Allegro MicroSystems Inc Stock

Allegro MicroSystems, Inc. operates as a global designer, developer, fabless manufacturer and marketer of sensor integrated circuits (ICs) and application-specific analog power ICs enabling the most important emerging technologies in the automotive and industrial markets.

The company is a leading supplier of magnetic sensor IC solutions worldwide based on market share, driven by its market leadership in the automotive market.

The company’s products are foundational to automotive and industrial electronic systems. The company’s sensor ICs enable its customers to precisely measure motion, speed, position and current, while its power ICs include high-temperature and high-voltage capable motor drivers, power management ICs, light emitting diode (LED) driver ICs and isolated gate drivers.

The company’s portfolio includes more than 1,000 products, and it ships over 1.5 billion units annually to more than 10,000 customers worldwide. By developing sophisticated, analog mixed-signal IC solutions that incorporate the company’s patented intellectual property, proprietary and robust process technologies and its unique packaging know-how, the company is well-positioned to compete across all of its target markets. The company’s established position as an incumbent supplier for the automotive market and its long product life cycles attest to the strength of this competitive advantage.

The company’s value proposition is based on providing complete IC solutions for motion control and energy efficient systems. This includes sensing angular or linear position, driving an electric motor or actuator, and regulating the power applied to sensing and driving circuits so they operate safely and efficiently. These capabilities are based on fundamental technical advances the company has made in the field of Hall-effect and xMR magnetic sensors and Bipolar-CMOS-DMOS (BCD) power ICs. The company continues to be instrumental in developing Hall-effect and magnetoresistive transducers (xMR) and power double diffusion metal oxide semiconductor devices on silicon, application-optimized packaging, high-temperature operation, high-speed precision signal paths for signal processing, and 100-volt (100V) capable BCD wafer technology. In Hybrid Electric Vehicles (HEV), Electric Vehicles (EV) and advanced driver assistance systems (ADAS) applications, these innovations translate to increased driving range for an electric vehicle, smaller and more reliable power conversion systems, improved safety and efficiency of motor and power management systems and safer and more reliable steering and braking systems. In the industrial market, these technologies enable clean energy and automation. These innovations improve reliability to avoid factory downtime, accurately measure to support increased energy efficiency for high-density clean energy applications and reduce the solution footprint.

The company has maintained its sensor IC leadership and built its power IC business through successfully developing deep customer relationships over time. The company’s customer list includes virtually all of the world’s top automotive companies and a large quantity of leading industrial companies. The company is a preferred vendor to tier-one suppliers in the automotive industry that supply parts or systems directly to original equipment manufacturers (OEMs). The company supports customers through design and application centers located in North America, South America, Asia and Europe. The company’s local teams in these centers work closely with its customers on their unique design requirements, often acting as an extension of a customer’s development team.

The company relies on a limited number of third-party wafer fabrication facilities for the fabrication of semiconductor wafers used in the manufacture of its IC products, primarily United Microelectronics Corporation (UMC), Polar Semiconductor, LLC (PSL), and Taiwan Semiconductor Manufacturing Company (TSMC).

Market

Within the global semiconductor industry, the company focuses on the magnetic sensor and power management IC markets.

E-Mobility

The company defines e-Mobility as the electrification of vehicles and the increasing adoption of advance safety-related driver assistance systems, known as ADAS.

The company is a leading provider of sensing and power solutions for vehicle electrification, building on its decades of experience in powertrain efficiency and performance leadership in technologies that reduce emissions. The ability to improve efficiency is critical as OEMs strive to comply with increasingly stringent regulations and heightened customer awareness of the environmental impact of high emissions.

The company’s September 2022 acquisition of Heyday Integrated Circuits (Heyday) provides it with additional content opportunities in every fully electric vehicle. This first-to-market technology, which integrates an isolated DC-DC and isolated gate driver (IGD) is more efficient than competitive solutions that require two chips. This not only allows customers to reduce their printed circuit boards (PCBs), but also enables the entire system, like an on-board charger, to shrink. The company continues to innovate this technology, which will enable gallium nitride (GaN) and silicon carbide (SiC) solutions in the electric powertrain.

Clean Energy

The company’s automotive first philosophy resonates with its industrial customers who appreciate its rigorous quality standards, devices designed to withstand extreme environments and its long product lifecycle of 10 years or more. These customers are in the company’s target markets of clean energy, defined as renewable energy generation, storage and distribution, EV charging infrastructure and data center.

