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Electronica: CEO panel basks in upbeat mood

November 10, 2010 // Peter Clarke

Electronica: CEO panel basks in upbeat mood

In the traditional CEO panel on the opening day of the Electronica exhibition here, the participants were unanimous that the semiconductor industry handled the economic crisis of 2008-2009 well, and that the industry is now set fair for return to "normal" growth.


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Nonetheless, the crisis did have a major impact on the chip industry, which now sees Infineon Technologies AG and NXP considerably smaller than they were two years ago as a result of restructuring.

Peter Bauer, CEO of Infineon, described the immediate sales impact as being a "shock-freeze of demand" which just stopped the supply chain in its tracks but did not reflect underlying end-user demand. "That's why the market went away very abruptly and came back very abruptly. But the demand remained. The mobile phone market survived quite well," said Bauer.

Henri Richard, senior vice president of global sales and marketing at Freescale Semiconductor Inc., was standing in for his absent CEO, Rich Beyer. Richard said the chip industry had clearly learned one important lesson: "Never waste a good crisis. We went back to basics and made some changes and have emerged stronger."

Carlo Bozotti, CEO of STMicroelectronics, and Rick Clemmer, CEO of NXP Semiconductors BV parried with statistics on how quickly markets had gone away in 2008 and 2009 markets dropping 40 percent in two quarters and the automotive market being 50 percent down on a year before in Q1 2009. Such things are impossible to predict and mean that the semiconductor industry must be flexible and quick to react, they said.

The panelists were quick to congratulate themselves on having responded quickly to the external crisis but Bozotti did point the finger of blame towards the bankers saying that there is now a greater tendancy towards the formation of bubbles in various sectors due to a "lack of good governance in the global financial world."

Although the panelists talked about quick reactions made by chip companies, none made anything but passing reference to the fact that this meant job losses inflicted in 2008 and 2009. The moderator, free-lance journalist Kilian Reichert, was unable to find a question that would expose differences of opinion amongst the panelists or prevent what came close to being an exercise in self-congratulation.

Clemmer said that while the first three quarters of 2010 had seen extreme annual growth in comparison with a very low 2009 the fourth quarter was like to show a normal seasonal sequential decline. And Bozotti said that 2011 would see the semiconductor industry return to normal and grow between 5 and 10 percent.

Bozotti pointed out that the drivers for the semiconductor industry have changed. Information technology and the internet while still being rolled out across the globe and being upgraded is being replaced by energy conservation, accessible and affordable healthcare and data security as top issues.

However, the new demand and a lack of investment in manufacturing capacity over the previous two years is producing long lead times. Bauer, although presiding over a chip manufacturer that is going fab-lite, revealed some frustration as he said: "The silicon foundries have underinvested massively. Now we are chasing parts."

It perhaps should not have been a surprise then when an audience member who identified herself as being from automotive supplier Bosch asked Infineon's Bauer why his company had longer lead times and was a less able supplier than the other companies represented on the panel

Bauer did not answer that directly, saying merely that Infineon had to increase production in waves. In the six months after February 2010 automotive demand into Infineon had increased 25 percent, he said, indicating that there would always be particular parts and customers that would be hit during the growth phase after such a deep dive in demand. Other CEOs were quick to help Bauer out saying that all companies have their successes and their horror stories.

Another questioner pointed out that much of the restructuring that had taken place in Europe chip companies had been away from the consumer and mobile sectors and towards the higher margin, lower volume and steadier demand represented by automotive, industrial and multimarket segments. He went on to ask if that moving away from the leading-edge in terms of volume and technology was a danger to Europe.

"I would not agree," said ST's Bozotti. In HDTV, in smartphones, in communications Europe is a leader. The challenge is not in the margin but in the R&D effort needed in design and in software. You need an evolution of the road-map and that requires massive R&D and to afford that you need scale. So only a few companies can take part."

Infineon's Bauer picked up the theme saying that there are so many market segments that it is inevitable that many that were broad chip suppliers must become specialized. "Take smartgrid, something Infineon is working on, it is a market that will be worth $100 billion over the next years." NXP's Clemmer cautioned the questioner not to think in regional terms. "It's a global industry now."

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