Mannerisms

One relatively new characteristic of the industry is that it no longer has a bellwether company. “No single semiconductor company is a bellwether of what the industry is doing”, said Penn, “it used to be Motorola, or TI, when it was a real company. Now there’s no company out there that can give you a snapshot of the rest of the industry. There are a hotch-potch of $5 billion niches plus three biggies”.

As to the semiconductor market, those traditional characteristics, volatility and uncertainty, are as powerful as ever. “The industry’s dynamics are as volatile as they ever were, they’re just as bad as they’ve always been and they will be just as bad for the next few years,” said Penn.

“The industry sells on cost, not on value”, continued Penn, “the industry has always failed to sell on value. Intel tried, and almost succeeded but it’s back to selling on cost now.”

Penn quoted the remark of Intel co-founder, Gordon Moore: “It’s a peculiar business. The only sane strategy is to bet the company regularly.”

Penn commented: “Intel is doing a lousy job of re-inventing the company. It still can’t do anything but make boring old CPUs and PC chips.”

One of the major problems for the semiconductor, because of its complex manufacturing process, has been that it has always mismatched supply and demand.

“The dilemma is that we measure demand in days, and measure production in months, because it takes three months to make a wafer, one month if it’s coming from a die bank. There’s always over-ordering, under-ordering and inventory adjustment. We can’t get it right on a month-by-month basis, let alone a year-by-year basis. We haven’t got a clue what we’re doing.”