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www.fairchildsemi.com 1 Fairchild Semiconductor International, Inc. Robert Baird Growth Stock Conference May 18, 2010 Dan Janson Vice President of Investor Relations
www.fairchildsemi.com
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Fairchild SemiconductorInternational, Inc.
Robert Baird Growth Stock ConferenceMay 18, 2010
Dan JansonVice President of Investor Relations
www.fairchildsemi.com2
Notes on Forward Looking Statements and Non-GAAP Measures
• Comments in this presentation other than statements of historical fact may constitute forward looking statements and are based on Fairchild’s management’s estimates and projections and are subject to various risks and uncertainties
• These risks and uncertainties are described in the Company’s periodic reports and other filings with the Securities and Exchange Commission (see the Risk Factors section) and are available at http://sec.gov and investor.fairchildsemi.com
• Actual results may differ materially from those projected in the forward looking statements
• Some data in this presentation may include non-GAAP measures that we believe provide useful information about the operating performance of our businesses that should be considered by investors in conjunction with GAAP measures that we also provide. You can find a reconciliation of non-GAAP to comparable GAAP measures at the Investor Relations section of our web site at http://investor.fairchildsemi.com
Recent additions to our website at http://investor.fairchildsemi.comUpdated Financials (through Q1 2010, with segment revenue/gross margin breakouts)
• Quarterly Fact Sheet with Q1 2010 highlights
• This investor presentation
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Highlights of the Quarter – Q1 2010
Sales were $378m, up 7% QoQ and 69% YoY... Solid performance in what is typically a down sales quarter
Demand was higher across a broad range of end markets and regions
Under-shipped POS to reduce channel inventory 2% QoQ or 1/2 week to record low 7.8 weeks supply
Internal inventory held at very lean 69 DOI…higher sales more than offset the $9m increase in raw materials & WIP
Generated $36m in free cash flow (cash from operation – capex) due to margin and earnings growth coupled with strong asset management…Net cash positive…as cash & securities top $481m at the end of Q1
Adjusted gross margin was 32.5%, up >2 points QoQ, due to ramp of new products, mix out of less profitable products, and higher factory loadings
Pricing remained better than typical at down <1% QoQ as customers continue to focus on product availability
Utilization increased again in Q1 causing lead times to extend. Using capacity reservations for top tier customers (75% of sales) to continue to provide them the product support they need
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Q2 Forward Guidance & Current Market Environment
• Sales expected to be $395 – 400m…current scheduled backlog covers low end of this range
• Gross margin expected to improve to 33 – 34%
• R&D and SG&A forecast at $82 – 84m…<21% of sales at mid-point…making good progress towards our target of 20% of sales
Current Market Environment
• Demand remains robust and Q2 sales and gross margin are tracking to the high end of the range
• Demand strength remains broad based across all regions
• Backlog continues to build for Q3 indicating seasonal strength is likely
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Fairchild Overview
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• Wireless Convergence and Energy Efficiency mega-trends
• Power silicon content grows faster than end market sales –premium paid for efficiency
• Segment structure increases our apps knowledge and ability to sell solutions
• Large customers dominate these markets and align well with Fairchild’s strengths in SCM, global presence and wide product breadth
Markets That Drive Our Business
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Power Silicon Content GrowthHandsets
• Handset growth still impressive as market hits 1.5B units in 2013
• Voltage regulator CAGR of 19% reflects greater power management value in the handset to support new features, better resolution displays and 3G/4G
Source: iSuppli, Jan 2010
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Mobile USB
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• Solutions for the full USB signal path• USB Switches• Multimedia Switches• Accessory Detection • Transceivers
• Enable USB port sharing for data, audio, video, and charging
• Reduce external components• Power savings with low power modes• Ultra-small packaging
Maximizing USB port functionality in mobile electronics
USB Accessory DetectionDetect an accessory type for automatic application routing.
USB TransceiversMaximizes design flexibility and assures USB compliance.
