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www.fairchildsemi.com
Company Confidential 1
Fairchild SemiconductorInternational, Inc.
November 2008
Investor Presentation
2
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 2008 Q3, with segment revenue/gross margin breakouts)
• Quarterly Fact Sheet with 2008 Q3 highlights
• This investor presentation
3
• Sales were up 2.3% sequentially and up 0.4% annually
• Overall demand as expected…strongest in handsets and weakening in computers and industrial
• Record sales of our high frequency voltage regulators, analog switches, IntelliMAX™ load switches, and analog video filters
•Internal inventory decreased more than $7m QoQ or 3 days to 72 days…one of the leanest levels in the industry
• Channel inventory was flat sequentially and at the midpoint of the targeted range on 1% higher distributor sell through QoQ
• Gross margin was up 130 bps QoQ to 29.9% due to higher factory loadings, cost decreases related to product insourcing, lower material costs, and favorable currency exchange rates in Asia
• Pricing down 1- 2% QoQ and within our normal range
• Blended average lead time were reduced 1 week to 6 - 8 weeks
Q3 2008 Summary Sales Growth Driven by New Products
4
Forward Guidance – Q4 2008
• Sales expected to be down 16-21% QoQ…98% of guidance was booked at the start of the quarter.
• Gross margins expected to be down 100 to 200 bps to a range of 27.9% to 28.9%
• R&D and SG&A expected to be $73 million to 76 million.
• Net interest and other expenses expected to be $6.0 – 6.5m
www.fairchildsemi.com
Company Confidential 5
Fairchild Overview
6
Taking Care of Our Stakeholders
CustomersMake our customers successful
EmployeesAttract the best
talent in the industry
StockholdersDeliver a superior return
7
Fairchild Focused on the Right Markets
• Energy efficiency and the wireless mobility revolution are mega-trends that will shape our world for years to come
• Fairchild is uniquely positioned to capitalize on these trends with our leadership position in switching and power conversion
• Our new HF DC/DC regulators for ultra-portable applications offers us a high performance entry point into the voltage regulation market
Fairchild is building the right products for the right markets!
Source: iSuppli, April 2007
-
400
800
1,200
1,600
2,000
2006 2007 2008 2009 2010
Offline Power Conversion Market Forecast
Dollars Units
13% Sales CAGR2006 - 2010
-
5,000
10,000
15,000
20,000
25,000
30,000
2006 2007 2008 2009 2010
Voltage Regulation Market Forecast
Dollars Units
14% Sales CAGR2006 - 2010
-
5,000
10,000
15,000
20,000
25,000
30,000
2006 2007 2008 2009 2010
Power MOSFET Market Forecast
Dollars Units
8% Sales CAGR2006 - 2010
8
Source: WSTS
Industry Cyclicality
WW Semiconductor Unit Shipments Data shows 2-Year cycle since 1991
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
YoY
Cha
nge
in S
emic
ondu
ctor
Uni
t Shi
pmen
ts
9
Source: WSTS
Despite Cyclicality, Semis Remain aGrowth Industry
Industry Semi Units Shipped (24 mo Rolling Avg)
0
5
10
15
20
25
30
35
40
45
50
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Sem
icon
duct
ors
Ship
ped
(BU
)
10
FCS Transition to Higher Valueis Underway!
