Pericom's Diverse Products, Clients
Help Tiny Chip Company Stand Tall

July 24, 2000

By Robyn Taylor Parets

When you think about semiconductor companies, the big names typically come to mind -- corporations like Texas Instruments Inc., Intel Corp., and National Semiconductor Corp.

Yet, these “biggies” aren’t the only companies helping electronic systems manufacturers improve their computing devices. Another lesser-known, yet rapidly growing chip company is Pericom Semiconductor Corp.

Unlike many larger semiconductor companies, Pericom does not make memory and data processing integrated circuits. Rather, it focuses on interface ICs, which control the transfer, routing and timing of data within an electronic system. These circuits, for example, help move data between a system’s microprocessor, memory and various peripherals, said CEO and president Alex Hui.

“Basically, they are the highway interfacing key components in a computer system. They make the chips that communicate data between the memory and a high-speed (central processing unit),” said John Lau, who covers semiconductor companies with senior analyst Scott Randall at Wit SoundView Corp.

The more than 400 Pericom interface products also help systems manufacturers increase bandwidth in applications like servers, network switches, storage area networks, wireless base stations, and notebook computers. With processing power continuing to double every 18 months, the speed at which microprocessors access memory can be a major system bandwidth constraint in high speed computing. Pericom’s products address this critical need, said Hui.

“Systems have to move data back and forth. If they can’t move it fast enough, what good does it do?” he said.

Pericom’s goal is to continue developing new products to help expand bandwidth in electronic devices. The market for interface ICs in all segments of the electronics industry is expected to grow from $980 million last year to $1.63 billion in 2002, according to Pericom, Insite/Onsite and Selantek estimates. Currently, Pericom holds a 7% marketshare, yet it expects its piece of the pie to grow to 10% by 2002, said Hui.

For the third quarter, ended March 31, per-share earnings rose 65% to 28 cents from 17 cents. Sales jumped 56% to $23 million from $14.75 million.

To help augment its business, the company has expanded from one product line ten years ago to four comprehensive product lines today. To boot, Pericom introduced 113 products last year. During the third quarter, it rolled out 24 new products and expects to introduce 80 this year, said Hui.

Its ability to continually develop new products that target expanding markets is a key growth driver for Pericom, said Quinn Bolton, a semiconductor analyst at CIBC World Markets.

“They have the right products to fulfill demand for higher bandwidth -- regardless of whether they are used in servers or telecommunications devices. All these systems need higher performance and a better way to manage traffic,” said Bolton.

As a testament to Pericom’s success, top name computing companies are incorporating more of its devices into their systems. Cisco Systems Inc., for instance, has designed about 120 Pericom products into its network routers and other devices, said Bolton.

“Just look at that penetration rate. More than one in four of Pericom’s products are shipped to Cisco,” he said.

Cisco, in fact, is Pericom’s biggest customer -- comprising about 10% of its business, said Hui. “If you want one customer to have 10% of your business, Cisco is a nice one to have,” he said.

Cisco, IBM Corp., Dell Computer Corp., Compaq Computer Corp., and Apple Computer Inc. together comprise 36% of Pericom’s revenues. The rest of its sales are derived from a diverse customer base including Qualcomm Inc., Hewlett-Packard Co., Sony Corp., and Cabletron Systems Inc. Although not immune to the cyclical nature of the semiconductor industry, its expansive customer roster and product line helps the company weather through industry downturns. “We don’t like to put all of our eggs in one basket. Not one single product accounts for more than 5% of our revenues,” said Hui.