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ADI beefs up RF line with Hittite buy

Posted: 19 Jun 2014     Print Version  Bookmark and Share

Keywords:Analog Devices  RF  Hittite Microwave  millimetre wave technology 

Analog Devices Inc. (ADI) has acquired Hittite Microwave Corp., an RF chip maker, in a $2 billion cash deal to expand its product line-up. ADI will gain more than a 1,000 RF chip products that cover the frequency range of DC to 110GHz: RF (0-6GHz), microwave (6-20GHz) and millimetre wave (20-110GHz).

By adding microwave and millimetre wave technology expertise to its RF and signal processing arsenal, ADI will deepen its penetration in the industrial, communications infrastructure and automotive markets, which account for 89 per cent of its revenue, as well as strengthen its financial position.

"ADI will be able to serve our customers with technology capable of converting the entire frequency spectrum, including RF, microwave and millimetre wave," said Vincent Roche, president and CEO of ADI. "We believe this capability meaningfully differentiates ADI."

However, it also allows ADI to "return to its roots" since it started out as military and aerospace supplier, according to Stephan Ohr, research director in Gartner's technology and service provider unit, San Francisco. "Who else could afford precision data converters back in the 1960s?" Ohr asked.

"With the acquisition of Hittite, ADI repositions itself on the high-end of radio parts suppliers. Their transmitter/receiver components will support radar and satellite communications, and their customers will include aerospace companies," Ohr noted.

Hittite Microwave, based in Chelmsford, Mass., is heavily focused on serving the military, microwave and millimetre-wave communications and cellular infrastructure applications. In 1Q14, the company reported revenue of $70.6 million of which 78 per cent was derived from those markets. Gross-profit margin was 67.4 per cent. Hittite has 36 product lines, which include power amplifiers, variable gain amplifiers, sensors, switches and attenuators, as well as frequency dividers and multipliers.

"Hittite's analogue front ends will complement ADI's high-sample-rate converters, a line of 100MHz and 150MHz ADCs with 14bit and 16bit resolution, to support cellular base station receivers," Ohr said. "Unlike the traditional analogue down-converters, which use an intermediate beat frequency to subtract the carrier from the RF composite, the digital receivers (with the ADCs) capture an RF swath and use a DSP to digital segregate channels and talkers."

ADI's signal processing solutions also include operational amplifiers and linear products, as well as DSPs, processors and MEMS devices. When the deal is completed, ADI's amplifier/RF product revenue base will approach nearly $1 billion.

Roche said that there is very little product overlap between the two companies and that it will "harmonise the product definition efforts and just get even more clarity about where each of the pieces plays," in subsequent months. Management will also decide how to assimilate Hittite's fabless structure with ADI's internal manufacturing capabilities. About 50 per cent of ADI's production is done in-house, but it taps outside foundries for 0.18-0.25um processes.

According to David Zinsner, ADI's CFO, ADI has "some operational scale" that it can leverage as it combines Hittite into its operations. "We do think we can actually improve the cost of manufacturing of Hittite's parts as it gets kind of integrated into our operations."

But since there is minimal product and process overlap with ADI's internal capabilities, Rick Hess, Hittite's CEO, stated that "for the most part, Hittite will continue to use its external fabs." Hess also cited gallium nitride as a "significant piece" in the future of the company's growth. "We will continue to drive in the gallium nitride area."

Wall Street applauded the deal, which expected to close near the end of ADI's third fiscal quarter. According to Tore Svanberg, an analyst with Stifel Nicolaus, San Francisco, "ADI's acquisition of Hittite enhances its competitive position and drives market-share gains and meaningful product differentiation in the high-performance RF and microwave/millimetre markets, and could pressure others in the space that are currently operating across all areas of the frequency spectrum, especially in the higher end."

- Ismini Scouras
  EE Times





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