Power Electronics

132 Pages·2000·0.835 MB·English

by  T. Cooper

POWER ELECTRONICS

Power Semiconductors and Power Supplies –
The Building Blocks of the Digital Power Revolution

Todd Cooper
Vice President
Power Electronics Analyst
[phone]
[email protected]

Holman Harvey
Associate
[phone]
[email protected]

September 2000
©2000 Stephens Inc.
This report has been prepared solely for informative purposes and is not a solicitation, or an offer, to buy or sell any security. It does not purport to be a complete
description of the securities, markets or developments referred to in the material. All expressions of opinion are subject to change without notice. The information is
obtained from internal and external sources which we consider reliable but we have not independently verified such information and we do not guarantee that it is accurate
or complete. We do not undertake to advise you to any change in figures or our views. We, our employees, and/or our officers and directors, may from time to time have a
long or short position in the securities mentioned and may sell or buy such securities. Additional information available upon request.

Stephens Inc., 111 Center Street, Little Rock, Arkansas 72201, [phone], FAX [phone], Member NYSE, NASD, SIPC
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TABLE OF CONTENTS

EXECUTIVE SUMMARY AND INTRODUCTION..........................................................................................6
Electric Power Revolution Drivers.....................................................................................................................7
The Digital Age is Very Energy-Intensive.........................................................................................................8
Reliable Power...................................................................................................................................................9
Expensive Power..............................................................................................................................................10
In This Industry Report....................................................................................................................................10
POWER SEMICONDUCTORS FUNDAMENTALS........................................................................................11
SEMICONDUCTOR BASICS............................................................................................................................12
Silicon (Si) - The Primary Material..................................................................................................................12
How Semiconductors Work.............................................................................................................................14
The Fabrication Process...................................................................................................................................15
DIGITAL VS. ANALOG....................................................................................................................................18
Broad Base of Demand....................................................................................................................................18
Low Unit Volumes, Broad Product Portfolio...................................................................................................18
Long Product Life Cycles................................................................................................................................19
Manufacturing Differences...............................................................................................................................19
Steady Pricing..................................................................................................................................................19
POWER SEMICONDUCTOR INDUSTRY OVERVIEW................................................................................20
History..............................................................................................................................................................20
Competitors......................................................................................................................................................20
Overall Industry Growth..................................................................................................................................21
A Cyclical Industry..........................................................................................................................................22
Challenges Facing the Power Semiconductor Industry....................................................................................22
FORECASTS BY END-MARKET.....................................................................................................................24
Automotive.......................................................................................................................................................24
Computers and Peripherals...............................................................................................................................25
Communications...............................................................................................................................................26
Consumer Electronics......................................................................................................................................27
Industrial...........................................................................................................................................................28
ANALYSIS BY PRODUCT CATEGORY.........................................................................................................30
Power Transistors.............................................................................................................................................30
Market Trends..............................................................................................................................................33
Market Drivers.............................................................................................................................................34
Market Restraints.........................................................................................................................................34
Thyristors.........................................................................................................................................................35
Market Trends..............................................................................................................................................35
Market Drivers.............................................................................................................................................36
Market Restraints.........................................................................................................................................37
Rectifiers..........................................................................................................................................................37
Market Trends..............................................................................................................................................38
Market Drivers.............................................................................................................................................39
Market Restraints.........................................................................................................................................40
Motion Control Power ICs...............................................................................................................................40
Market Trends..............................................................................................................................................42
Market Drivers.............................................................................................................................................42
Market Restraints.........................................................................................................................................43
Power Conversion/Management ICs................................................................................................................43
Market Trends..............................................................................................................................................44
Market Drivers.............................................................................................................................................46
Market Restraints.........................................................................................................................................46
Smart Power ICs (Low Voltage)......................................................................................................................46
Market Trends..............................................................................................................................................48
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Market Drivers.............................................................................................................................................48
Market Restraints.........................................................................................................................................49
High-Voltage Smart Power ICs........................................................................................................................49
POWER SEMICONDUCTORS –– CONCLUSION..........................................................................................49
Power Semiconductors – Company Profiles.......................................................................................................51
Advanced Power Technology, Inc...................................................................................................................53
Cree, Inc...........................................................................................................................................................57
International Rectifier Corp..............................................................................................................................61
Power Integrations Inc.....................................................................................................................................65
Semtech Corp...................................................................................................................................................69
TelCom Semiconductor....................................................................................................................................73
POWER SUPPLY FUNDAMENTALS..............................................................................................................77
PRODUCT PROFILE.........................................................................................................................................78
Electricity Review............................................................................................................................................79
Why Do We Need Power Supplies?.................................................................................................................79
Types of Power Architecture............................................................................................................................80
AC/DC POWER SUPPLIES...............................................................................................................................82
Switching vs. Linear Power Suppliers.............................................................................................................84
Efficiency.....................................................................................................................................................85
Size...............................................................................................................................................................85
EMI and RFI.................................................................................................................................................85
Custom, Standard and Modified Standard Products.........................................................................................86
Output Segmentation........................................................................................................................................86
DC/DC CONVERTERS......................................................................................................................................87
TELECOM POWER PLANTS...........................................................................................................................89
POWER SUPPLY INDUSTRY OVERVIEW....................................................................................................90
Intense Industry Fragmentation........................................................................................................................91
Barriers to Entry...............................................................................................................................................93
Foreign Competition........................................................................................................................................93
Continued Industry Growth..............................................................................................................................94
Market Segments..............................................................................................................................................96
Growth Opportunities by Power Supply Category...........................................................................................97
Increased Outsourcing......................................................................................................................................98
Consolidating Industry.....................................................................................................................................99
Other Market Dynamics.................................................................................................................................101
POWER SUPPLY SECTION CONCLUSION.................................................................................................102
Power Supply Company Profiles.......................................................................................................................103
Artesyn Technologies Inc...............................................................................................................................105
C&D Technologies.........................................................................................................................................109
Power-One, Inc...............................................................................................................................................113
Vicor Corp......................................................................................................................................................117