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Power Silicon Content GrowthPower Supplies
• Greater power supply efficiency requires more advanced topologies and greater power silicon content
• Fairchild is a leader in supplying integrated and discrete power management solutions to the top power supply manufacturers in the world
Source: Climate Savers Computing Initiative 2008
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
80%+ 82%+ 85%+ 87%+
Efficiency
Total Discrete Content ($/supply)
Total IC Content ($/supply)
Power Silicon Content versus Efficiency
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High Voltage MOSFETTransition to Deep Trench Requires Strong IP
• Significant Design IP Required to Make Transition• Termination and isolation critical in handling high voltage• High Epi efficiency required to reduce specific resistance• No standard design approach in HV
• Process challenges and difficulties• Deep junction & long diffusion process required…3X longer than planar• Deep trench uniformity• Process control for Superjunction is challenging• Capex investment and experienced, tight maintenance control required
• Epi expertise is essential• Control the uniformity in thickness and resistivity for various HV devices• Epi process-sensitive device are common• In-house Epi capability is required
Smaller, local competitors rarely enter the HV market!
Planar MOSFETSuperjunction MOSFET
Muti-Epi tech Deep Trench tech
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Power Silicon Content GrowthLCD TV
• LCD TVs expected to continue to grow rapidly
• Power analog & transistor sales forecasted to grow even faster as screen resolution and backlighting requirements advance and concern over energy efficiency of these devices increases
Source: iSuppli, Jan 2010
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Power Silicon Content GrowthAppliances/Industrial Motors/Pumps
• Conversion to inverter type or BLDC variable speed motors significantly increase energy efficiency (60%+ typically) and improves cost of ownership
• This transition opens huge new markets to Fairchild power management solutions…typical SPM content on a washing machine is $4 – 6…no content before
• Fairchild is uniquely positioned to provide a full range of discrete and integrated power management solutions across the complete range of power requirements
Source: iSuppli, Jan 2010
Note: VF=Variable Frequency Control T=Total worldwide Shipments
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Why Use Inverters in Motion Control?
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Because of Energy Savings and High Performance !!
Energy SavingInverter control can save average 40% electricity than conventional on/off control
ComfortableIn air contitioner, Inverter can - save cooling time
(50% faster)- Precise temperature
control (±1ºC control)
SilentIn fan motor, Inverter can reduce audible noise
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Motion SPM Portfolio
Capacity
Application
Mid. Power Industrial Inv.
Fan motor
System A/C
Room A/C
RefrigeratorW/M
VacuumCleaner
Power tool
Low Power Industrial Inv.
Dish washer
SPIM600V / 50A ~ 100A1200V / 30A ~ 75A
10kW5kW2kW1kW0.5kW0.1kW
Package A/C
SPM2600V / 15A ~ 75A1200V / 10A ~ 20A
SPM3600V / 3A ~ 30A
SPM5500V / 1A, 3A250V / 3A
SPM4600V / 20A ~ 30A
PumpSPM7500V / 1A
E-bike
SPM45600V / 3A ~ 15A40V / 60A60V / 40A
SPM45H
SPM45L
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Fairchild Supports Full Range of Power Needs
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Power Silicon Content GrowthAdvanced Lighting, PV, Wind Power & Smart Grid
• New markets for power discrete and analog solutions in the lighting, PV, wind and smart grid create huge new opportunities for Fairchild
• Fairchild has wide range of products to support these markets including PSR for low power apps and PFC for higher power requirements…both discrete and integrated power management solutions
Source: iSuppli, Jan 2010, IMS Research
CFL 2009 2010 Growth
Rev (M$) 4,604 5,697 23.7%
ASP 4.5$ 4.3$ -4.4%
Units(Mu) 1,023 1,325 29.5%
>20% Semi Growth in Solar Inverters
through 2014
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Power Modules ($8.00 – $14.28)• EPS/EHPS Modules• Auxiliary VSD’s
Discrete Power($0.07 – $0.35)• Low Voltage MOSFET’s• Mid Voltage MOSFET’s• High Efficiency Diode
Ignition ($0.30 – $4.00)• Current Limit IGBTs• Smart IGBT
Functional Drivers ($0.30 – $2.15)• Smart Switches• Gate Drivers• Motor Controls
Power Silicon Content GrowthAutomotive
• Semiconductor content is growing rapidly in automotive designs to increase fuel efficiency and improve user experience
• Fairchild is expanding our power module technology into electronic power steering (EPS) control. Design wins at 3 major customers and more in process
• Fairchild is also a leader in ignition IGBTs that provide more precise spark control and better fuel efficiency