8 Qtr Average GM Trend
20.0
25.0
30.0
35.0
40.0
45.0Q
1Y20
02
Q2Y
2002
Q3Y
2002
Q4Y
2002
Q1Y
2003
Q2Y
2003
Q3Y
2003
Q4Y
2003
Q1Y
2004
Q2Y
2004
Q3Y
2004
Q4Y
2004
Q1Y
2005
Q2Y
2005
Q3Y
2005
Q4Y
2005
Q1Y
2006
Q2Y
2006
Q3Y
2006
Q4Y
2006
Q1Y
2007
Q2Y
2007
Q3Y
2007
GM
%
FCS - GAAP Peer Average
Transition Begins
Note: FCS Q3 is mid-point of guidance range…Peer group includes VSH, ONNN, IRF, DIOD, NSM, ISIL, TXN, MXIM
11
The Power Franchise®
Fairchild is a world leader in high performance semiconductors specializing in products for the optimization of system power
Our Power Franchise® Plan: • Enhance position in Power Conversion• Establish leadership in HF DC/DC regs• Extend lead in MOSFETs
This plan is supported through improved supply chain & POS mgmt to reduce cyclicality and package cost reductions through greater in-sourcing to improve margins
µSerDes™
Logic
Video filters
Amplifiers
Optocouplers
Analog switches
12
FCS Power SAM by Market Segment
Source: iSuppli Jun. 2007 (industry definitions)
9.0%
19.1%
5.3%
12.0%
4.3%
12.7%
9.8%
0
5,000
10,000
15,000
20,000
25,000
30,000
Automoti
ve Elec
tronic
sCom
putin
g
Consu
mer Elec
tronic
s
Wired C
ommun
icatio
ns
Wireles
s Com
munica
tions
Indus
trial E
lectro
nics
Worldw
ide SAM
$M
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
20062010CAGR ('06 - '09)
13
Share in Focus Markets
Switching
DC/DC Regulation
Offline Power Conversion
Tosh
Vishay
IRF
FCS
RenasasSTM
~10 Others
~40 Others
MXIM
FCS TXN
NSM
LINEAR
2006 TAM, 2005-2010 CAGRDC/DC Regulation
Linear Regs $2826 5.0%
DC/DC Regs $2297 15.9%
Battery Mgmt $1512 16.8%
Hot Swap $ 210 15.3%
MOSFET Drvr $ 771 14.1%
Non-ISO PWM $1416 16.0%
Offline Power Conversion
AC/DC Regs $ 744 13.3%
PFC $ 245 16.1%
ISO PWMs $ 586 14.4%
Switching
Lo Volt FETs $3369 8.5%
HI Volt FETs $1333 7.5%
$8.5B$8.5B
$1.5B$1.5B
$4.6B$4.6B
INF
Sanken
POWI
FCS
STM
TXN
ONNN
~5 Others
Source: iSuppli Jun. 2007
Huge potential with UP strategy
Achieved #1
Achieved #1
14
Increased Segment Focus
We have defined target markets and are focusing on key solution spaces for specific customers to drive higher content, market share & margins!
µSerDes™
Logic
Video filters
Amplifiers
Optocouplers
Analog switches
Product View
Increased Importance to Our Customers
Source: Fairchild estimates
GM Potential by Segment
0%10%20%30%40%50%60%70%
HandsetsAPG
Handsets -FPG
Displays -APG
Displays -FPG
Pw r Supplies- APG
Pw r Supplies- FPG
Computing -APG
Computing -FPG
Narrower, Deeper Focus
in Markets with Higher GM Potential
15
Segment Focus Drives Content Gains
Content Trends
$0 $2 $4 $6 $8 $10 $12 $14
Computing
LCD Displays (>40")
Handsets
2006 2008 2010
Power Supplies• Commercial & regulatory pressure for greater
efficiency drives PFC and higher silicon BOM• FCS content grows with addition of SG, PFC,
integrated HV MOSFETs and ICs, SR, QR & Digital Power
• Expect higher content to drive 3X SAM by 2010
Displays• Larger panel sizes and greater resolution require
improved backlighting which drives power BOM• FCS adds SPM, analog & HDMI switches, video
filters, power conversion solutions
Handsets• New features/3G/iPhone revolution while users
demand same or better talk time• FCS improves content with HF DCDC,
IntelliMAX™ added to the proliferation of analog switches, µSerDes™ and MOSFETs
Source: Fairchild estimates
16
Becoming a More Important Supplier
• Application intimacy
• Solve important problems
• Provide complete power management solutions
• Reduce BOM and costs for our customers
• Global supply chain support
• Consistent lead times & BIC performance to request date for key customers
• Leader in innovation where it matters most for our customers
Sales Growth: Strategic Customers
0
0.5
1
2007 Fcst 2009 Fcst
$ B
50% Growth
Source: Fairchild estimates
17
Update on Key Themes from 2007 Analyst Day
• On track to exit 2008 at about 40% outsourced vs65% outsourced a year ago• Expect about 150 bps improvement to GM
Package cost reduction through greater in-sourcing
• Launched HF Voltage Regs in late 2007 and expect to exit 2008 at >$13m quarterly run rate
Increase market share in DC/DC voltage regulation market
• Greater engagement with top 5 handset customers and major power supply makers• OEM is our fastest growing channel
Focus on Tier 1 customers to drive apps knowledge
• Realigned APG & FPG to segment structure at the start of 2007• Increased field apps knowledge
Adopt Segment structure
2008 Update2007 Analyst Day Theme
18
Acquisition Landscape
Small Privates
Carve outs
<$1B Public
Large Public Combination
Technology/IP, Key Personnel Talents, Emerging Products
Easy path to profitability, Complementary Products
Change Competitive Structure
Enter new markets
Financial Leverage, Cost reduction possibilities, Complementary Products
Low, mostly around keeping talent
Low to High, very situation dependent
Med to High. Mgmt & change of control issues.
