SEMICONDUCTOR SECTOR REPORT
SAVVIAN, LLC 150 CALIFORNIA STREET, SAN FRANCISCO, CA 94111 | www.savvian.com | 415.318.3600
MARKET HIGHLIGHTS Inside this issue MARKETMARKET HIGHLIGHTSHIGHLIGHTS STMicroelectronics (NYSE:STM, Paris: STM.PA, Milan:STM.MI), Intel (NASDAQ:INTC) and Francisco Partners entered into a definitive agreement to create a new independent semiconductor company from the key assets of businesses which Market Highlights last year generated approximately $3.6Bn in combined annual revenue. The new company’s strategic focus will be on Summary Performance supplying flash memory solutions for a variety of consumer and industrial devices. Two Global Positioning Systems (GPS) related private companies were acquired, confirming the emerging significance of Observations GPS-related technology in the semiconductor industry. In early June, Broadcom (NASDAQ: BRCM) signed a definitive Trading Data agreement to acquire Global Locate, Inc for $226MM. In late June, GPS chipmaker SiRF Technology Holdings Inc. (NASDAQ: SIRF) announced the purchase of Centrality Communications for $283MM. Transaction Activity Early in the quarter, Linear Technology announced a $3Bn Accelerated Stock Repurchase in combination with $1.7Bn in Savvian Update privately placed convertible senior notes. This financing was noticed and emulated by numerous other large capitalization companies who are seeking to optimize their capital structures in light of increased shareholder pressure and private equity interest. Applied Materials (NASDAQ:AMAT) acquired HCT Shaping Systems, a Swiss solar company, for CHF 583MM ($475MM) in cash, extending the company’s reach in the solar industry. The acquisition advances AMAT’s strategy leveraging its semiconductor process capability into complementary adjacent markets. Zarlink (NYSE / TSX: ZL) signed a definitive agreement to acquire privately held Legerity Holdings for $135MM in cash. The combined company will target the growing voice-over-packet communication market. San Francisco Office Three high profile fabless IC companies successfully completed IPO’s, including Cavium (NASDAQ: CAVM), AuthenTec 150 California Street (NASDAQ:AUTH) and Spreadtrum (NASDAQ:SPRD), signaling renewed investor interest in semiconductor growth stories. San Francisco, CA 94111 Phone: (415) 318-3600 SUMMARY Q2 STOCK PERFORMANCE 116 New York Office 7 Times Square, 112 +13% Suite 2501 New York, NY 10036 Phone: (212) 999-7090 108 +8% +7% +5% Chicago Office 104 +5% 71 S Wacker Drive, Indexed Price Suite 1230 +1% Chicago, IL 60606 100 Phone: (312) 212-8210 96 4/02/07 4/13/07 4/27/07 5/09/07 5/22/07 6/01/07 6/15/07 6/29/07
NASDAQ SOX IC IP & EDA Equipment Services & Materials
For further information, OBSERVATIONS please contact: Q2 demonstrated the continuance of a trend we highlighted last quarter with several divisional sales by IDMs who are realigning product portfolios around “fab-lite” strategies. In total, four such divestitures were announced involving LSI, Texas Instruments, NXP, and Infineon. Bryce Dakin Combining complementary product portfolios to increase scale was also a significant driver of several M&A transactions Director announced during the quarter including: Zarlink’s acquisition of Legerity, Magnum Semiconductor’s acquisition of LSI’s Phone: (415) 318-3673 Consumer Products business and Exar’s acquisition of Sipex. [email protected] While three semiconductor IPOs and several high-profile private company sales were announced during the quarter, VC investment maintains a cautionary stance on the sector with early and mid-stage private financings generally done at conservative valuations. A “selective” IPO market is however preferable to a “closed” market and has provided additional Mark Waissar leverage to top private companies who are simultaneously evaluating both M&A and IPO paths. Managing Director In the public markets, momentum shifted positive for many of the semiconductor sub-sectors. Discrete ICs, Packaging & Phone: (415) 318-3650 Testing Services, Analog ICs, Memory ICs, and Wireless ICs all outperformed the broader SOX, while equipment stocks [email protected] experienced cyclical softness. Overall, investors continue to have confidence in the industry and have applauded moves by some companies to optimize capital structures, return money to shareholders, and generally have better supply chain control. In total, 5 IPOs, 11 follow-ons, 6 PIPEs & Rule 144a financings (deal value greater than $10MM) were completed for a combined $9.2Bn. SEMICONDUCTOR SECTOR STOCK PERFORMANCE
Sector 1 Month Sector 3 Month Sector 1 Year
Packaging / Testing Services 9.9% Discretes 15.6% Packaging / Testing Services 62.0% Memory 6.6% Packaging / Testing Services 13.4% Intellectual Property 40.9% Discretes 6.5% Analog / Linear 9.1% Wafer and Materials 24.3% Metrology, Test and Packaging Equipment 6.0% Memory 8.7% Processors 20.6% SOX 4.1% Wireless 8.3% Memory 19.5% Wafer and Materials 3.7% SOX 7.6% Analog / Linear 18.2% Analog / Linear 3.6% Wafer Processing Equipment 6.6% PLD / ASIC 17.9% Multimedia 3.4% Metrology, Test and Packaging Equipment 6.3% EDA 17.1% Intellectual Property 3.2% Wafer and Materials 5.9% SOX 12.3% Processors 2.5% Multimedia 4.9% Wafer Processing Equipment 9.8% Wireless 1.3% Processors 4.8% Foundries 8.3% Foundries 1.0% Foundries 4.1% Discretes 8.2% Wireline 0.9% Intellectual Property 2.6% Wireless 7.0% Wafer Processing Equipment 0.4% PLD / ASIC 2.0% Wireline (7.1%) EDA (1.1%) Wireline 1.8% Metrology, Test and Packaging Equipment (11.9%) PLD / ASIC (1.3%) EDA 1.1% Multimedia (15.5%)
Notes: Represents median price change for each category over specified time period. SOX represents index of semiconductor public companies.