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Power Silicon Content Growth Notebook PC
• Notebook unit growth projected to be robust through 2013
• Power transistor/FET sales growth remains strong even as CULV and netbooksrequire fewer power rails but place greater value on size and weight
Source: iSuppli, Jan 2010
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Fairchild Integrated PowerStage SolutionsHigh Side and Low MOSFETs in a Single Package
25A Buck Converter Solution
6mm
5mm
6mm
5mm
5A Buck Converter Solution
S08
3mm
3mm
Standard Solution: 60mm2
PowerStage Solution: 30mm2
Better Performance, 3X Smaller Footprint
HS HS
LS
LS LS
HS
LS
HSLS
Standard Solution: 90mm2
PowerStage Solution: 9mm2
Better Performance, 7X Smaller Footprint
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25A Control and Synchronous Solutions
S7.2mΩ
Dual CoolTM 3x37.2mΩ
Dual CoolTM 3x32.4mΩ
30A Control and Synchronous Solutions
M
M
Power Trench® Dual Cool™
Component Area:49mm2
Component Area:21.5mm2
M2.4mΩ
Dual CoolTM 3x37.2mΩ
Dual CoolTM 5x61.2mΩ
Component Area:62mm2
Component Area:41mm2
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Capitalizing on these Market Trends
• Engage with industry-leading customers in key markets to build our applications expertise (ex. Handsets, power supplies)
• Leverage our technology leadership in analog switches, HF Voltage Regulators to expand content and increase integration level in handsets & ultra-portable apps
• Leverage silicon-based technology leadership in power MOSFETs and IGBTs to gain share and deliver industry-leading margins
• Accelerate share gains in power conversion business driven by new products and transition to higher efficiency power supply designs
• Expand SPM business beyond Japan to support transition to variable speed motors in appliances
• Drive higher GM and double-digit sales growth
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Finance Overview
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Gross Margin ImprovementKey Drivers
• Growth of new product families with higher margins• USB and Mutimedia Switches, HF Voltage Regulators, PT6 & 7 LV
MOSFETs, Power Conversion T-Series, primary side regulator (PSR), SupreMOS, integrated power systems (SPM), IntelliMAX™
• Improved product mix• Mix out standard products and older technology MOSFETs to free up
capacity to support higher margin new products• Manufacturing cost reductions and product redesigns
• Lean manufacturing techniques • Convert to 8” wafers…Maine largely done, more to follow• Fab process upgrades/shrinks for HV & LV MOSFETs, IGBTs and Power
Conversion• Close Mountain Top fab…current schedule Q2 2011
• Higher factory loadings
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Gross Margin TrendNew Products & Mix Powering Breakout
SCM fix
Mix Out/Product Direction
10 point GM swings2 - 3 point GM swings
GM breakout
SG acquisition/prod line upgrade
R&D focus on MCCC and PCIA markets
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Balance Sheet ImprovementDisciplined Asset Management
• Q1 balance sheet is strongest in the history of the company:• Cash and investments exceed debt• Debt at lowest level in company history at $471m• Internal inventory at near record low of 69 DOI• DSO at very low 37 days• Days of payables at normal level of 45 days
• S&P recently upgraded Fairchild’s corporate credit rating to BB from BB- with a stable outlook
• Generated record $129m FCF in 2009 and on track to deliver even greater FCF in 2010
• Primary focus remains investing in our business• Reducing debt to increase operational flexibility is also a top
priority
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4 Qtr Rolling Depreciation vs Capex
Depreciation expense is returning to a more normalized 6 – 8% of sales
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4 Qtr Rolling Free Cash Flow
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Net Debt & Interest Trend
Cash exceeds debt for first time in our history!
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Fairchild: The Power Franchise®
• Wireless convergence and energy efficiency mega-trends create huge market opportunities
• New products and better mix are driving improved margins• Profitable sales growth in analog and power management products • Better mix of products due to more new products and reduction of low margin
business• Product cost reduction driven by efficiency gains, fab shrinks, fab consolidation and
new processes• Reduced D&A due to consolidations and long term lower CAPEX spending• Structural changes to reduce OPEX and improve earnings
• Earnings growth coupled with capex and working capital discipline expected to enable strong cash generation in 2010
www.fairchildsemi.com
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Fairchild SemiconductorInternational, Inc.
Robert Baird Growth Stock ConferenceMay 18, 2010
Dan JansonVice President of Investor Relations