Risks of culture clash
High, if priced right and strategy fits
Pricing power elusive. Must have strategic synergies
Banks/sponsors and investors who flip shares will make the most
Reason to Pursue Integration RiskLikelihood of Value to FCS Shareholders
Med to High. Mgmt & change of control issues.
Risks of culture clash
High, if priced right and integration is crisp. Needs strategic value beyond beating DCF
Increasing Focus
19
Levers to Drive Higher Margins
• Expand content in key segments
• Upgrade HV business to perform in line with LV
• Roadmap for Power Conversion margin improvement
• Continue above-market growth for Signal Path
• Capitalize on HF DC/DC opportunities
• Run SPG at target model
• Package cost reductions
• Tight OPEX control
20
Fairchild Semiconductor Solid Progress, Exciting Potential
• Transition to a higher value company is well underway
• Demonstrated best ever trough sales & GM performance
• Cross-cycle metrics for sales / GM / EPS all positive
• #1 sales position in 2 of our 3 target markets
• Investment in Analog & Power Management drives exciting new products – Ramping across 2008 and 2009
• Segment focus drives greater application and customer intimacy – Enables us to become a more important supplier
• Package cost reductions & tight spending controls increase confidence in ability to achieve target model
www.fairchildsemi.com
Company Confidential 21
Mobile, Computing, Consumer & Communications (MCCC)
Group Overview
22
Analog Market Breakdown 2007
ASSP
Standard Linear
Standard Linear TAM$18.9B
(9.5% CAGR)
Analog TAM $51.2B
(8.4% CAGR)
Source = iSuppli Q2 2007, CAGR 2006-2010
Regulators$9.1B
(13.8% CAGR)
Data Converters$3.1B
(4.6% CAGR)
Amplifiers$3.1B
(6.4% CAGR)
Interface$2.8B
(8.8% CAGR)
Semiconductor IC TAM$250B
(6.4% CAGR)
Memory
Analog
Logic
Micro IC
23
Analog Power Management Market
DC:DC Regulation ($9B) 2007 TAM ($M) CAGR*Linear Regulators $3,174 5.0%
DC:DC Regulation $2,670 15.9%
Battery Management $1,775 16.8%
Hot Swap $ 242 15.3%
MOSFET Drivers $ 885 14.1%
Non-Isolated PWM $1,662 16.0%
Off-Line Power Conversion ($1.6B)
AC:DC Regulators $836 13.3%PFC $287 16.1%Isolated PWM $683 14.4%
*CAGR 2005-2010
Source: VDC
Ultra-portable
Computing/Point of Load
Power Conversion
Targeted >$6B TAM with CAGR ~15%
24
Application Specific Analog for Cell Phones, UP and PCs
Expand across top 5 manufacturers
Analog SwitchesµSerDes™ASSP’s
Ultra-portable (Cell Phones)
Focus
Product Categories
Market Segment
Top handset manufacturer as driverExpand across top 5 manufacturers
Building Block DC:DC
Ultra-portable (Cell Phones)
System PowerSignal Path
25
Ultra-portable
Interface ($1.50-$3.00)µSerDes™
Switch ($0.45-$0.50)AnalogUSB
Regulators ($1.20-$2.00)DC/DCLED DriversOff-line Power ($0.15-$0.25)
Charger adapters
Discrete ($0.43-$0.45)LV MOSFETIntelliMAX™
Logic ($0.25-$0.60)TinyLogic®Translators
Total FSC Content $4.30-$7.30
Market Opportunity* 480MuFSC SAM $2.1B-$3.5B
Signal Conditioning ($0.30-$0.50)Current Sense Amplifiers
Source: iSuppli June 2007 estimate handsets in mid to high end range for 2008
26
µSerDes™Serializer / Deserializer Technology
Features & Performance
• Industry leader in Serializer / Deserializer technology for small display and camera applications in handsets
• Proprietary technology reduces wires through hinge by up to a factor of 5x
• First SerDes solution to support primary and secondary displays, camera, keypad, and GPIO control in one IC pair
Strategic Importance to Fairchild
• Proprietary signal path solution for cell phones capitalizing on expanded multimedia functionality
• More valued supplier to top 5 cell phone manufacturers
Potential Business Opportunity
• Existing leadership in embryonic application in cell phone market evolving to dominant position during high growth ramp.