CHARTS and TABLES

Chart 1 – Stephens Inc. Power Solutions Focus.......................................................................................................6
Chart 2 – Digital Economy Electricity Consumption...............................................................................................9
Chart 3 – Electrical Conductivity of Selected Materials.........................................................................................13
Chart 4 – Summary of the Process Employed to Produce Ultrapure Silicon..........................................................13
Chart 5 – Silicon Molecular Structure....................................................................................................................14
Chart 6 – The Fabrication Process..........................................................................................................................17
Chart 7 – North American Power Semiconductor Market......................................................................................21
Table 1 – North American Automotive Power Semiconductor Market.................................................................24
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Chart 8 – Power Semiconductor Automotive Applications....................................................................................25
Table 2 – North American Computer and Peripherals Power Semiconductor Market...........................................26
Table 3 – North American Telecommunications Power Semiconductor Market...................................................27
Table 4 – North American Consumer Electronics Power Semiconductor Market.................................................28
Table 5 – North American Industrial Power Semiconductor Market.....................................................................29
Chart 9 – Power Semiconductor Market Segmentation..........................................................................................30
Chart 10 – North American Power Semiconductor Market Percentage of Revenue by Product............................31
Chart 11 – North American Power Transistor Market............................................................................................32
Table 6 – North American Power Transistor Market............................................................................................33
Chart 12 – North American Thyristor Market........................................................................................................35
Table 7 – North American Thyristor Market..........................................................................................................36
Chart 13 – North American Diode Market.............................................................................................................38
Table 8 – North American Diode Market...............................................................................................................39
Chart 14 – North American Motion Control Power IC Market..............................................................................41
Table 9 – Motion Control Power IC Market...........................................................................................................42
Chart 15 – North American Power Conversion/Management IC Market...............................................................44
Table 10 – North American Power Conversion/Management IC Market..............................................................45
Chart 16 – North American Smart Power IC Market.............................................................................................47
Table 11 – North American Smart Power IC Market.............................................................................................48
Chart 17 – Power Supply Devices..........................................................................................................................78
Table 12 - AC Line Voltages – Selected Countries................................................................................................80
Chart 18 – Centralized Vs. Distributed Architecture..............................................................................................81
Chart 19 – North American Consumption of Distributed Power Architecture......................................................82
Chart 20 – Simple AC/DC Power Supply...............................................................................................................83
Table 13 – Pricing Trends In AC/DC Power Suppliers..........................................................................................84
Table 14 – Linear Vs. Switching Power Supplies..................................................................................................84
Table 15 – Output Segmentation............................................................................................................................87
Table 16 – DC/DC Converter Pricing Trends.........................................................................................................89
Table 17 – Power Supply Industry..........................................................................................................................91
Table 18 – Ten Largest North American Power Supply Companies* - 1999 Sales...............................................92
Table 19 – Largest Worldwide Power Supply Companies* - 1999 Sales..............................................................92
Chart 21 – Global Power Electronics Market.........................................................................................................94
Chart 22 – Global Power Supplies Consumption...................................................................................................95
Chart 23 – Global Telecom Power Plant Consumption..........................................................................................96
Chart 24 – North American Power Supplies Consumption by Market Segment....................................................97
Chart 25 – North American Merchant Power Supplies Consumption....................................................................98
Chart 26 – North American Power Supplies Consumption....................................................................................99
Chart 27 – Fragmented Merchant Power Supply Industry...................................................................................100
Table 20 – Recent Consolidation in The Power Electronics Industry..................................................................101
Chart 28 – North American Market Share Held by Top 10 Merchant Power Supply Manufacturers..................101
Appendix A – Power Electronics Valuation Analysis..........................................................................................121
Appendix B – Power SemiconductorS – Comparative Analysis..........................................................................122
Appendix C – Power Supply Manufacturers – Comparative Analysis.................................................................123
Appendix D – Glossary.........................................................................................................................................124
Appendix E – North American Power Semiconductor Manufacturers.................................................................126
Appendix F – North American Power Supply Manufacturers..............................................................................128
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EXECUTIVE SUMMARY AND INTRODUCTION