The company offers one of the largest portfolios of current sensors on the market, including those with integrated components, requiring less board space. The company’s ‘lossless’ current sensor ICs are used to improve efficiency in these power conversion systems. The company’s 100V BCD wafer process technology and galvanically isolated current sensors are suited for higher voltage operation, and the demand for current sensor ICs will increase as more solar and EV applications come to market. In addition, the company expects its IGD technology to enable it to use a single, small-footprint package to significantly reduce system design time and complexity.

The company’s motor drivers are heavily adopted in the data center space, mainly for thermal efficiency, as these products reduce complexity and design time, while also reducing the energy consumption required to cool servers.

Automation

With the growing adoption of factory automation, there is increasing demand for precise motion control and energy efficient technologies representing additional meaningful growth opportunities for the company. The company can leverage its technology leadership in solutions optimized for high-accuracy, high-voltage and high-reliability conditions to expand its presence in these markets. Many of these applications require the same safety and accuracy, which the company has designed into its automotive first devices. In particular, the company has the potential to leverage the synergy between its power and sensor solutions, including motor drivers, voltage regulators, display drivers, and current, position and speed sensors, into under-penetrated opportunities within industrial automation.

Traditional Automotive Applications

The internal combustion engine (ICE) will continue to exist in some form for the foreseeable future, either in pure ICE vehicles or hybrids, the largest portion of the EV market for the next few years. OEMs continue to improve their fuel mileage and look to Allegro to help create the most efficient ICE powertrains possible. The company has decades of experience as a proven supplier in ICE powertrains to support engine efficiency.

Products the company’s customers have relied on for lighting and infotainment are becoming more energy efficient as it develops more advanced products and innovate with its customers. Additionally, the company works to improve electrified powertrains is translating into an electrified thermal management system, where it can leverage the trust the company has established with OEMs based on its prior experience to introduce and sell new products.

Broad Industrial

The Broad Industrial market includes the company’s personal mobility, or two wheeler market, and a number of other end uses from heavy equipment to telecom connectivity. The company’s two-wheeler business is seeing similar electrification trends as larger vehicles. The company’s solutions are proven in electrified powertrains and in small form factors needed in these applications. These markets are looking for many of the same devices the company’s automotive customers use, from high voltage and high temperature performance to long life cycle, small form factors, integration and unique packaging.

Consumer & Computer Markets

The consumer and computer markets include smart home applications, personal computers and consumer electronics. The company’s devices enable its customers in these markets to manufacture more energy efficient products with extended battery life.

Strategy

The company’s strategy is to provide complete IC solutions for its customers, innovate with purpose to build on leadership in its key markets and expand its presence to become a global leader in semiconductor power and sensing solutions for motion control and energy efficient systems in automotive and industrial applications.

The key elements of the company’s strategy are to invest in research and development that is market-aligned and focused on targeted portfolio expansion; emphasize its automotive ‘first’ philosophy to align its product development with the most rigorous applications and safety standards; invest to lead in chosen markets and apply its intellectual property and technology to pursue adjacent growth markets; expand its sales channels and enhance its sales operations and customer relationships; continue to improve through product innovation; and selectively pursue acquisitions and other strategic transactions; and maintain sustainability efforts.

Products and Solutions

The company’s product portfolio includes over 1,000 products across a range of high-performance analog mixed-signal semiconductors.

The company applies its deep technology know-how to deliver magnetic sensing IC and power IC solutions to:

Sense speed, position, and current to enable electric powertrains, improve vehicle fuel efficiency and CO2 emissions, enable safer cars through ADAS safety features, and enhance factory automation and clean energy systems;

Regulate systems to improve safety and power efficiency and ultimately reduce solution size; and

Drive motors through the company’s advanced, proprietary algorithms that provide industry leading reliability and energy efficiency, with minimal audible noise and vibration.

Magnetic Sensor ICs

The company offers what to be the industry’s leading portfolio of integrated magnetic sensor ICs. The company’s solutions are based on its monolithic Hall-effect and xMR technology that allows customers to develop contactless sensor solutions that reduce mechanical wear and provide greater measurement accuracy and system control. The company’s portfolio of magnetic sensor ICs includes the following:

Current Sensor ICs: Current sensor ICs provide output signals proportional to the overall strength of a magnetic field created by a current carrying conductor. The company has developed a broad portfolio of current sensors to meet multiple voltage and application needs for its customers. Current sensor ICs are used to improve energy efficiency in a broad range of applications, on-board chargers, DC-DC converters, inverters, industrial motors, solar inverters, and EV charging infrastructure.

