« Good Luck Rich. | Main | Development Buys Success, says Transitron »

French Can't Make Chips

One would have thought that the idea of merging Europe’s Big Three semiconductor companies would have been put to bed forever, but last week it surfaced again with a proposal for a three-way merger made by an ex-ST guy to the new fun-loving French president.

It’s always the French who come up with this merger nonsense. Maybe it’s because of the French penchant for dirigisme and grands projets, or maybe it’s delusions of la gloire engendered by Parisian lunches.

Joseph Borel, a former executive vice president in central R&D at STMicroelectronics,
is reported to have sent a 12 page merger plan to Nicolas Sarkozy in which he puts forward the usual arguments for mergers: economies of scale and rising process development costs.

It seems a crazy notion on many fronts. First, mergers have rarely been successful in the semiconductor industry where “one plus one equals half,” as Europe’s leading chip industry analyst, Malcolm Penn, CEO of Future Horizons, puts it.

Secondly, none of the Big Three perform their own perform their own basic process development work anymore, NXP having farmed it out to TSMC, and ST and Infineon having gone to IBM.

Thirdly, one of the Big Three, NXP, is owned by a private equity consortium led by KKR. No French bureaucrat is able to exercise much control over KKR.

Of course the French did get one merger right: the SGS–Thomson merger. That worked well, against the odds, because they had an exceptional (Italian) person to make it work.

The thing is the French have never been much good at making semiconductors. They’ve always trotted off to the Americans when they’ve wanted a semiconductor operation.

In the 1970s, the French defence company Matra formed an alliance with the US chip company Harris, and the French industrial conglomerate St Gobain, formed a chip joint venture called Eurotechnique with National Semiconductor. Neither set the world on fire.

In 1978, for some strange reason, the French oil-field services company, Schlumberger, paid $425 million for Fairchild Semiconductor, then in dire straits principally because it couldn’t make MOS.

Schlumberger then pumped a further $1.3 billion into Fairchild before finally despairing and flogging it off to National Semiconductor for $122 million in 1986.

So the French and semiconductors do not go together.

The best thing for M’sieur Bling-Bling to do with this latest merger plan is: forget it.

TOMORROW: TEN BEST MOBILE PHONE MANUFACTURERS

TrackBack

TrackBack URL for this entry:
http://www.electronicsweekly.com/cgi-bin/mt/mt-tb.cgi/23558

Listed below are links to weblogs that reference French Can't Make Chips:

» Top 10 most popular articles on ElectronicsWeekly.com from Electro-ramblings
Here are the top ten most popular articles on ElectronicsWeekly.com in the last week, with a Mannersims blog leading the way, about the idea of merging Europe's Big Three semiconductor companies. This is followed by articles on the design implications ... [Read More]

Comments (8)

Elisabeth:

Hi David,
alas ! much to my despair (I am french), I tend to agree ... but why didn't you go further and explained why french + SCs doesn't work, or at least tried ... I am sure you have some (good) ideas ... problem of elitism ? no idea of where the real competencies lie (related to elitism) ? research is OK but making money is dirty ? the tantalizing wait for the financing money with/and the "politique industrielle" to make it work ?
Well ?
Elisabeth
P.S. by the way, Matra-Harris and Eurotechnique were both set up really at the end of the 70s ! In 1982, the french government decided, two SC companies should be enough for France, and in 1983 the Thomson group (later merged with the italian SGS) bought National's part for a symbolic sum ...

David Manners:

Thanks Elisabeth,

I think you’ve put your finger exactly on it – the problems are: French elitism in an industry where ideas are more important than rank; bureaucracy in an industry where speed of execution is vital; state control in an industry where individuality is all-important.

It seems to me that when government gets involved, the sort of people it appoints to head up enterprises are very solid, dependable, grown-up people where the sort of people who can make a success of a chip business are disruptive, anarchic, contrarians doing their own thing in their own way.

Which is why the Americans used to be so good at it., although their big companies are now all headed up by grown-up, responsible guys who wouldn’t recognise a contrarian idea if it hit them between the eyes. Which is why they are all doing pretty badly at the moment.

So, Yes, I agree with you. The chip industry needs qualities which are antithetical to grown-up French corporate/government thinking.

