvement, because designing their system products in parallel with our development can accelerate time-to-market for their end products. Collaborative relationships also help us to obtain early design wins and to increase the likelihood of market acceptance of our new products.
Use Standard CMOS and Bipolar CMOS-DMOS (“BCD”) Process Technologies to Provide Compelling Price/Performance Solutions—We design our products to be manufactured using standard CMOS and BCD processes. We believe that these processes are proven, stable and predictable and benefit from the extensive semiconductor-manufacturing infrastructure devoted to CMOS and BCD processes. In certain specialized cases, we may use other process technologies to take advantage of their performance characteristics.
Employ Fabless Semiconductor Model—We have long-standing relationships with third-party wafer foundries, assembly and test subcontractors to manufacture our ICs. Our fabless approach allows us to avoid substantial capital spending, obtain competitive pricing, minimize the negative effects of industry cycles, reduce time-to-market, reduce technology and product risks, and facilitate the migration of our products to new CMOS and BCD process technologies. By employing the fabless model, we can focus on our core competencies in sales and marketing as well as in product design, development and support.
Broaden Sales Coverage with Channel Partners—We have strong relationships with our distributors and sales representatives throughout the world representing a significant portion of our total revenue. Through our partners, we have access to large market segments which we cannot directly support. Through these relationships, we extend our expertise and product exposure by enabling our partners to discover new demands for our solutions as well as aid us in defining our next generation solutions.
Expand our Business Through Acquisitions—The markets in which we compete require a wide variety of technologies, products and capabilities. The combination of technological complexity and rapid change within our markets makes it difficult for a single company to develop all the technological solutions that it desires to offer within its family of products. Through acquisitions, we aim to deliver a broader range of products to customers in target markets. We employ the following strategies to address the need for new or enhanced products: we develop new technologies and products internally; we acquire field proven third-party intellectual property cores to accelerate time to market; and we acquire all or parts of other companies.
We outsource all of our fabrication and assembly, as well as the majority of our testing operations. This fabless manufacturing model allows us to focus on sales and marketing as well as product design, development and support.
Our products are manufactured using standard CMOS, bipolar, BiCMOS (bipolar CMOS) and BCD process technologies. We use wafer foundries located in the United States and Asia to manufacture our semiconductor wafers.
Most of our semiconductor wafers are shipped directly from our foundries to our subcontractors in Asia for wafer test and assembly, where they are cut into individual die and packaged. Independent contractors in Malaysia, China, Indonesia and Taiwan perform most of our assembly work. Final test and quality assurance are performed either at our subcontractors’ facilities in Asia or at our Fremont, California facility. All our manufacturing partners have been certified to ISO 9001:2000 and are or soon will be automotive spec, TL16949 compliant.
For all acquired Hifn products, currently in production, we will continue to use the turnkey manufacturing model, with our suppliers delivering fully assembled and tested products based on our proprietary designs.
Research and Development
We believe that ongoing innovation and introduction of new products in our targeted and adjacent markets is essential to sustaining growth. Our ability to compete depends on our ability to offer technologically innovative products on a timely basis. As performance demands and the complexity of ICs have increased, the design and development process has become a multi-disciplinary effort requiring diverse competencies. Our research and development is focused on developing high-performance analog, digital and mixed-signal solutions addressing the high-bandwidth requirements of communications and storage systems OEMs and the high-current, high-voltage requirements of interface and power management OEMs. We make investments in advanced design tools, design automation and high-performance intellectual property libraries while taking advantage of readily available specialty intellectual property through licensing or purchases. We also augment our skill sets and intellectual property through university collaboration, incorporating talent through acquisition and by accessing needed skills with off-campus design centers. We continue to pursue the development of design methodologies that are optimized for reducing design-cycle time and increasing the likelihood of first-time success. While we continually upgrade our internal technology to develop innovative products, as a fabless company, we also work with foundries that provide our wafers. As a result of the Hifn acquisition we now have a substantive research and development presence in the People’s Republic of China (“PRC”).