• Up to 4 units per phone
1,349Mu
2010 Market Size
8.1%990Mu
2006 – 10 CAGR
2006 Market Size
Source: iSuppli Jun. 2007
27
Analog Switch
$375M
2010 Market Size
10.7%$250M
2006 – 10 CAGR
2006 Market Size
Features & Performance• New Analog Quad Switches are being used in phones with two
SIM cards. This is a rapidly emerging application in those countries that allow one phone number with two service providers
Strategic Importance to Fairchild• The early recognition of this opportunity for non-US designs is
changing our model to adopt both application specific solutions and market specific solutions
Potential Business Opportunity• With the vast majority of cell phones now sold outside of the US,
the opportunity is significant
FSA2567 Quad Analog Switch
SIM Card #1 SIM Card #2Dual SIM Card Cell Phones
Source: iSuppli Jun. 2007
28
DC/DC Regulators for Cell Phones
$1.41B
2010 Market Size
3.9%$1.21B
2006 – 10 CAGR
2006 Market Size
Features & Performance• “DC/DC Regulators” convert the varying
battery power of a cell phone to a stable voltage that supplies power to digital components inside the cell phone
• Fairchild delivers the smallest and most efficient DC:DC regulators, resulting in cell phones with longer operating times
Strategic Importance to Fairchild• Build a business in the large DC:DC power
management segment
• More valued supplier to top 5 cell phone manufacturers
Potential Business Opportunity• $100M+ business potential over 3 to 5 years
Source: iSupply 2006
DC/DC
DC/DC
DC/DC LDO
LMU
Display Module
Camera Module
D/DC
LDO
DC/DC
PA
PMU
PMU
graphics accelerator
WLAN Module
DDR2/SDRAM
Base Band and application processor
subsystem
Audio
RTCPLLSIMM
LDOSDCARD
DC/DC
PMU Sub Display
SDCARD
29
Evolution of Switching Frequencies in DC:DC Converters
100
1000
10000
100000
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Year
Sw
itchi
ng F
requ
ency
(KH
z)
FAIRCHILD 16MHz
Micrel MC13882 8MHz
Freescale Semiconductor 6MHz
Fairchild FAN5350 3MHz
Linear LTC3411
National LM3671
Linear LTC1616Linear LTC1767
Linear LTC1701
MAXIM MAX887
Linear LTC1307
Motorola MC34063
LTC LTC3448
TI TPS62300
National LP5552
Freescale MC13882 Micrel
MIC3358
75
77
79
81
83
85
87
89
91
93
95
0.1 1 10 100Switching Frequency in MHz
Pow
er E
ffici
ency
(%).
FairchildCompetition
Fairchild is leading in high frequency
….at high efficiency
30
IntelliMAX™
$200M+
2010 Market Size
43%$60M
2006 – 10 CAGR
2006 Market Size
Value to the Customer• A Power Management solution that solves the protection
issues around low Vdd IC processes
• Features: Over Voltage Protection, in-rush current, transients, ESD…CSP/MLP packaging.
Potential Business Opportunity• Revenue > 45% CAGR since inception (2007 ≥ $10M)
• Achieves Gross Margins compatible with leading analog competitors
• Continues to “jump” market Segments…initial target was ultra portable, but continues to expand in the computing space
Source: iSuppli & Fairchild estimates
31
Computing
Silver Box ($3.25)ControllersPower DiscretesSPM
Servers ($4.00–$5.00)ControllersDriverMOSDriversLDO
Desktop ($3.00-$3.50)Switching RegulatorsLDODiscretesLogicDriverMOS
Gaming ($2.00-$3.50)Power DiscretesControllersDriversLDOMarket Opportunity
FSC SAM $2.5B-$3.25B
Notebooks ($4.00-$4.50)DriverMOSLDOPower DiscretesIntellimaxLogic
Total FSC Content $2.00-$5.00
32
Silicon Technology Drives Performance & Cost Advantages
Align the Technology…..Transition every 18 to 24 months• Continuously improve Figure of Merit• Reduce Die Size by 30%
Primarily based on technologies released
in ’04-’05
2004-2005 Technology 2006 Technology
Technology-MarginLow Voltage High Volume Package
Revenue vs. ASP/Cost per Unit
2001 2002 2003 2004 2005 2006E 2007E
Revenue
ASPCost
Rev
enue
Cost ↔ Value Delta
New Technology!