We believe that, over the next decade, one of the most robust investment sectors
in the economy will be the electric power industry. But we don’t advise that you
run out and invest in your local power company. The electric utilities will have
their role, but we suggest you focus on those companies that provide the power
Electric utilities are
for the dot-coms. We’re talking about companies that make products like power
not providing the type
of power that the semiconductors and superconductors, batteries and flywheels, ac/dc power
digital economy supplies and dc/dc “bricks.” These are the products that provide the ultra-clean,
requires ultra-reliable electricity consumed in the digital economy. We think well-run
companies that manufacture and sell these products successfully will offer the
astute investor the potential for exceptional returns, not unlike those that have
been experienced in the communications revolution.

In 1997 Stephens Inc. made the power electronics industry a focus of its equity
Our power electronics
research (see Chart 1). We define power electronics as the application of
research focuses
electronic devices and associated components to control, convert and condition
exclusively on power
electric power. In other words, we have been following power supply
semiconductors and
manufacturers and semiconductor manufacturers that focus on power
power supplies
management applications.

Recently, Stephens Inc. placed even more emphasis on the power solutions area
by having analyst Steve Sanders and his team moved to cover a sector that we are
calling Emerging Power Technologies. The Emerging Power Technology sector
includes information management technologies, distributed generation, power
procurement, infrastructure enhancements and system integration. We at
Stephens Inc. are committed to helping our clients benefit from the exceptional
investment opportunities that we believe will materialize over the next few years
in the electrical power industry.

Chart 1
Stephens Inc. Power Solutions Focus

Power Solutions
Power Quality
and Reliability
Distributed
Generation
Power
Supplies
Emerging
Power Information
Power Management
Electronics
Technology Technologies
Power
Semiconductors
Systems
Integrators
Infrastructure
Enhancement
Source: Stephens Inc.
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Stephens Inc. Power Solutions Research Group

Power Electronics Emerging Power Technology

Todd Cooper, Analyst Stephen Sanders, Analyst
[email protected] [email protected]
[phone] [phone]

Holman Harvey, Associate Joe Chumbler, CFA, Associate
[email protected] [email protected]
[phone] [phone]

Michael Peng Zhang, Associate

We believe that the experience we’ve gained over the last three years following
the power electronics industry gives Stephens Inc. a unique perspective on this
space. We are not semiconductor analysts who have strayed into the power
semiconductor space, nor are we contract manufacturing analysts who have
recently discovered power supplies. We have come to the job focused on power
and the unique industry dynamics that it entails. There is no single strategy a
company can follow to become successful in this industry. However, there are
trends and market dynamics that should not be ignored by companies and
investors alike. By thoroughly understanding the market and its participants, we
plan to identify those companies that are best positioned to prosper in the power
electronics marketplace.

