Ex-ST exec proposes European super chip company
March 13, 2008 //
Joseph Borel, former executive vice president in central R&D at STMicroelectronics NV has proposed that NXP, ST and Infineon Technologies should consolidate into one European super chip company. A 12-page proposal from Borel has been sent to the French Senate and is being transferred to the office of French President Nicolas Sarkozy.
MUNICH Joseph Borel, former executive vice president in central R&D at STMicroelectronics NV has proposed that Europe's top three chip companies NXP, ST and Infineon Technologies should consolidate into one European super chip company. A 12-page proposal from Borel has been sent to the French Senate and is being transferred to the office of French President Nicolas Sarkozy.
The European semiconductor industry has been struggling in a storm-tossed tempest. To avoid shipwreck, Borel, now of the JB-R&D consulting company, explained with conviction in an exclusive interview with EE Times Europe that NXP Semiconductors (Eindhoven, The Netherlands), ST (Geneva, Switzerland) and Infineon Technologies AG (Munich, Germany) have to stop operating individually, and join to achieve critical mass at a scale close to that of semiconductor market leader Intel and to be larger than number two Samsung.
Borel said he had defended his idea in front of Medea, now Catrene, the pan-European research collaboration for microelectronics. But, because he realized that only state governments could take such a decision, Borel addressed his 12-page proposal to the French Senate, which then transferred it to French President Nicolas Sarkozy.
According to Borel, Europe's situation has become critical. For fiscal year 2007, ST reported a net loss of $477 million on revenues of $10.0 billion, NXP made a net loss of $750 million on sales revenue of $7.04 billion and Infineon, excluding DRAM maker Qimonda, announced a profit of about $121 million (up from negative $27.7 million in fiscal year 2006) on revenues of $6.27 billion.
Besides, Borel explained that process R&D, design and manufacturing costs are skyrocketing when moving to the 45-nm node and below. This means that only a few organizations worldwide will be able to support such costs, which would need to be driven by significant worldwide market share.
In his proposal, Borel highlighted two simple equations in terms of sale revenues. Not only do Intel sales equal Samsung plus TI sales, but they also equal ST plus Infineon plus NXP sales.
When looking at the top 25 in the market share ranking in 2006, Borel said, NXP, ST and Infineon totaled worldwide semiconductor revenue of $26.5 billion, still below the $31.3 billion performance of Intel alone. Intel indeed remained on top of the list even though its revenues had declined by 9.5 percent compared to 2005.
"This shows how urgent it is to have a synergetic move of Europe, through co-operation and complementary product lines offered through a single European production foundry," declared Borel. "There is room for investment rationalization and product synergies between the three European independent players addressing at present some overlapping parts of the market, with no formal agreements on strategic sectors like memories where manufacturing costs are very critical to survive."
According to Borel, the quality of R&D in Europe in large R&D centers, if properly funded and driven by applications, can help meet this challenge.
"The only way to save Europe is to be just behind Intel and to put everyone under the same banner, so as to avoid duplication," stated Borel. "We need to have the same ambition as Intel, and, with a unique management, we would be able to develop a solution that would equal Intel's Merom processor."
Intel Corp. released its Merom processor as part of its Core 2 Duo family of chips in July 2006. Merom became Intel's premier line of mobile processors, with mostly the same features as Conroe, but with more emphasis on low power consumption to enhance notebook battery life.
Regarding the Merom processor, Borel said it is an early example of what a process-device and design optimized chip can bring in terms of overall performances including digital, analog, low power, error correction, disable non used functions, thermal control, speed debug and test functions.
Borel said he believes Europe can establish an "Intel-like" company that would result from the consolidation of Europe's existing players with some boundary conditions. A European chip company would have close connections to system houses, such as Nokia and Bosch, due to past Medea+ research, as well as more formalized links with large European research centers, such as CEA-Leti, IMEC and Fraunhofer, Borel said.
Among other conditions would be the sharing of process technologies, libraries, design developments and the complete sharing of production facilities, addressing the detailed technology needs of European applications as a priority.
"I believe in this convergence, which will bring new opportunities to create jobs, to save our universities and our research base," said Borel. "We only need to have Nicolas [Sarkozy], Angela [Merkel], Giorgio [Napolitano] to take the right decision," he said referring to the presidents of France, Germany and Italy, respectively.
"This decision can come from neither the companies nor from the European authorities. They have to get in the same boat and row together, but the problem is that individual member states have always preferred to promote their own national champions."
According to Borel, the time has come to stop being chauvinistic and start thinking of Europe as a whole. "The time of the Gauls or of the Romans is over. We should all start working together and establish a European champion," he asserted.
Questioned about the management structure of a European chip company, Borel said there would have to be one senior manager for fabs, one for IC design and one for R&D activities. All three senior managers would work for a single entity and report to a business oriented CEO.
"At that level, we do not need a technologist but a businessman that would ensure and maintain technical and industrial autonomy in the area of low-cost complex systems," he added.
Borel said he wanted his proposal to raise the alarm.
"We need to defend this [convergence] idea. It is the same as when we merged Thomson and SGS." Borel said when faced by an economic challenge before, the merger of Thomson and SGS had worked well and so Europe should not hesitate to use consolidation again.
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