Position Sensor ICs: Position sensor ICs provide an analog or digital voltage output that measures the intensity of a magnetic field, thereby establishing a precise position. In automotive applications, the company’s position sensor ICs are used to improve safety applications, such as ADAS power steering and braking systems; mild HEV powertrain systems, such as the shaft position of a starter generator; and ICE powertrain systems, such as clutch and fork position in advanced transmissions. The company’s TMR Angle Sensor ICs offer high resolution position feedback and the safety diagnostics required for adoption in advanced ADAS motor position applications.

Speed Sensor ICs: Speed sensor ICs detect and process the magnetic fields created by a rotating gear tooth or ring magnet with the output being a digital reading proportional to speed. These sensor ICs are used in camshaft/ crankshaft and transmission systems and employ proprietary algorithms for high accuracy, leading to reduced CO2 emissions and improved fuel economy of combustion engines. Additionally, xMR wheel speed sensors play an important role to increase the safety of ADAS braking systems.

Power ICs

The company’s power IC portfolio consists of high-temperature and high-voltage capable motor driver ICs, regulator power management ICs, LED driver ICs and high-voltage IGDs, which allow its customers to design safer, smaller and more power-efficient systems. The company employs embedded algorithms that simplify system-level design, reduce audible noise, and increase start-up reliability in BLDC motors and fans. The company’s portfolio of power ICs includes the following:

Motor Driver ICs: Motor driver ICs contain the power drivers and the sequencing logic to drive the coils of a variety of motors. The company’s motor driver ICs utilize embedded algorithms to improve energy efficiency and motion control in HEV and EV systems, automotive fans and pumps, data center cooling fans, automation and home appliances.

Regulator and LED Driver ICs: As the industry transitions to more highly integrated products, the company’s portfolio of regulator ICs, and power management ICs (PMICs) is used extensively in under-hood automotive ADAS and powertrain systems. The company’s LED driver ICs and modules are used in smart lighting systems to improve system safety, efficiency and size.

Isolated Gate Drivers: These devices combine isolated DC-DC and IGDs into a single package. They are designed to complement GaN and SiC switches in high-efficiency power conversion systems. The company’s IGDs enable an application that is smaller and more efficient than the competing solutions, helping to shrink PCBs and reduce total system size.

Sales, Marketing and Customer Support

The company sells its products worldwide through multiple sales channels, including through its direct sales force and through distributors and independent sales representatives, which resell its products to numerous end customers.

The company’s direct sales force and applications engineers provide its customers with specialized technical support. The company provides ongoing technical training to its distributor and sales representatives to keep them informed of its existing and new products.

The company maintains an internal marketing organization that is responsible for increasing its brand awareness and promoting its products to prospective customers. This includes the creative management of the company’s website, market research and analytics, and development of demand generation strategies and materials, such as product announcements, press releases, brochures, training and videos, as well as securing thought leadership through published technical and trend articles and advertisements, and active engagement in key industry events.

Customers

The company sells its products to major global OEMs and their key suppliers, primarily in the automotive and industrial markets. The company sold to more than 10,000 end customers, directly and through distributors, during the year ended March 31, 2023.

Intellectual Property

As of March 31, 2023, the company owned 1,371 patents, including 742 active U.S. patents (with expiration dates between 2023 and 2042), with an additional 357 pending patent applications, including 154 U.S. patent applications. The company markets its products worldwide under the ‘Allegro’ name.

Competition

The company’s primary magnetic sensor and power IC competitors are other semiconductor design and manufacturers, such as Analog Devices, Infineon, Melexis, Monolithic Power Systems, TDK Micronas, and Texas Instruments.

Seasonality

The company’s business exhibits some seasonality. Historically, the company’s net sales have generally been higher in the second half of the fiscal year (year ended March 31, 2023) than in the first half.

Research and Development

For the year ended March 31, 2023, the company’s research and development expenses were $150.9 million.

Environmental and Occupational Health and Safety Regulation

The company faces increasing complexity in its product design and procurement operations due to the evolving nature of environmental laws regulations and standards, as well as specific customer requirements. These laws, regulations and standards have an impact on the material composition of the company’s products entering specific markets. For example, the European Union (EU) adopted its Restriction of Hazardous Substance Directive (RoHS) in 2003 and continues to develop evolving compliance standards, with its most recent restrictions announced as part of RoHS 3, which took effect in July 2019.

History

Allegro MicroSystems, Inc., a Delaware corporation, was founded in 1990. The company was incorporated in 2013.