33
DriverMOS
Value to the CustomerProvides a cost effect path to the performance requirements of the next Gen. High End Desktops, Servers and Games
• State-of-the-art system efficiency
• High Frequency Operations
• Lower Overall System Cost
• Fewer passive components
Potential Business Opportunity• DriverMOS is a flexible Product Family that can
be scaled across all value / performance tradeoffs
• The combined computing market size totals $2.0B. This includes FETs, drivers, controllers and functional power solutions
$630M
2010 Market
8%$500M
CAGRSAM2010 Market SAM
2007 - 10CAGR
2007 Market
64 mm2
D D D D
S S S G
=
3 D-Pak’s 180 mm2 + Driver 30 mm2 = 210 mm2
• SAM is based on Vcore MOSFET/Driver ContentCalculated from Notebook, Driver, Server and Gaming units
34
Digital Control Technology
Features & Performance• Communication: The power supply can become an
intelligent module instead of a black box
• Performance: Easier optimization through communication means higher system efficiency
• Cost: >50% component reduction and higher reliability for lower Total Cost of Ownership (TCO)
Strategic Importance to Fairchild• Digital control and management is an emerging
trend in power management. As a leader in power conversion, vetting new technology to better serve our customers is a key imperative
Potential Business Opportunity• Significant strides have been made in digital power
management and control technology in the past few years, driving market forecasts close to $1B in 2011 with a CAGR > 36%. Power supply manufacturer, OEM and ODM adoption will depend on solution cost, performance and ease of use.
Source: Darnell June, 2006
AC - DC DC - DCInput OutputDigital Control
Comm
Digital Power Management:
Board / System Level
Digital Power Management:
Rack / Facility LevelComm
Digital Loop Control ICs
Digital Power ICs
36%$589M$169M
$315M
2010 Market Size
23%$137M
2006 – 10 CAGR
2006 Market Size
35
Consumer - Displays
Off-line Power ($2.30-$2.60)FPS
Signal Conditioning ($0.25-$0.35)Video Filters/Drivers
Switch ($0.35-$0.55)AnalogHDMI
Lighting IC ($0.70-$0.95)HVIC Backlight Inverter IC
Total FSC Content $9.75-$12.80
Market Opportunity* 268MuFSC SAM $2.6B-$3.4B
Discrete ($3.35-$4.85)Low Voltage MOSFETHigh Voltage MOSFET
Logic ($0.80-$1.00)
DC/DC Regulators ($2.00-$2.50)Switching Regulators
Source: iSuppli June 2007 estimate LDC TV/Monitor for 2008
36
Summary
• Revenue and margin expansion through growth of new products
• Application specific products targeted at cell phones, UP, consumer applications
• Continued evolution of supply chain and sales channel to supportthis business
• Upgrade silicon based MOSFET technology for better performance, lower costs and smaller size
• Reduce packaging costs through greater in-sourcing
www.fairchildsemi.com
Company Confidential 37
Power Conversion, Industrial & Auto (PCIA)
Group Overview
38
Analog Power Management Market
DC:DC Regulation ($9B) 2007 TAM ($M) CAGR*Linear Regulators $3,174 5.0%
DC:DC Regulation $2,670 15.9%
Battery Management $1,775 16.8%
Hot Swap $ 242 15.3%
MOSFET Drivers $ 885 14.1%
Non-Isolated PWM $1,662 16.0%
Off-Line Power Conversion ($1.6B)
AC:DC Regulators $836 13.3%PFC $287 16.1%Isolated PWM $683 14.4%
*CAGR 2005-2010
Source: VDC
Ultra-portable
Computing/Point of Load
Power Conversion
Targeted >$6B TAM with CAGR ~15%
39
Market Drives IC Technology
Legislative/MarketTrend
Power Supply/IC Trend
Low Standby Power1W → 300mW
Transmission Efficiency
Operation EfficiencyDC to DC, AC to DC
Linear to SwitchingSynchronous RectificationQuasi Resonant ConversionDigital
Incandescent to CFL, LED
AC Motor to BrushlessDC Motors
Power Factor Correction (PFC) Controllers (active)
Burst Mode and Soft Switching
HVIC, Electronic Ballast, LED Drivers
BLDC Controllers and Drivers
Longer Battery Life Low Power TechnologyMarket
Smaller Footprint Integration and Small PackagesHigh Frequency @ High Efficiency
40
Primary Side Regulation for Charger/Adapters
$315M
2010 Market Size
