Tessera is a provider of back-end technology for semiconductor
manufacturing. The company's fourth 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. It has lowered its operating expenses,
redirected investment to areas with growth potential and secured
several patent licensing agreements Cost savings from its
restructuring efforts will act as a positive for the company. A
number of patent litigations have also been settled in its favor.
The company's prospects appear to be improving therefore we have an
Outperform 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. In 2013, the company generated revenue from two
segments: Intellectual Property (89% revenue share) and Digital
Optics (the remaining 11%).
Following a strategic review of its operations, management
decided to do away with product manufacturing and focus instead on
developing and licensing its technologies. As a result, 2013
revenue was derived entirely from royalties and licensing, whch
included amounts generated from patent infringement
Intellectual Property revenues come from two operating
subsidiaries: Tessera Inc and Invensas Corp. that focus on
chipscale packaging, primarily for dynamic random access memory
(DRAM) producers. DigitalOptics has been reduced to FotoNation
Products, which are technologies for improving the appearance, such
as face beautification and red eye removal.
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 the dissipation of thermal energy or heat from
Tessera's advanced packaging technologies include chip-scale
package (CSP) and multi-chip package (MCP). At 2013-end, the
company's intellectual property (IP) portfolio consisted of 1,225
U.S. patents and patent applications (1,135 in 2012), as well as
919 foreign patents (713 in 2012).
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
technology 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 and interconnect technology is incorporated
in a wide range of ICs with end product applications that include
mobile computing and communications, memory and data storage, and
3DIC technologies. New markets with potential include automotive
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. Revenue from Asian markets
grew strongly in 2013 while the U.S. and Europe & Other
declined. Specifically, Korea and Japan grew 48.9% and 112.2%
respectively, with other Asian countries declining 64.2%. The U.S.
and Europe & Other dropped 58.9% and 59.8%, respectively. The
contribution by geography was Korea 37%, Japan 29%, the U.S. 25%,
Other Asia 8% and Europe & Other 1%.
Given the nature of business, there is a certain amount of
customer concentration. Tessera's top customers in 2013 were SK
Hynix accounting for 26%, Sony Corp 18% and Samsung 11%.
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
the current DigitalOptics products ArcSoft and internal design
groups of companies.
Tessera Technologies Inc. (TSRA): Read the Full
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
TESSERA TEC INC (TSRA): Free Stock Analysis
To read this article on Zacks.com click here.