Genesis Microchip (GNSS)

Based in Alviso, CA, Genesis Microchip, Inc. (GNSS) is a fabless original equipment manufacturer (OEM) of a range of semiconductor integrated circuits (ICs) for video display controllers used within flat panel computer monitors, advanced televisions (ATV) and multimedia front projectors. Display controllers functionally process and optimize video signals that drive the new generation of digital-based displays. These displays are composed of thousands of tiny pixels, or picture elements, each of which is digitally controlled. The analog-based legacy cathode ray tube (CRT) displays utilize a sweeping high-speed electron beam that paints the pixels on a phosphor screen. GNSS operates and reports results in a single operating segment.

The end products for the company's offerings are computers and advanced televisions. In the computing market, the traditional CRT PC monitors are transitioning to LCD (liquid crystal display) monitors. Of the 130 million PC monitors sold in 2004, 67 million (or 51.5%) were LCDs. PC monitor LCDs grew very strongly in 2005, and are expected to decline slightly in 2006. The continued decline in prices has driven penetration rates, although it also tightened margins for component suppliers such as Genesis. Management strategically repositioned the company into the newer flat panel TV market, where growth rates are more promising and margins are relatively higher than within the PC monitor market. iSuppli, one of the leading market research firms, estimates that LCD TV shipments will rise at a CAGR of 47.2% from 8.9 million units in 2004 to 61.2 million units in 2009. The research firm estimated that approximately 17.1 million LCD TVs were shipped in 2005. Genesis is one of the leading suppliers of display controllers into this fast-growing market.

The company's three main product lines target the LCD monitor, digital video and Faroudja home theater system markets. The LCD monitor product line includes ICs and controllers for a wide range of conventional flat panel LCD computer monitors. Products in this category include the Malibu gm1601 (resolution WUXGA), gm5861 (UXGA), Oak FLI5962/61/21 (WUXGA/UXGA/SXGA), Phoenix-U gm5766 (UXGA/WSXGA) and the Phoenix gm2621/5621/26 (SXGA). Traditionally, this segment has been the core business for the company. However, it contributed only 43% of revenue in fiscal 2007, while the TV segment generated the balance. The digital television product line includes ICs and controllers for digital TVs and LCD TVs, digital converters for digital CRTs, and high-end digital video format converters. The end market applications for these product lines include high-end flat panel computer monitors, flat panel televisions and HDTVs. The Faroudja product line includes digital video processors with various high definition plasma display panel (PDP), digital light processing (DLP) and direct drive image light amplifier (DILA) projectors for high-end home entertainment systems. The product line comprises the Faroudja FLI2300/01/10 (WXGA/SXGA), Malibu gm1601/1501 (1080p/WUXGA), Hudson FLI8120/22/25 (SXGA/WXGA), Cortez FLI8532 (SXGA/WXGA), Cortez-Plus FLI8538/48H (1080p/WUXGA) and Cortez-Advanced FLI8638/68 (1080p/WUXGA). The latest introduction is the gm7746, the company's first timing controller. In June 2005, management sold the manufacturing and distribution rights of its Faroudja home theater line after incorporating the technology into some of the new products.

All wafer manufacturing of the IC products is outsourced to Taiwan Semiconductor Manufacturing Company (TSMC), a sole-sourced third party foundry. ASE International, Siliconware, ST Microelectronics and TSMC conduct all the assembly and product testing prior to shipment.

In 2007, the revenue contribution by product segment was LCD monitor 44% (down -20.1% from 2006 levels) and video/advanced TV 56% (down -20.6%). The company's top five customers contributed 52% of total revenue in fiscal year 2007. LG Electronics, BenQ and Royal Philips each accounted for more than 10% of sales. The geographical distribution of revenue was as follows the U.S. less than 1%, Europe 12%, China 39%, Japan 11%, South Korea 25%, Taiwan 9%, and rest of the world 3%.

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