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Reuters interview: Cypress CEO sees big gains in programmable chips | Cypress Semiconductor

Reuters interview: Cypress CEO sees big gains in programmable chips

Last Updated: 
May 24, 2012

SAN JOSE, California (Reuters) - Cypress Semiconductor Corp (CY.N: Quote, Profile, Research, Stock Buzz) expects to garner 80 percent or more of its revenue from programmable chips found in electric-powered bikes, light- emitting diodes, washing machines and myriad other devices by 2012, its chief executive said on Monday.

Already, 26-year-old Cypress gets more than half its revenue from selling programmable chips, a vast increase from several years ago, T.J. Rodgers said in an interview at the company's San Jose, California headquarters. "By 2012 we expect to be 80 percent programmable products revenue," Rodgers said.

While Cypress has been designing, making and selling programmable logic devices since 1985, it has in recent years restructured its business to focus on driving more sales of those products.

Contrary to its historical strategy of selling its chips in line with the march of Moore's Law, Cypress is now pricing its programmable products using value pricing to boost the average selling price of its chips, Rodgers said. Even though Cypress has long made programmable devices, it is perhaps still best known for its SRAM memory chips and, more recently, its stake in SunPower Corp (SPWR.O: Quote, Profile, Research, Stock Buzz), the solar power company in which Cypress still has a 56 percent stake. And unlike past boom and bust cycles in which Cypress would bleed money when the chip industry hit a downturn, that is not the case this time around, when the U.S. economy is in a tough spot and the chip industry is in a recession, Rodgers said.

"The main event is I'm not going through the manic up down cycles of Moore's law anymore," Rodgers said. "We can now consistently make a profit and that's a big change for us."

Moore's law is the observation made by Intel Corp co-founder Gordon Moore that the price of computing power is halved about every 18 months as the number of transistors on a microchip doubles in the same period.

"We're in a recession right now in semiconductors, but it's not a killer", Rodgers said. "Now we're making money and we're not making excuses."

Within the category of programmable chips -- those that can be programmed by customers using software to perform particular functions -- Cypress is making a big bet on its product line called PSoC, or programmable system on a chip.

Rodgers said Cypress ended 2007 with more than 6,300 PSoC customers, up from 2,000 at the end of 2005, and will crest 8,000 PSoC customers by the end of the current quarter.

PSoCs are now used in electric bicycles in China, known as eBikes, a market expected to hit $9 billion by 2011. Cypress's PSoC device provides motor control in not only eBikes, but also motorized baby strollers and remotecontrolled toys.

The technology -- which combines in one package a number of microchips typically provided by a number of chip companies -- is also used in the clickwheel of the iPod and in other electronics and appliances that use touchsensing pads.

Rodgers also said he still expects to detail to the investment community Cypress's plans to divest the 56 percent stake it holds in SunPower, one of the hottest-performing stocks in 2007.

Cypress said in April it had received a ruling from the U.S. Internal Revenue Service that could allow it to spin off the stake before 2009.

"I told (Wall Street analysts) I was going to put together a plan for separation and I'll talk about it in our next conference call on July 17," Rodgers said. "As the IRS is predisposed to go forward, so are we, and I'll tell (analysts) on July 17."

When Cypress last reported quarterly results in April, Rodgers said he expected the first quarter was "the bottom quarter of the current market slowdown."

Analysts have also said that, once Cypress spins off the rest of SunPower that it still owns, it could add $3 or $4 to its stock price.

Cypress shares fell 16 cents to close at $24.75 on the New York Stock Exchange on Monday.