13%$206M
2006 – 10 CAGR
2006 Market Size
Features & Performance• PSR eliminates components enabling a cost effective switcher solution for consumer ultra-portable chargers
Strategic Importance to Fairchild• Enables technology-driven entry into the charger market
Potential Business Opportunity• Low power charger/adapters are largest segment of off-line regulators Source: VDC Mar 2006
41
Motion SPMValue to the customer• A Smart Power Technology that enables manufacturers of White Goods to meet the new Government Regulated efficiency requirements for their product (USA, EU, JPN)
• SPM is a family of products sized for Power as well as Drive Configuration
• Washing machines
• Air Conditioning
• Refrigerators
Potential Business OpportunityGovernment Regulations with respect to Utility Power (Power Factory and Efficiency) will continue to drive this market for the foreseeable future. The SPM product family is staged to follow this trend
$1.4B
2010 Market Size
15%$800M
2006 – 10 CAGR
2006 Market Size
2010 Market Size
2006 – 10 CAGR
2006 Market Size
Source: Fuji Chimera, Darnell, IMS)
42
Value to the customer• A Smart Power Technology that enables the Offline
Power Supply Market (Consumer, Telecom, Computing, Industrial) to meet the new Government Regulated efficiency requirements for their product (USA, EU, JPN)
• SPM is a family of products to meet
•Power Factor Correction
•Flyback and Forward
•Full and Half Bridges
Potential Business OpportunityGovernment Regulations with respect to Utility Power (Power Factory and Efficiency) will continue to drive this market for the foreseeable future. The SPM product family is staged to follow this trend
Power Supply SPM
PWMController
Optocoupler
VDC OUT
VAC IN
PWMController
Optocoupler
VDC OUT
VAC IN
$2.5B
2010 Market Size
8.5%$1.8B
2006 – 10 CAGR
2006 Market Size
2010 Market Size
2006 – 10 CAGR
2006 Market Size
Source: Fuji Chimera, Darnell, IMS)
43
Industrial –Lighting/HVIC/LED
HVIC ($0.60)
Ballast ($0.58)Ballast Control ICPFC IC
CFL ($0.40)Control IC
LED Lighting ($0.35) AC-DC LED Driver
44
Summary
• Capitalize on growing demand for greater power supply and system efficiency…Energy Efficiency Implemented Simply!
• Innovative power conversion and DC motor control products to support move to high efficiency BLDCs
• Rapid growth of highly integrated SPM™ products for consumer and industrial applications
• Upgrade silicon based MOSFET and IGBT technology for better performance, lower costs and smaller size
• Reduce packaging costs through greater in-sourcing
www.fairchildsemi.com
Company Confidential 45
Standard Products Group Overview
46
SPG’s Value to Shareholders
• Generates solid cash flow and ROIC• SPG extracts value from older product lines and
manufacturing assets through intensive product life cycle management
• Increases cost awareness for the whole company• Drive improvements in manufacturing and operation costs
• Enhances our BOM position with customers to solve more of their needs
• Creates potential to generate even more cash when market offer on divestiture exceeds our discounted cash flow expectations
47
Q1'04
Q2'04
Q3'04
Q4'04
Q1'05
Q2'05
Q3'05
Q4'05
Q1'06
Q2'06
Q3'06
Q4'06
Q1'07
Q2'07
Q3'07
Q4'07
Rev
($M
)
EBIT
(%)
Rev-8 Qtr M/A EBIT-8 Qtr M/A
SPG Rev & EBIT Development
Transition Begins
48
Margin Progression
• Cost reductions• Manufacturing• Business support structure• Simplification
• Disciplined business practices• Price management• Inventory control, both internal and channel
• Focused promotional programs
• Selective investment / divestiture
49
Translator ProductsFXL4TD245 4 Bit Low Voltage Configurable Translator
FXL4TD245Mobile Phone
Chipset
3V 1.8V
T-Flash/microSDUsing SPI mode4 wire interface(clock, serial in, serial out, chip select)
Features and Performance• Provides voltage translation between 3.6V
and 1.8V
• Allow designers to set either side as the high or low voltage
• DQFN Packaging saves nearly 75% board space compared to TSSOP packages