Best wishes

David

Robert:

And... what has happened to UK chip making? How many state of the art fabs have been built lately in the UK? Remember Silicon Glen and the Silicon Moors (Dartmoor).
The old GPS fab in Swindon now belongs to Xfab, following the Roborough fab in Plymouth. (Mind you they did build the Swindon fab next to a railway line, on occasions the steppers had to wait for the mainline express to pass!

Patrice:

Hi David,

My name is Patrice and I am a French expat living in the UK. I used to work for ST in Grenoble as a chip designer and I agree that French elitism is a problem that plagues the whole of the French industry, not just microelectronics. I find engineers and managers in the UK much more interested in what employees can do as opposed to their rank/diplomas etc... I also prefer working in the UK than back home.

However, like many Britons I find your views about France simplistic, and frankly I sense it's more to do with the Agincourt syndrome than fact. Although it is true that the French are going through a period of turmoil and adaptation, it's easy to forget that their elitism (which I don't find endearing) has served them well in the past. They have a host of very successful cutting edge companies and more Fields medallists than the UK and Germany put together.

In ST Grenoble I worked in the team which designed the MPEG decoders that later made ST the world leader in set-top-box chips. I can tell you that the engineers in that team were truely impressive individual thinkers who did not let bureaucracy get in the way of success. Given how key their contribution was to ST's later business recovery I feel it's a bit unfair (and inaccurate) to pin ST's success on its Italian boss. So I have to disagree with you: the French can make chips, and not just those of a culinary sort.

Cheers,

Patrice

david manners:

Patrice you are right. My Agincourt-syndrome is something I should be ashamed of, and I absolutely agree thyat the ST MPEG programme was a classic of its kind - the need was identified before anyone else, superbly engineered and executed magnificently and, as you say, was justly rewarded in delivering a leading position for ST.
I don't know why the English and French love to take the mickey out of eachother but they do.
And, I suppose, probably always will.
Cheers
David

Peter B:

In 1962, needing a new job, I interviewed at Pye Radio in Cambridge, and at Texas Instruments' facility in Bedford. At the former, I was taken to lunch in a nice room, where the interviewer explained I would not be eligible to eat when/if I joined. At TI, we went to the company cafeteria, where everyone ate, from the local CEO to the janitors. I took the TI job, partly associated with my romantic relationship issues at the time, but partly because of the non-elitism there. Luckily, they also offered me a little more money. This started me on a 45-year career in IC design, where out-of-the-box thinking has proved so beneficial. I am glad to hear that elitism is less powerful in the UK now (though I have a UK nephew who might disagree with that assessment).

david manners:

It seems to me that the Fairchild culture knocked elitism on the head for Silicon Valley, then for high-tech industry in general and now for most Western industrial companies.
I understood the Fairchild culture derived from Bob Noyce's upbringing as the son of a non-conforming protestant minister.
So the nonconforming prots have had a huge influence on modern industry!

Anuj Valmiki:

Hi David,

Nice article. One reason for the success that silicon valley has enjoyed is their open door policy to a multi-cultural employee base. They have harnessed the skills of Americans (sadly, not many african-americans are in the fray here), Spanish (locals) and Asians (Indo-China).

The Europeans were late to wake up to the reality of the hard-work that needs to go in and the need to import talent or export work as needed to get the job done on time.

More recently, the Koreans, unlike the Japanese, have realized this and are very quick in establishing design centers in India and such locations. They have a non elitist approach to harness talent, avoiding elitist outlook. The Taiwanese have always managed to harness China, through sub-terrain layers that stupifies us!

Post a comment

(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)

About

This page contains a single entry from the blog posted on March 18, 2008 5:50 AM.

The previous post in this blog was Good Luck Rich..

The next post in this blog is Development Buys Success, says Transitron.

Many more can be found on the main index page or by looking through the archives.

Sign up for the new weekly Mannerisms eNewsletter. Get the latest posts straight to your email inbox, no fuss. Tick the option for Semiconductor commentary.

RSS Subscribe to this blog's feed
[What is this?]

Recent Comments

Archives

Go back to ElectronicsWeekly.com