Power Integrations Inc. (NASDAQ:POWI) Q4 2014 Earnings Conference Call - Final Transcript

Feb 04, 2015 • 04:45 pm ET

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Power Integrations Inc. (NASDAQ:POWI) Q4 2014 Earnings Conference Call - Final Transcript

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Executive
Balu Balakrishnan

major markets we address, from electronics and appliances to lighting and industrial. While not a new trend, energy efficiency takes on added importance in the electronics market with the pending onset of DoE 6, the next iteration of mandatory federal standards for external power supplies. Set to take effect in 2015, DoE 6 calls for increased active-mode efficiency and a substantial reduction in no-load consumption for external chargers and adapters. DoE 6 may be the most impactful update to power supply efficiency standards in the US since the original California Energy Commission standards took effect in 2007.

We are already seeing strong redesign activity with InnoSwitch and with our newly announced LinkSwitch 4 products, both of which comfortably meet the new standards. While the full impact of the standards won't be felt until next year, we anticipate uplift in sales over the course of 2015 as compliant designs start going into production. While DoE 6 applies to external power supplies, energy efficiency continues to be an important factor for embedded

Executive
Balu Balakrishnan

power supplies as well. In the consumer market, our dollar content is expanding thanks to the increasing use of electronic features in white goods and countertop appliances. The additional features add to the challenge of meeting standby efficiency requirements such as European ecodesign directive, which in turn increases our content even further. With the appliances continuing to become smarter and more connected, we expect this trend to continue for years to come.

In the industrial market, we see energy efficiency as a long term driver across a full range of power levels. In the lower end of the scale, we enable clean technologies like LED lighting and smart utility meters, while our high-power IGBT drivers are a critical component in renewable energy systems, the transmission of high voltage DC on the power grid, and the efficient consumption of energy in heavy industry and transportation.

Although softness in oil exploration markets and other macro factors are affecting demand for IGBT drivers in the current quarter, we have a robust outlook for the high power business beyond the first quarter and expect overall industrial revenues to grow nicely in 2015. Energy efficiency also played a key role in our acquisition of Cambridge Semiconductor, or CamSemi, which closed in early January. This transaction, our first since the 2012 purchase of CT-Concept, is consistent with our history of highly selective M&A in our core competency of high voltage power conversion.

CamSemi brings a talented team of engineers with deep expertise in AC/DC power supplies, and we plan to operate their U.K. headquarters as an R&D center focused on accelerating our product development for the low power market. The acquisition also broadens our technology and product portfolio for low power applications, especially for high efficiency chargers and adapters designed to meet tight requirements like the upcoming DoE 6 standards.

In summary, while disappointed with our 2014 performance, we look forward to the new growth in 2015. The technology behind InnoSwitch is among the most significant