• Unique control over the direction of all four bits provides designers control of individual bits in their design
Strategic Importance to Fairchild• Unique function, no direct competition
• Above average margin
Potential Business Opportunities• Applies in the fast growing portable market
such as hand phones, MP3, PMP, etc including portable instrumentation
Translator ($M)
2006 TAM 2010 TAM CAGR%
72.1 102.6 9.2%
Source: Selantek 2006
50
Summary
• SPG business provides solid cash flow and reasonable profitability
• With good discipline, SPG business is able to weather business cycles and provide more stable profits
• SPG business drives manufacturing and operation cost reduction initiatives that will benefit other business in Fairchild
• Demand for Standard products is here to stay
• Fairchild will continue to manage the standard products portfolio and make selective investment/divestiture to achieve our target business model
www.fairchildsemi.com
Company Confidential 51
Finance Overview
52
Financial Highlights
• Better cycle management has driven more consistent financial performance
• Top priority is to drive future margin expansion • Gross margin leverage
• OPEX leverage
• Target operating model
• Strong cash flow and balance sheet
www.fairchildsemi.com
Company Confidential 53
Better Cycle Management and More Consistent Financial Performance
54
Improved Cycle Management Inventory Impact
Inventory & Distributor POS Trends
50
100
150
Q102
Q202
Q302
Q402
Q103
Q203
Q303
Q403
Q104
Q204
Q304
Q404
Q105
Q205
Q305
Q405
Q106
Q206
Q306
Q406
Q107
Q207
Q307
Q407
$0.0
$100.0
$200.0
$300.0
$400.0
Internal DOI Channel DOI Channel POS
Just 5% Peak-Trough POS ∆Inventories Stable Through the Cycle
55
Adjusted Revenue & Gross Profit %
200
250
300
350
400
450
500
Q1'02
Q2'02
Q3'02
Q4'02
Q1'03
Q2'03
Q3'03
Q4'03
Q1'04
Q2'04
Q3'04
Q4'04
Q1'05
Q2'05
Q3'05
Q4'05
Q1'06
Q2'06
Q3'06
Q4'06
Q1'07
Q2'07
Q3'07
Q4'07
(In $
M)
18%
20%
22%
24%
26%
28%
30%
32%
Total Revenue Gross profit %
56
200.0
250.0
300.0
350.0
400.0
450.0
500.0
Q1'00
Q2'00
Q3'00
Q4'00
Q1'01
Q2'01
Q3'01
Q4'01
Q1'02
Q2'02
Q3'02
Q4'02
Q1'03
Q2'03
Q3'03
Q4'03
Q1'04
Q2'04
Q3'04
Q4'04
Q1'05
Q2'05
Q3'05
Q4'05
Q1'06
Q2'06
Q3'06
Q4'06
Q1'07
Q2'07
Q3'07
Q4'07
Q1'08
(in $
M)
20.0%
22.0%
24.0%
26.0%
28.0%
30.0%
32.0%
34.0%
Total Revenue Gross profit %
Solid Sales & GM Growth8 Qtr Rolling Average Adjusted Sales & GM
Notes : Includes Equity CompSystem General included from Q107 onwards
57
Improving Financial Results Drives Free Cash Flow (FCF)
8 Qtr Rolling FCF
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
Q4'01
Q1'02
Q2'02
Q3'02
Q4'02
Q1'03
Q2'03
Q3'03
Q4'03
Q1'04
Q2'04
Q3'04
Q4'04
Q1'05
Q2'05
Q3'05
Q4'05
Q1'06
Q2'06
Q3'06
Q4'06
Q1'07
Q2'07
Q3'07
Q4'07
Free
Cas
h Fl
ow $
M
Note: FCF defined as Operating Cash Flow - Capex
58
Strong Cross-Cycle EPS Improvement:8 Qtr Rolling Average Adjusted EPS
Note: System General included from Q107 onwards
$0.14$0.13
$0.11
$0.06
$0.05$0.03
$0.14
$0.31
$0.23
$0.20
$0.15
$0.15
$0.03
$0.06
$0.09
$0.14
$0.13
$0.13
$0.13
$0.14$0.16
$0.18
$0.14
$0.13
$0.20
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
Q4'01 Q1'02 Q2'02 Q3'02 Q4'02 Q1'03 Q2'03 Q3'03 Q4'03 Q1'04 Q2'04 Q3'04 Q4'04 Q1'05 Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 Q4'07 Q1 '08
Adj
EPS
$
www.fairchildsemi.com
Company Confidential 59
Top Priority: Increasing Gross Margins
60
Gross Margin ImprovementKey Drivers
Growth of new product families with higher margins• µSerDes™, Analog Switches, HF Voltage Regulators, System
General, SupreMOS, integrated power systems (SPM), IntelliMAX™, DrMOS, Digital Power
Divest / Reduce low margin business• Divest = Motor ICs, LEDs, RF• Reduce = Planar MOSFETs, small signal and bipolar transistors
Manufacturing cost reductions and product redesigns• Package in-sourcing• 8” upgrade in Maine• Fab process upgrades/shrinks for HV & LV MOSFETs, IGBTs and
Power Conversion
61
Margin DriversGrowing Profitable New Product Families
