International Rectifier Makes Its Case for Energy Efficiency

0

The last time a computer chip company ingrained itself in the public psyche was in the 1990s, when Intel Corp. put engineers in white lab suits and had them dance around the lab for its “Intel Inside” ad campaign.


Local chipmaker International Rectifier Corp. hopes to make a similar name for itself, minus the bunny suits.


“There has been an uptick in people wanting to buy the energy efficient products,” said Graham Robertson, spokesman for the El Segundo-based company. “We’re inside the energy efficient washing machines, the air conditioning units, the hybrid cars you’ll find our devices in there.”


The company is trying to capitalize on what it sees as a surge in energy consciousness gripping the appliance-buying public. Chief Executive Alex Lidow has been offering to give talks on energy efficiency, and company announcements are not complete without an emphasis on the energy-saving stats of its latest chips.


Oddly enough, IR has not altered its chips substantially, nor is it unveiling a new raft of “green” products. Its chips can cut electricity consumption by 30 percent to 70 percent, and have been able to for some time.


“The reality is that we’ve had energy-saving products forever,” Robertson said. But last quarter, the energy-saving products group accounted for 27 percent of the company’s business, and was the company’s most profitable unit, accounting for nearly 50 percent of gross margins. The company has decided it is now time to play up the “green” side of its business.


“They’re trying to push that more,” said Jim Schneider, analyst with Wedbush Morgan Securities. “Their CEO has a vision about where the world especially the developing world is going in terms of energy savings, and they’re trying to capitalize on this green market.”


The company supplies chips to Whirlpool Corp., AB Electrolux, General Electric Co. and Sanyo Electric Co., and works with major car manufacturers on hybrid vehicles. But in the global market for chips, IR’s 2005 sales of $1.1 billion isn’t a big dent.


“They’re not the only ones in the game,” Schneider said. Fairchild Semiconductor International Inc. ($1.3 billion in revenues) and ON Semiconductor Corp. ($1.4 billion in revenues) also make energy-efficient chips. “Both of those companies talk less about this energy efficient and green technology thing, but both have the same products,” Schneider said.


International Rectifier is hoping to cast a green shadow over the competition.


The company recently hit what some analysts are calling a “rough patch,” reporting December results in-line but lowering guidance for its March quarter. It earned $24.3 million (34 cents a share), for the quarter ended Dec. 31, compared with $39.5 million (55 cents a share) in the year-ago period. Revenues for the quarter sank almost 7 percent to $270 million.


Inventory buildup was partly to blame, and the company miscalculated which products its customers would want to buy.


By focusing its efforts on the energy-efficient market, where in many cases it develops custom chips with the manufacturer, the company is looking to boost the sunnier side of the business.


“They’re targeting more stuff toward the white-goods market,” Schneider said, referring to energy-efficient refrigerators and washing machines.


The company’s bread and butter business remains in computers and communication systems. It makes the chips that control battery power and keep lap top computers from overheating, for example, or control the light and power flowing into a flat-screen LCD television screen.


About 34 percent of its business comes from computing, 14 percent from commodity chips, and 12 percent from aerospace. International Rectifier’s chips powered up the Mars Rover, for example.


But don’t expect to be entertained by an International Rectifier commercial any time soon. Part of the reason Intel’s ad campaign was so successful is that the company co-financed the advertising campaigns with the PC makers that used its chips. International Rectifier hasn’t even increased its advertising and marketing budget this year.


Instead, the company is focusing the marketing campaign on its first-tier customers: the auto companies, white-goods manufacturers and television makers.


“It would be lovely for people to buy a product because it has International Rectifier inside it,” Robertson said. “But the reality is that we’re a little ways away from that right now.”


The company’s first foray into a joint marketing agreement came last year in Japan. It entered into a venture with Sanyo to design and package a small motor module that would be used in energy-efficient washing machines.


The company did not disclose the financials terms of the joint venture agreement, but Robertson called it a “sizeable opportunity” to create brand recognition and inroads into the Japanese market.

No posts to display