Littelfuse was established as a company back in 1927. As the name suggests, the company was built on circuit protection. But during the last few years this has changed significantly. DESIGN&ELEKTRONIK met Dave Heinzmann, CEO of Littelfuse, at electronica 2018 and asked him why.
DESIGN&ELEKTRONIK: Since a few years Littelfuse also manufactures semiconductors, especially power semiconductors, as well as sensors. Can you please tell me a little bit on the background, why Littelfuse has shifted its strategy?
Dave Heinzmann: It all started in 2012. I was responsible for corporate strategy at that time, and our board of directors asked me to put together a team that works out a long-term strategy for the company. Not for the few years, but for the next 10 to 20 years.
So, we started with a stocktaking exercise and found that we were by far the market leaders in circuit protection. This is a nice business with a nice growth, but we were beginning to run out of elbow room. The opportunity for further growth in this area was limited because of the size of the market.
So, we identified some long-term market trends. After that, we looked for adjacent technologies that would be very similar to our core competencies as well as at our customer base to take advantage of our great customer relationships. So, we identified sensing as well as power control and power conversion as areas of adjacent technologies in which we were able to grow organically and by acquisitions.
Can you name some of these long-term market trends?
One is safety. Our legacy is circuit protection, so many of these products are safety-oriented and are making our customer’s systems safer and more reliable. And, if you think about autonomous vehicles, you need a lot more safety-related components like sensors.
Another major trend we identified is the electrification of vehicles, whether hybrid-electric or fully-electric. These need a lot of safety components for the high-voltage battery and a lot of power semiconductors for the charger and the main drive inverter.
If I look at Littelfuse, another company comes to my mind: Vishay. In which ways the strategy of Littelfuse and Vishay is similar, and in which ways it is different?
Vishay is a great company. Felix Zandman and his family, together with the current management, have built up a great business. Of course, I cannot tell you what their strategy is, but I think their approach is to be a one-stop shop. They like to have the broadest offering in all applications. We, as Littelfuse, are a bit more focused. There are similarities; we both manufacture passive components and semiconductors. But we are targeting specific markets and specific areas. Taking power semiconductors as an example, we focus on the medium- and high-power range, but not the low end.
Littelfuse has acquired two companies in the power semiconductor area: Monolith Semiconductors and IXYS. The first is a young company, the other one well-established. Why did you choose to acquire these two?
As said before, we identified the medium- and the high-power business as interesting segments, because we think we can bring more value to our customer base. And so we made our own organic efforts to build up knowledge and products in that area. But then the possibility to acquire IXYS came along. That company has a very broad product and technology portfolio in the medium- and high-power range. Our core technologies and theirs actually matched together very well with almost no overlap. This really helped us to build a very full range of technologies to serve our end market.
Monolith Semiconductor is a very different story. We were engaged with them before IXYS. Actually, we funded Monolith as a start-up, eventually buying all their shares. They focus solely on wide bandgap semiconductors. IXYS didn’t have any activities in that area. So, the Monolith technology is also very complementary to ours.
Can we expect further acquisitions? Which types of devices do you want to add to the Littelfuse portfolio?
Sure, this is part of our corporate strategy. We have set a goal for the next 5 years to grow 5 to 7 percent per year organically. But we believe that there is the opportunity to grow another 5 to 7 percent per year from acquisitions. Typically, our acquisitions are driven about placing ourselves into an area of faster organic growth.
Littelfuse is based on three pillars: circuit protection, power semiconductors, and sensors. Do you think there are opportunities for acquisitions in all these three segments?
The great thing about our strategy is that we have a good optionality. In our legacy segment, circuit protection, we know our competitors very well, and maybe there will be some opportunity for consolidation. But in our newer segments, power electronics and sensors, I see a lot of opportunities for further growth.
Is the integration of IXYS working out well, and when will IXYS be completely integrated into Littelfuse?
The integration is going on very well. With approximately 750 million US dollars, this is the largest acquisition in our 90-year history, and IXYS has a complex operation. Therefore, I think it will take a little longer as our other acquisitions to integrate.
But more important than integrating their products is to integrate their customer base. We made good progress, and I think we will be able to complete that work by the end of 2018. But to integrate the rest will take us maybe another year.
At PCIM Europe in June 2019, I talked to Sujit Banerjee, the CEO of Monolith Semiconductor. He told me that the Monolith brand will go away, but the IXYS brand will stay alive. Is this still your plan?
In the near term, I’d agree. Monolith is a start-up company and has not have much brand recognition so far. This is very different with IXYS of course. That is a very well-established brand name. So that name has a lot of value to us. So IXYS will stay for quite a while as a brand name.
Regarding the electronica, what new developments in terms of products and technologies can you report?
There are a couple of these, of course. We have some new products from our core automotive fusing business which are more compact and can handle higher power as well as higher voltages. But we are also showing new power stacks and IGBT modules, and of course new silicon carbide devices – MOSFETs as well as diodes.
If you look 5 years into the future, how will Littelfuse look like then?
Great question. I think about that all the time. Look at our journey since 2012. We had less than 800 million dollars in revenue back then; today we have some 1.7 billion. So, I would say that in 5 years I expect some 3 billion revenue-wise. But more importantly we have to stay focused on our three pillars: circuit protection, power electronics, and sensors. There are still a lot of opportunities to grow in these and adjacent areas.
Our acquisitions in the power semiconductor space have opened up the industrial market for us. Some 15 years ago, the automotive market was driving some 40 to 50 percent of our revenue. Today our portfolio is much more balanced; automotive drives about a third of our revenue, electronics drives about another third, and industrial drives the remaining third. And, we will grow our business in that balanced manner.
Mr. Heinzmann, many thanks for taking the time.
The interview was conducted by Ralf Higgelke.