Dive Brief:

• Semiconductor company Analog Devices is investing billions of dollars in its hybrid manufacturing model to raise its factory utilizations rates, according to its Q4 earnings call. 
• The company is growing in two ways — investing billions in capital expenditures after it acquired semiconductor company Maxim Integrated in 2021, and expanding its partnership with Taiwan Semiconductor Manufacturing Company to secure advanced 300mm manufacturing capacity in Japan.
• The hybrid approach aims to protect Analog Devices against regional supply shocks, boost flexibility, and allow the company’s “swing” production capacity across internal and external sites to capture 70% of revenue in coming years, CFO Richard Puccio said on the call. 

Dive Insight:

Analog Devices has invested $2.7 billion in capex since the Maxim acquisition, trying to increase its capacity and build resiliency, CEO Vincent Roche said on the call.

The Massachusetts-based company has been rapidly expanding its manufacturing operations in the U.S. and Europe, with plans to double output capacity by the end of 2025.

In July 2023, Analog announced plans to invest $1 billion to expand its Beaverton, Oregon, plant to double capacity and be converted to a full 8-inch fab.

In Limerick, Ireland, the company is expanding its headquarters with a new 45,000-square-foot research and development and manufacturing facility to triple capacity. Lastly, in Camas, Washington, Analog is investing to double capacity.

Analog Devices has a global manufacturing footprint of 10 internal factories as well as external partner foundries, according to its website.

As part of its external partner foundries network, in February, Analog Devices also secured a long-term agreement with TSMC through its Japan-based subsidiary, Japan Advanced Semiconductor Manufacturing, to secure additional capacity of wafer nodes. 

While the company’s overall Q4 revenue was down 23% year over year to $2.4 million, Roche highlighted the company's strategic investments, expressing optimism for fiscal year 2025. 

"While unprecedented customer inventory headwinds drove a historic revenue decline during fiscal 2024, we maintained operating margins north of 40%, which is a testament to our business model's resilience,” Roche said.

The company has faced low factory utilization rates at its internal fabs for the past two quarters, Puccio said on the call, yet this quarter turned a corner.

“One of the reasons we've been able to bring utilization levels up is our ability to swing capacity back into our internal fabs,” Puccio said. “We're still not at anywhere near normalized utilization rate but our ability to swing during the downturn has allowed us to continue to grow off the trough that we talked about in Q2.”

In FY 2025, Analog Devices plans to normalize capex spending to be 4% to 6% of revenue, supported by investment tax credits from the U.S. CHIPS and Science Act and the European Chips Act, which the company hopes will provide a cash flow boost, Puccio said. In June, Analog Devices finalized its $12 million Oregon CHIPS Act award, meant to expand its Beaverton facility.