Q2 Best Performers – Large Cap Q2 Best Performers – S/M Cap LTM Best Performers – Large Cap LTM Best Performers – S/M Cap Richtek Technology 60% CSMC Tech 89% Mosel Vitalec 217% Elan Micro 307% Cree Inc. 57% Color Kinetics 72% Richtek Technology 189% Weltrend Semi 289% NVIDIA 44% Elan Micro 68% Realtek Semi 157% Wavecom SA 233% SunPower 39% Weltrend Semi 68% Faraday Technology 151% Pan Jit International 216%
Large Cap consists of companies with current market capitalization greater than $1Bn as of June 29, 2007. Small / Mid Cap consists of companies with current market capitalization between $100MM and $1Bn as of June 29, 2007. Q2SEMICONDUCTORS and LTM as of June 29, 2007. PUBLIC COMPANY UNIVERSE SEMICONDUCTOR SECTOR TRADING MULTIPLES
Combined EPS Market AV / Revenue AV / EBITDA Price / EPS CY 07E Price / Long Term Revenue Growth Cap (MM) CY 07E CY 08E CY 07E CY 08E CY 07E CY 08E PEG Book Growth 08E/07E Y/Y MRQ
Median Multiples
Processors $151,949 5.0 x 2.9 x 12.7 x 8.9 x 22.3 x 17.7 x 1.1 3.5 x 16.2% 16.9% (1.0%) Wireless 137,178 2.9 x 2.3 x 12.7 x 9.8 x 19.3 x 17.8 x 1.0 4.0 x 19.2% 19.1% 21.1% Foundries 81,279 2.2 x 1.7 x 7.8 x 5.9 x 24.1 x 19.2 x 0.8 1.4 x 20.0% 18.5% 2.6% Analog / Linear 80,784 3.3 x 2.8 x 13.6 x 11.7 x 23.8 x 19.5 x 1.2 3.4 x 17.3% 13.9% (1.3%) Wafer Processing Equipment 72,315 1.8 x 1.8 x 9.5 x 9.6 x 17.3 x 13.6 x 0.8 2.1 x 17.5% 12.8% 10.5% Memory 65,278 1.2 x 1.3 x 10.1 x 6.2 x 34.6 x 22.4 x 1.4 1.5 x 15.7% 14.2% 12.7% Multimedia 46,567 1.8 x 1.5 x 11.0 x 8.3 x 21.0 x 16.5 x 0.7 2.4 x 19.2% 15.2% (0.6%) Wireline 40,432 1.7 x 1.5 x 29.0 x 17.5 x 32.4 x 24.1 x 1.1 2.0 x 20.0% 16.6% (5.7%) PLD / ASIC 40,378 2.1 x 1.9 x 10.1 x 8.9 x 25.8 x 19.1 x 1.3 2.4 x 15.0% 13.5% (0.5%) Wafer and Materials 32,272 1.9 x 1.7 x 10.5 x 8.9 x 20.6 x 15.6 x 0.9 2.2 x 18.5% 12.0% 14.2% Metrology, Test and Packaging Equipment 23,152 1.5 x 1.5 x 10.5 x 9.9 x 22.3 x 16.6 x 0.8 2.1 x 16.4% 13.2% (10.5%) Packaging / Testing Services 19,272 1.9 x 1.6 x 6.5 x 5.6 x 14.5 x 11.6 x 0.8 2.5 x 16.3% 16.2% 4.4% Discretes 16,853 1.5 x 1.8 x 8.6 x 7.0 x 19.5 x 15.1 x 1.0 1.7 x 15.8% 8.3% 12.0% Intellectual Property 13,514 5.8 x 5.7 x 18.2 x 13.4 x 32.3 x 24.2 x 0.9 2.7 x 20.0% 21.0% 2.9% EDA 12,143 2.6 x 2.3 x 12.7 x 10.1 x 27.0 x 19.1 x 1.0 2.9 x 21.1% 9.6% 11.3%
Mean 2.5 x 2.2 x 12.2 x 9.5 x 23.8 x 18.1 x 1.0 2.4 x 17.9% 14.7% 4.8% Median 1.9 x 1.8 x 10.5 x 8.9 x 22.3 x 17.8 x 1.0 2.4 x 17.5% 14.2% 2.9%
Notes: Source: Reuters, FactSet and Street Estimates As of June 29, 2007.
