Tessera is a provider of back-end technology for semiconductor
manufacturing. The company's second quarter earnings exceeded the
Zacks Consensus Estimate. Management also provided an encouraging
guidance. Management is refocusing the business on the
higher-margin, higher-risk licensing model, so the host of patents,
new technologies and customer wins are encouraging. The product
portfolio has also been revamped to target the mobile segment,
which should help growth. The major negative is the excessive legal
charges, which are necessary to protect its IP. This is a special
concern given Tessera's small size with respect to defaulters that
are usually big technology companies such as Micron. However, its
prospects appear to be improving, and therefore we have a Neutral
recommendation on TSRA shares.
San Jose, California-based Tessera Technologies, Inc. (TSRA)
licenses its proprietary advanced integrated circuit (IC) packaging
technology to semiconductor manufacturers, assemblers and material
suppliers. Around 80.0% of 2012 revenue (93.0% in 2011) was
generated through licensing fees related to its proprietary
packaging technologies. Roughly 11.4% of revenue (7.0% in 2011) was
generated through the sale of micro-optics products that impart
camera functionality to electronic devices and services for
back-end operations, such as prototype design, assembly-line
consulting and related services. In 2012, the company generated the
remaining 10.6% from past production payments (0.0% in 2011).
Sources of Revenue
The IP (intellectual property) licensing segment includes
one-time start-up licensing fees and recurring royalty fees, based
on production volumes and chip pin counts of the licensee. The
royalties and fees related to previous periods are the result of
license negotiations, or patent disputes that were resolved during
the year. The primary users of Tessera's technology are dynamic
random access memory (DRAM) producers.
Semiconductor Manufacturing Process
The semiconductor manufacturing process is composed of the
front-end and back-end operations. Front-end processes involve the
deposition or implantation of multiple thin layers of
electronically conductive, semiconductive and insulating materials
onto and within a silicon wafer to give multiple copies of
integrated circuit devices.
Back-end processes involve the separation of the silicon wafer
into individual semiconductor IC devices or die after addition of
electrical contacts, die packaging and final testing. Electrical
leads are then attached to the die, which is followed by die
encapsulation and additional packaging within an environmentally
protective encasement. Other than protection, the die package also
facilitates the securing of electrical contacts to the protruding
electrical leads and dissipation of thermal energy or heat from the
Tessera's advanced packaging techniques are focused on
chip-scale package (CSP) and multi-chip package (MCP) technologies.
At 2012-end, the company's intellectual property (IP) portfolio
consisted of 1,135 U.S. patents (1,736 in 2011), as well as 713
foreign patents (902 in 2011) and pending applications.
The CSP solution is much smaller than a typical package, with
shorter electrical leads and similar in size to the device itself.
The real breakthrough in the design was that it permitted physical
movement of the semiconductor device within the encasement,
overcoming a variety of miniaturization induced problems, such as
thermally induced stress. Licensees either incorporate the IP
directly into proprietary designs or utilize the micro ball grid
array ( BGA) or BGA-F (in which the die is flipped over)
The MCP solution physically stacks the semiconductor devices on
top of each other within the package. There are four varieties of
MCP products fold-over, ball stacked, folded stacked and chip
stack. The company's Pyxis platform integrates RF-based
semiconductors into a high-density RF package.
Tessera's packaging technology is incorporated in a wide range
of ICs with end product applications that include digital cameras,
MP3 players, personal computers, personal digital assistants
(PDAs), video game consoles and wireless phones. New markets with
potential include automotive and security.
(Note: Will be updated after the company files its 10K)
Being a back-end technology company, Tessera generates the
largest chunk of its revenue from Asia/Pacific countries followed
by the U.S. and then Europe & Other. Revenues declined
double-digits across all geographies in 2012. The Asia/Pacific
region (52% of 2012 revenue) was down 26.7%, the U.S. 45% (up
43.2%) and Europe & other 3% (down 55.6%).
The company's packaging technologies compete against the
internal capabilities of semiconductor companies, such as Texas
Instruments, Intel and Samsung, as well as technologies from other
back-end technology companies, such as Advanced Semiconductor
Engineering, Amkor Technology and STATS ChipPAC. Competitors for
image and optics products include companies offering image sensors,
such as OmniVision Technologies, Micron Technology, ST
Microelectronics, Samsung Electronics and Toshiba Corporation.
Tessera Technologies, Inc. (TSRA): Read the Full
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