What's The Answer To The Chip Industry's Problems? Asks IEF

Friday, 2 October 2009

 

So what's the way out of the semiconductor industry's problems? Finding renewed growth and better profitability was very much on the agenda at the opening day of the Future Horizons' International Electronic Forum 2009 in Geneva yesterday.

The chip market is still the same size it was in 2000, employment in the industry has declined 36% between 2001 and 2009, and profitability is on the wane.

 

TSMC's European President Maria Marced pointed out that: "The weighted average of the profit margins of the major semiconductor OEMs (excluding memory, fabless and foundry) declined from 21% in 2005, to 17% in 2006, to 16% in 200 and to 15% in 2008.

 

"It has to be made more profitable", said Marced, "and it can only be done by collaboration."

 

Marced argued that collaboration reduces waste and shares investment, while individual efforts lead to redundant initiatives and heavier investment.

 

Agreeing with Marced that collaboration is the key was Jean-Marc Chery, executive vice president and chief technology officer of STMicroelectronics.

 

"We leverage our internal capabilities and multiple external sources to deliver to our business units the best competitive supply price", said Chery.

 

Chery instanced external sources like: European collaborative programmes like Nanotech 2012, ST's participation in the International Semiconductor Development Alliance (ISDA), CEA/LET, universities in France, Italy and the USA and research institutes in Singapore.

 

ISDA allows design compatibility between IBM's technology development fab at East Fishkill, at ST's fabs Crolles, Globalfoundries' fabs, Chartered's fabs and Samsung's fabs.

 

Ronald Collett, CEO of Numetrics Management Systems agreed: "Deep partnerships distinguish the R&D leaders", he said, "R&D must deliver the ROI".

 

Alain Dutheil, CEO of ST-Ericsson, pointed out that, of 8,000 employees in his company, 85% were engaged in R&D.

 

He suggested another approach to solving the industry's problems: increased broadband penetration is the stimulant the world economy needs, stated Dutheil, quoting a World Bank finding that every ten per cent increase in broadband penetration delivers a 1.2% increase of a country's GDP.

 

In addition to economic benefits broadband delivers, said Dutheil: "More responsive governments which we need, especially in Europe."

 

Average global broadband penetration is 24.7%.

 

But the most traditional semiconductor answer to the semiconductor industry's problems came from Young Sohn, CEO of Inphi: "You need to be in the right place going after the right space", said Young, "you have to pick the right space to grow and to bet your company around."

 

Inphi is growing at 45% a year by making said Young, very high-speed analogue components aimed at Cloud computing i.e. server manufacturers and server farms where customers demand the fastest possible delivery of their information.

 

Young gave commercial examples of the need for speed.

 

. Amazon says every 100ms of latency costs them 1% in sales;

 

' Google says an extra 500ms in search page generation time dropped traffic by 20%;

 

. Tabb Group says 'a broker could lose $4m per millisecond if their electronic trading platform is 5ms behind the competition'.

 

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