See also: International Electronics Forum 2009 - News Roundup
At the International Electronics Forum in Geneva last night, Pasquale Pistorio, Honorary Chairman of STMicroelectronics and Chairman of Sagem Wireless was asked how the credit crunch had changed the world for semiconductor CEOs.
"Things have changed but the fundamentals are the same", replied Pistorio. He went on to enunciate six principles for being a CEO in the semiconductor industry.
"1. Due to the financial crisis and government intervention the time of easy money is gone. For the next several years, it will be difficult to get credit. To raise money on the markets or borrow from the banks will be difficult. Companies must generate their own cash. P&L will be very important. EBITDA will be very important."
"The cake is smaller and will grow bigger slowly and more people are eating the cake. The consolidation in semiconductors which I predicted in 1986 has not happened. Why not? Because the foundries eliminated the barriers to entry, and because, with the easy money of the 90s and 2000s, everyone had money to burn."
"The consolidation process will accelerate. I would love to be a CEO today because I'd go shopping like crazy. You can get companies cheaply. Qimonda and Spansion have gone. NEC and Renesas have merged. ST-Ericsson is a consolidation in wireless."
"2. Innovation. Nothing can change the world like innovation. Not only innovation in products and processes but in the way you deal with customers and in the operating processes of the company. SGS and ST were always above the industry average in R&D spending and below the industry average in SG&A."
"3. Asia. Asia is the driver of growth. The intra-regional trade in Asia is growing every year and will grow much faster. Asia is going to be very important. Companies that don't address Asia fail."
"China is spending 1.4% of GDP on R&D. Europe is spending 2.2%. But because of the relative labour costs, China's investment is greater."
"4. Social responsibility. At ST social responsibility is written into our charter. ST is signed up to the global standards on environmental protection, it practises environmental neutrality and contributes some of its profits to charity to decrease the digital divide People ask: Which is more important stakeholder value or shareholder value? I say there's no contradiction. Environmental responsibility makes money. It's good for the bottom line. In 2007 it produced savings of $220m for ST."
"5. Energy is a key element of the crisis. The world consumption of 85bn barrels of oil is costing $1.5trn - a tax on the world economy. If the fuel efficiency of American cars was the same as in Japan, they'd save $4m a day. That's more than they're spending on wars. Business enterprise must lead the way in solving this energy crisis."
"6. The role of the CEO is to: create a vision; build a team, set a culture; define a road map and drive execution. You must create an environment which is conducive to innovation which means it is tolerant of mistakes and gives projects time to succeed."
"The CEO is the custodian of the company's assets. If you make decisions to please the financial community for the next quarter you are wrong. You have to think of your company as an on-going concern. For instance we started investing MEMS in 2000 and now it is flourishing profitable business."