Electric Power Revolution Drivers

Due to the laws of physics, energy underpins any economy. In other words, you
cannot get something for nothing. The Internet has not changed the laws of
physics. Even cyberspace has an energy cost. Energy will continue to underpin
our economy in the 21st century, just as it did in the 20th. The last century
belonged to oil; this one belongs to electricity. The transformation is already
evident. Our economy today spends four times as much purchasing electricity as
oil.

The beginning of the last century saw an explosion of economic activity in the
creation of the automobile. One consequence of the rise of the automobile was
the creation of an enormous and complex oil-related industrial infrastructure to
fuel the engines in all kinds of vehicles. The creation of the automobile and the
infrastructure needed to support it are analogous to what’s taking place in today’s
digital age.

The engine of the digital age is the microprocessor. Its fuel is electricity. The
The engine of the proliferation of microprocessors and computers and the seemingly unending
digital age is the appetite for communications bandwidth is increasing the demand for reliable
microprocessor; the electricity. It takes a lot of “clean,” reliable electricity to process and move bits
fuel is electricity
of information around. The sheer amount of electricity demanded by the
information economy is, in itself, a primary driver behind the changes occurring
in the electric power industry. But far more important than the steep increase in
the demand for electricity is the type of electricity the information economy
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requires—ultra-clean, stable, and totally reliable. This type of electricity cannot
be delivered by the same old technologies on the same old power grid. A new
type of infrastructure is developing to support the digital economy. We will
examine both drivers, the increase in demand and the reliability issue, in more
detail.

The Digital Age Is Very Energy-Intensive

The expansion of the digital economy is creating two kinds of electrical
problems. The most straightforward is that it drives up the absolute demand for
electricity. It takes about a pound of coal to create, package, store and move two
megabytes of data. When you include the portion of the infrastructure that
supports Web-enabled devices, such as the Palm Pilot™ PDA, each device uses
as much electricity as a refrigerator. Your typical PC and its peripherals require
about 1,000 watts of power, which for the average home PC equates to about
1,000 kilowatt hours (kWh) of electricity a year.

The last non-extrapolated study that was conducted to ascertain exactly how
much electricity was being consumed by computers was done in 1995. Lawrence
Berkeley Labs reported that approximately 50 billion kWh in 1993 were
consumed in the commercial sector by PCs, computers and directly related
equipment such as monitors and printers. Since then:

• The number of PCs and related equipment in offices has increased
exponentially.
• The number of PCs in homes and schools has also increased dramatically.
• The Internet has rapidly made its way onto the scene, with all its back-office
Web and telecommunications hardware.
• An entirely new class of businesses has been created—the dot-coms.
• The usage level for all computing and IT equipment is up globally.

It is now estimated that 8% of the nation’s electric supply, or 290 billion kWh, is
It is estimated that the
Internet consumes 8% absorbed by the hardware of the Internet. When you consider a broader scope of
of the country’s all computers and related equipment, U.S. electricity consumption by the digital
electricity economy reaches 13%. There is simply no denying it, computers, and more
recently, the Internet, are driving up the demand for more electricity.

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Chart 2
Digital Economy Electricity Consumption

14%
12%
10%
8%
6%
4%
2%
0%
1978 1982 1986 1990 1994 1998
All computers Internet only

Source: Information Technology Industry Council; Greening Earth Society

Reliable Power

Our U.S. trillion dollar electric utility grid is a remarkable engineering
achievement. It delivers electricity that is up and clean, or “event free,” 99.9% of
the time. Said another way, the 99.9% reliability figure equates to about eight
hours of outage a year for a typical residential consumer. Until the digital
revolution, the grid has handled the three previous electricity-demanding waves
of technology well. First came electric lights, then electric motors and finally air
conditioning. For each of these technologies 99.9% reliability was, and is,
acceptable.