SAVVIAN, LLC 150 CALIFORNIA STREET, SAN FRANCISCO, CA 94111 | www.savvian.com | 415.318.3600 SELECTED MERGER & ACQUISITION TRANSACTIONS
$MM Ann / Close Deal Date Status Target / Unit Name Buyer Name Value Target Business Description
6/28/07 Completed Acer / Apacer Technology Powerchip Semiconductor $8 Manufactures memory module, flash memory and related products 6/27/07 Announced LSI / Consumer Products Business Magnum Semiconductor ND Develops chips, software and platforms for consumer entertainment systems Supplier of wafering systems used in manufacturing of crystalline silicon (c-Si) 6/26/07 Announced HCT Shaping Systems Applied Materials 475 substrates for the solar industry 6/25/07 Announced Legerity Holdings Zarlink Semiconductor 135 Manufactures semiconductors and related devices 6/25/07 Announced Texas Instruments / DSL Customer Premise Business Infineon Technologies ND Manufactures telephony equipment 6/21/07 Announced Centrality Communications SiRF Technology Holdings 283 Develops semiconductor system solutions for GPS navigation products 6/12/07 Announced Global Locate Broadcom 226 Provides GPS semiconductor products and software 5/14/07 Announced NXP BV / Cordless & Voice Over IP Terminals Operation DSP Group 345 Supplies RF chipsets, basebands, software and system solutions 5/8/07 Announced Sipex Exar 189 Manufactures and sells analog integrated circuits 5/29/07 Completed Octalica Broadcom 31 Provides networking solutions for the digital home entertainment market 4/23/07 Completed Applied Materials / Metron Clean Room Business Basan & Origin Outsourcing Solutions ND Distributor of cleanroom consumables for the semiconductor industry
4/20/07 Announced Advanced Interconnect Technologies Unisem (Malaysia) 70 Provides semiconductor assembly and test services 4/30/07 Announced Future Communications IC Silicon Motion Technology 102 Designs fabless RF IC of low power, low cost semiconductor solutions 4/2/07 Announced Infineon Technologies / Polymer Optical Fiber Operation Avago Technologies ND Manufactures automotive multimedia infotainment networks and transceivers
Notes: Savvian acted as an advisor in transactions highlighted in light blue. Source: Mergerstat, Company Filings, CapIQ, Wall Street Research ND represents Deal Value that were Not Disclosed.
