PARIS * The semiconductor industry is fifty years old. For the last 30 to 40 years, this industry was simple. It was growing. Major changes are underway. In a keynote speech at SAME Forum early October in Sophia-Antipolis (France), Jean-Philippe Dauvin, chief economist emeritus at STMicroelectronics NV (Geneva, Switzerland), offered his view of tomorrow's semiconductor industry.

Dauvin said that the semiconductor industry is moving from a two dimensional world with strong growth, simple market combination, single-type of competition, few identified "fair play" partners, stable business models and monolithic company structure to a multidimensional world with moderate growth, a multiple market combination, multi-type of competition, many partners among which unidentified Ç Barbarians È and different manufacturing models.

"In the old world, we had 40 years to react. In the new world, we have 40 minutes before sinking," Dauvin declared.

The past ten years can be characterized by six components, that Dauvin named "The six Cs". First on the list are the customers who absorb 65 percent of total semiconductor shipments, followed by China as Greater China has become the world workshop. Then, Dauvin mentioned the market cycle as the end of the yearly cycle seems close. Cost is also in all mouths since fab costs are increasing in proportion with complexity. The last two elements of trend are consolidation and cooperation.

Looking five years ahead, Dauvin identified five main trends: market growth, value chain, industry, speed and market structure.

"For the period of 2005 to 2010, we are forecasting a 6.6 percent market growth", declared Dauvin. "The long term growth is no longer 15 percent but 4 to 6 percent. When the growth goes down to 4 percent, there is usually a consolidation, like in the automotive industry."

Dauvin specified that a 4.4 percent growth is expected in 2010, a low record only comparable with the period of 1995 to 2005. The reasons, he continued, are the development of low cost products, the consumerization of the market, the intensification of rivalries due to the number of competitors, the lack of strategic innovation from the semiconductor industry and the intensification of customers' bargaining power.

"We are in a business that addresses the end-user, but we cannot understand the customer. Our obsession is silicon but the final customer cares about the usage not the fabs. This industry has no creativity. Consequently, when you are not creative, you suffer from decreasing prices, and the market capitalization drops. That's the reason why this industry is in a profitless trend."

Dauvin's response to the loss of creativity is to hire more marketing people. "In the old world, we recruited only among engineers. The recruitment from financial and marketing schools is now essential."