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A MESSAGE FROM THE CEO
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FAIRCHILD SEMICONDUCTOR INTERNATIONAL, INC. AND SUBSIDIARIES |
“With a product portfolio of more than 10,000 components sold to more than 50,000 customers worldwide, our diversity is our strength.”
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It’s with great pride that I present Fairchild Semiconductor International’s 1999 annual report. And, it’s with even greater enthusiasm that all of us at Fairchild look to the year ahead.
Fairchild employees around the globe are focused on one goal: to be the best semiconductor company in the world focused on the design, manufacture and marketing of high-performance building block semiconductors to multiple end markets. You’ll find Fairchild semiconductors in electronic products everywhere. Our products manage power in portable applications such as laptop computers, cellular phones and palmtop appliances. Our products convert and route power in monitors, industrial ballast, set top boxes, desktop computers and consumer appliances. We also provide fast, clean data transmission and signal conditioning in Internet hardware applications such as servers, RAID storage systems, ATM switches and network routers. Fairchild products touch people’s lives hundreds of times each day. With a product portfolio of more than 10,000 components sold to more than 50,000 customers worldwide, our diversity is our strength.
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When we began in March 1997, we had several short term objectives critical to establishing our strategic position as the world’s leading multi-market semiconductor company. We wanted to add analog products to our portfolio, broaden our power offering, expand our sales presence in Asia, and broaden our end market penetration beyond the computer and wired communication segments that dominated our sales. We also wanted to invest strongly in our business, focusing our R&D and capital spending on growing new product sales to increase our market share, improve our gross margins, and build our competitive advantage.
Through one of the worst downturns in our industry’s history, we accomplished all of these goals while continuing to meet our financial commitments. We completed two acquisitions, becoming a top power discrete supplier and a leading analog vendor. We doubled our revenues, and dramatically improved our Asian market penetration. We significantly increased our penetration into wireless communications and now sell 35 percent of our products into consumer and industrial applications. And, after taking our company public on the New York Stock Exchange in August 1999, we’ve strengthened our balance sheet. Phase I of our company growth strategy is now complete: we’ve established our product lines, our regional and end market positions, and we’re financially strong.
These accomplishments—a stellar record in a short period of time—have been possible because of the quality of Fairchild’s employees around the globe. They are focused, they understand our mission and they are talented in their respective fields. Fairchild employees have been the key to our past successes and will be even more important to our future plans.
* Graphs represent calendar 1999 data and include pro forma results from the acquisition of the power device business.
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 Fairchild is now executing its Phase II growth plan. It’s an exciting time. Phase II focuses on accelerating our growth. We’re at the beginning of a strong upturn in our industry, driven by increasing worldwide demand for computing, communications and consumer products. Fairchild will grow faster by expanding our product development and manufacturing capacity, delivering power components and interface products into these high growth markets.
We’ll continue to grow our business through our proven two-pronged strategy. Fairchild will grow organically through new product development. We invest five to six percent of total sales revenues in new product research and development, significantly more than our multi-market competitors invest in these products. New product sales, which represented only five percent of sales when we became an independent company, have now grown to more than 28 percent of our trade revenues. New product successes helped raise our gross margins over 900 basis points in the last twelve months. In order to supply the increased demand for new products, we plan to spend more than $240 million this year to expand capacity at all of our major manufacturing fabs and assembly/test centers.
Fairchild will also grow through strategic acquisitions. Each acquisition we pursue must meet our minimum criteria. Acquisitions must expand our product offerings in line with our multi-market strategy, they must expand our geographic and end market penetration presence across key regions of the world, and they must be financially sound, contributing profitable revenues to Fairchild. Fairchild has successfully completed two acquisitions to date: Raytheon Semiconductor, which gave us entry into the analog business, and the power device business of Samsung Electronics, which expanded our high voltage power and analog product lines while increasing our presence in Southeast Asia. We believe this two-pronged growth plan of new product development and strategic acquisitions will position us as a leader in the multi-market segment of our industry, which is forecasted to grow to over $60 billion by 2002.
Fairchild Semiconductor is positioned for accelerated growth. We have talented people, a clear strategy, and the high-performance, building block products that make today’s electronics work, while improving the lives of millions of people each day. Fairchild is poised for an exciting future. I want to thank you for your interest in us, and your continued support.
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