SELECTED FINANCING ACTIVITY
$MM Effective Deal Effective Deal Date Company Value Business Description Date Company Value Business Description
IPO PIPE (Equity & Debt) & Rule 144a Financings
Engages in the development of baseband processor Manufactures semiconductor integrated circuits (ICs) on 6/28/07 Spreadtrum $126 6/13/07 Tower Semiconductor Ltd. $40 solutions for the wireless communications market silicon wafers Provides fingerprint authentication sensors and solutions to 6/26/07 AuthenTec 83 the high-volume personal computer (PC), wireless device, 6/8/07 OPEL International, Inc. 11 Produces monolithic integrated circuit solutions and access control markets Manufactures and sells multicrystalline solar wafers to the Manufacturessemiconductor wire bonding assembly 5/31/07 LDK Solar Co.Ltd. 469 6/6/07 Kulicke & Soffa Industries Inc. 110 manufacturers of solar cells and solar modules equipment and packaging materials
Manufactures solar cells from silicon wafers utilizing Provides processing solutions for the computing, graphics, 5/17/07 China Sunergy Co. Ltd. 108 4/27/07 Advanced Micro Devices Inc. 2,200 crystalline silicon solar cell technology and consumer electronics markets
designs, develops, and markets semiconductor processors Engages in the design, manufacture, and marketing of 5/1/07 Cavium Networks, Inc. 91 4/24/07 Linear Technology Corp. 1,700 for intelligent and secure networks various linear integrated circuits Manufactures and markets radio frequency (RF) components 4/10/07 RF Micro Devices Inc. 400 Follow-on Equity Offering and system solutions for mobile communications
Develops semiconductor integrated circuits or chips, known 6/13/07 MathStar, Inc. $35 Venture Capital as field programmable object arrays (FPOAs)
Engages in the design and marketing of re-programmable, Provides silicon design, software, and systems to Wireless 6/1/07 SIMTEK Corp. 62 6/21/07 picoChip Designs Limited $27 nonvolatile semiconductor memory products systems
Engages in the manufacture and sale of solar-power Develops silicon solutions to receive digital multimedia 5/31/07 Trina Solar Ltd. 243 6/19/07 SiPort, Inc. 21 products broadcast for the mobile market consumers
Develops high-definition televisions (HDTVs) in liquid crystal Engages in the development and marketing of mobile 5/23/07 Syntax-Brillian Corporation 147 6/12/07 Altair Semiconductor Ltd. 18 display (LCD), and liquid crystal on silicon (LCoS) formats broadband silicon solutions for WiMAX networks
Manufactures semiconductor integrated circuits (ICs) on Supplies ultrawideband solutions to personal computers 5/23/07 Tower Semiconductor Ltd. 85 6/11/07 WiQuest Communications, Inc. 23 silicon wafers (PCs), consumer electronics, and mobile systems companies
Produces integrated process control metrology systems and Engages in developing and supplying wireless components 5/23/07 Nova Measuring Instruments Ltd. 14 6/8/07 Nanoradio AB 27 process control metrology systems and systems for the wireless industry Manufactures integrated circuits and other semiconductor 5/17/07 Taiwan Semiconductor Manufacturing 2,563 devices 6/4/07 Stretch, Inc. 12 Designs and manufactures microprocessors
Engages in the design and development of front-end radio 5/8/07 ON Semiconductor Corp. 543 Manufactures power and data management semiconductors 5/30/07 SiGe Semiconductor, Inc. 19 frequency integrated circuits and chip-scale modules
Develops high-definition televisions (HDTVs) in liquid crystal Provides chips, software, platforms, and engineering 4/30/07 Syntax-Brillian Corporation 91 5/24/07 Magnum Semiconductor, Inc. 27 display (LCD), and liquid crystal on silicon (LCoS) formats customization support
Engages in the manufacture and design of high reliability Develops a manufacturing technology for the production of 4/13/07 API Nanotronics Corp. 55 5/8/07 Solaicx, Inc. 27 semiconductor and microelectronics circuits single crystal silicon ingots
Designs, manufactures, and markets signal processing 5/7/07 GTronix Inc. 10 integrated circuits for mobile device applications
Develops high-speed interconnect technologies for high- 4/20/07 Redmere Technology Ltd. 13 definition video and multi-channel audio products
Source: CapIQ, includes transactions in Q2’07 greater than $10MM. SAVVIAN, LLC 150 CALIFORNIA STREET, SAN FRANCISCO, CA 94111 | www.savvian.com | 415.318.3600 SAVVIAN TRANSACTIONS IN 2007
Strategic Acquisition of Acquired by Acquired by Acquired by Merger With Investment by HowStuffWorks International
Financial Advisor We advised the buyer We advised the seller We advised the seller We advised the seller We advised INTAC
Divestiture of Acquired by Acquired by Acquired by Acquired by Cell Phone Innovation Interactive Common Stock Distribution Management and PIPE Business
We advised the seller We advised the seller We advised the buyer We advised the seller Placement Agent We advised the seller
Divestiture of Acquired by Sale of Semiconductor Automatic Acquired by Preferred Test Equipment Assets to Cleanroom Integrated Acquisition of Silicon Valley Stock Tech Center from Solutions Business
We advised the seller Financial Advisor We advised the seller We advised the buyer We advised the seller We advised the seller
Has sold its CDN Strategic Preferred Secondary Services Business to Acquired by Alternatives Stock Public Review Equity Offering
Financial Advisor Financial Advisor Financial Advisor We advised the seller We advised the seller
Semiconductor & Electronics related transactions highlighted in blue ABOUT SAVVIAN ADVISORS LLC Savvian Advisors, LLC is a leading investment bank serving growth companies through its merger and acquisition advisory and capital market financing services. Savvian professionals cover a broad array of industries, including the technology, media, communications, healthcare, business services, financial technology and consumer commerce sectors. Savvian has offices in San Francisco, New York and Chicago.
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SAVVIAN, LLC 150 CALIFORNIA STREET, SAN FRANCISCO, CA 94111 | www.savvian.com | 415.318.3600