Eight hours worth of power outages over the course of a year is an inconvenience
for you and me, but a financial nightmare for businesses in the digital economy.
A few industries have always required electricity that was more reliable than
Several industries
have always required what comes off the grid. Hospitals, airports, military bases and phone companies
highly reliable power have always deployed generators and banks of batteries to provide standby
power. In the new digital economy, add to the list of companies already
requiring extremely reliable power the Amazons and AOLs of the world. And as
digital semiconductors (i.e., microprocessors and memory chips) and the Internet
penetrate deeper and deeper into our society, even “old economy” companies are
requiring more reliable power. Next will be our homes. The number of
commercial and residential devices and users that rely on digital semiconductors
and the Internet is growing exponentially.

For these applications, demand reliability only starts at 99.9999% (six nines). At
six nines the length of power outage is equivalent to only 30 seconds a year. At
seven nines, it’s only out for a few seconds, but that’s still long enough to crash a
network. Only at the ninth and tenth nines is the power reliable enough for the
digital semiconductors that are at the heart of the digital economy.

The problem is that it’s hard to imagine the traditional electric utility grid ever
providing electricity that is much more reliable than 99.9%. The grid is simply
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too exposed to catastrophic events (i.e., bad weather, animals shorting out
The traditional electric
grid is too exposed to transformers, and car - utility pole interactions). It’s far too impractical and
catastrophic events to expensive to rebuild the grid to support the digital economy. To do that requires
provide highly reliable an array of systems and components that will reside on the customer’s side of the
power electric meter.

These systems and components include capacitors and inductors to fix problems
of milliseconds in duration; batteries, flywheels, and super-conducting coils to fix
outages ranging from seconds to a few minutes; and generators and turbines to
supply power for hours or days. The switch that links these systems together
seamlessly is the power semiconductor.

Expensive Power

Building reliability into the power grid is expensive, but how much will people
pay? What does it cost AOL if it is off-line for an hour? With some of the larger
communications companies billing customers in total at a rate of over $4 million
per minute, what will they pay to stay up and running? The questions are
rhetorical ones. The answer is: “a lot.”

Electricity at the wholesale level is relatively cheap, approximately 2¢ per kWh
(kilowatt hour). The electric utility grid, with its 99.9% reliability, delivers
electricity to you at roughly 8¢ to 10¢ per kWh. The cost goes up exponentially
as you add nines. The cost of six nines reliability is approximately $1,000 per
kWh, and customers that need this level happily pay it. We estimate that the cost
of providing ten nines reliability is over $100,000 per kWh.

We predict that, very According to the Gilder Group’s inaugural Power Report, the total market for
soon, the aggregate electricity that is more reliable than 99.9% is approximately 20% of the total
profits of companies electricity market. As digital semiconductors and the Internet penetrate deeper
that provide reliable and deeper into the economy, demand for reliable power will continue to grow as
power will exceed the a percent of the total electricity market. We predict that, at some point in the not
aggregate profits of too distant future, the aggregate profits of the companies providing reliable
the nation’s electric
power will exceed the aggregate profits of those companies/utilities providing
utilities
99.9% reliable electricity. And that’s precisely why we think that, over the next
decade, one of the most robust investment sectors in the economy will be the
electric power industry.

In This Industry Report

This industry report is divided into two sections. First, we address the power
semiconductor industry. We’ll explore the various types of power
semiconductors, the market dynamics and growth rates, and the players. Second,
we address the power supply industry. Here too we’ll explore the different types
of power supplies, the market dynamics and growth rates, and the players. After
years of evolutionary technological change, a few manufacturers of power
semiconductors and power supplies are making the revolutionary technological
changes necessary to take advantage of the vast market that is craving affordable
reliable electricity. At Stephens Inc., we want our clients to be prepared to profit
from the electric power revolution that is underway. This industry report has
been written for that purpose.

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