MCCC Growth Drivers
-Switches USB and multimedia applications
-High Frequency Voltage Regulators Highly efficient regulators for handsets
-Power Trench Technology Potentially best figure of merit for lowvoltage applications
-µSerDes™ Proliferation to top 5 cell phone suppliers
-Digital Power Flexible power mgmt for high-end POL andpower supply applications
PCIA
-Power Conversion System General acquisition, driver for energy efficiency
-SupreMOS/FS IGBT Potentially best figure of merit for highvoltage applications
-HF Voltage Regulators New high performance platform addresses emerging needs
-SPM Highly efficient package-level integratedpower management solutions
62
$0
$200
< 0 0 > 10 10 > 20 20 > 30 30 > 40 40 > 50 50 >
Mill
ions
$
0%
40%
% o
f Tot
al
Margin DriversShifting Our Margin Profile
Decrease Population I
• Minimize through lead time
• Obsolete / exit / divest
• Cost reductions / product redesigns
Manage Population II
• Cost reduction
• Pricing
• Technology migrations
Grow Population III
• New product design wins
• Responsive supply chains
Low Margin Average Margin High Margin
63
Margin DriversIncrease In-sourced A&T
Cost Reduction Opportunity• Backend drives 30% - 70% of total product cost depending on product line • Subcon costs have risen due to exchange rates and higher utilization• Invest $90M+ over 3 years to increase backend capacity
• Payback is < 2 years• Impact on gross margins is 1.5% to 2.0%
Today
In-Source %
2 – 3+ Years
80%
60%
100%
40%FCS
Peers
64
Margin DriversProcess Upgrades will Drive Front End Savings
• Maine 8” conversion will increase die capacity by ~70% with minimal impact to fixed and variable overhead
• Migration of System General and other Bucheon processes to Maine fab on 0.5µm or lower will increase Power Conversion margins by ~600 bps
• SupreMOS and FS Trench IGBT processes in Bucheon drive 30% to 40% die shrink while maintaining RDS on performance
• PT4, PT6, PT5, RP5 processes in Salt Lake underway to increase die per wafer by 30% to 45%
www.fairchildsemi.com
Company Confidential 65
Strong Cash Flow and Balance Sheet
66
Strong Balance Sheet Stable Cash Flow Drives Lower Financial Leverage
Trended Debt
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
Total Year Total Year Total Year Total Year
1997 (Mar 11- Dec 21,1997)
1999 2001 $2,007
0.0%1.0%
2.0%3.0%4.0%
5.0%6.0%7.0%8.0%
9.0%
Drawn Revolving Credit Bank Debt Convertible DebtHigh Yield Debt Undrawn Revolving Credit Net Interest % of Sales
Net Debt
$0.0
$100.0
$200.0
$300.0
$400.0
$500.0
$600.0
$700.0
1999 2000 2001 2002 2003 2004 2005 2006 2007
Stable cash flow and disciplined balance sheet
management enabled FCS to decrease debt and secure
lower interest rates
8 Qtr Rolling FCF
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
Q4'01
Q1'02
Q2'02
Q3'02
Q4'02
Q1'03
Q2'03
Q3'03
Q4'03
Q1'04
Q2'04
Q3'04
Q4'04
Q1'05
Q2'05
Q3'05
Q4'05
Q1'06
Q2'06
Q3'06
Q4'06
Q1'07
Q2'07
Q3'07
Q4'07
Free
Cas
h Fl
ow $
M
67
Capital Expenditures
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
% o
f Sal
esStrong Balance Sheet Investment to Drive Margin Improvement
Increased Investment toDrive A&T Cost Reduction
68
Fairchild: The Power Franchise®
• Better cycle management has produced improved financial results
• 8 quarter rolling average for sales / GM / EPS show good progress
• Top priority going forward is margin growth through:• Profitable sales growth in analog and functional power products • Better mix of products due to more new products and reduction/divestiture of low margin
business• Product cost reduction driven by increased A&T in-sourcing, fab shrinks and new
processes• Good cost controls to reduce OPEX as a % of sale to target levels
• Expect strong cash flow as we progress to financial targets, which enables lower leverage and allows us to invest in the business
We’re making solid progress at transitioning Fairchild to be a premier power management company…not only in sales but also
profitability!