NXP: Compendium Of Readers' Comments

Big Softie writes: "As an ex-NXP'er I have to say I always found Frans an inspirational leader. I believe replacing him at this stage will not affect NXP's future positively. By virtue of the cost cutting that has taken place, and the massive loss of competence already mentioned, what is left of the company is now set on a course that cannot change without significant investment, or divestment. Frans' weakness was in not understanding the disparity that existed between the things he championed as our leader, and what actually took place at the working level....or maybe he knew it but was unable to change it. A disparity that sadly remains as a legacy of the Philips days and culture, whereby there exists a substantial layer of ineffective people promoted to a senior level that abstract the leadership from reality and add no value whatsoever...in fact quite the opposite. Far too many undeserving people ascend far too rapidly to this level through some mystical process which appears to take no account of their lack of knowledge or competence. Unfortunately for the company, the prime goal in life going forward for such people concerns only their own progression. The company morale started to decline during 2007, and over the last 12 months hit a very low level. It is a tough challenge for the incoming CEO."

 

Anonymous writes: Thanks for the insightful, if somewhat depressing, blog on NXP. I am an NXP employee, an architect in the troubled business unit Home, and it's interesting to see some outside perspective on our situation. You might think that as an employee I have a lot of inside knowledge on the workings of KKR and co, but in fact they rarely figure in my daily work. They are referred to as "the sponsors", but are, at my level, rarely seen taking direct actions. The term "sponsor" is actually quite strange. I'd say only bondholders have some moral basis to call themselves sponsors of NXP, although at this point these good people probably refer to themselves as suckers instead. I'm sorry to see Frans van Houten go, as he always struck me as a competent and honest leader, and I enjoyed the few chances I had to meet him. I guess he was just given an impossible mission. It's really too bad for the semiconductors and techonlogy industry in the Netherlands and Europe to see NXP stumble and maybe ultimately fail. It won't directly affect me anymore, since I have given notice a few weeks ago (before Frans copied my actions :-). I saw a good opportunity in the rapidly deteriorating Dutch employment market and decided to take it. The economy going the way it goes, the alternative would have been to stick with NXP until the end of the recession or the end of NXP, whichever occurs first. I will be leaving the semiconductors business, with some regret, but also wondering: what kind of crazy industry is this? Thanks for cheering me up a bunch :-)

 

 

Maxi writes: "As a current employee of NXP, I personally don't think FvH did a bad job under the circumstances. He focused the investment, cut out a bunch of unnecessary management and replaced more or less every key manager in the company. What he didn't do is lay down a clear vision of where we are going, why this will beat the competition and how we are going to do it. Most dangerous is that employees are now in wait-and-see mode until they find out where they end up. We have had an office sweepstake for over a year now to predict how long the entity NXP will still exist. Even last year nobody wanted a date later than 2010."

 

Oswald Fulcanelli writes: "As to the remarks about the layer of ineffective managers at NXP. When Frans took over he removed the entire layer of managers reporting directly to him. It turned out that those people could leave without any negative effects to the company."

 

Utah writes: "As ex-NXPian, I want to share some views. I had attended leadership development programmes where Frans used to visit. I saw him very inspirational. At times, I felt quite proud of being part of such a company. Slowly I started realising that the company was being managed by a bad MT. No vision and no strategy !! Same set of power point were presented Quarter after Quarter. No major change !! The biggest white elephant was R&D. MT never did anything concrete to resolve the major problem of portfolio management. Major R&D investments were never fetching any concrete products / revenue. Yet no one was held accountable !!. "Highway to customer" never worked. There were still silos among various functions and they were fighting internally instead of taking on the external competition. Biggest flop was BU-Home !! Yet people are still pretty , flaunting flimsy wins and no one is accountable for the R&D debacles. Company is infected with politics to the core and victimisation is going on!! Big challenge for the new CEO. Need clean-up from the EMT."

 

Paul writes: "Frans van Houten did not 'leave' NXP, he was fired. I don't share your optimism about Clemmer. If you read what he has done he is an M&A guy. He is certainly sent in by KKR to save what can be saved and sell what remains as fast as possible. He has worked in semiconductor but as a finance guy, not as an engineer. This is not somebody who plans to move to the Netherlands for a long time. He has a job to do and will finish the job in 6 to 12 months. To Big-Softie, One of the reasons I left Philips Semiconductors (even before it became NXP) was Frans van Houten. I did not find him inspirational at all, all his statements came straight out of management handbooks, I never detected a true vision".

 

Big Softies writes: David, I completely agree with your description of the "semiconductor-savvy" versus "management" type CEO. I believe there is another aspect which deserves inclusion here, and that is the disruptive effect that (embedded) software technology has had on the mass-market semiconductor business model. The unrelenting march of semiconductor integration means that most mainstream applications now consist of one large multi-core SoC device, and a huge stack of enormously complex software. In order to demonstrate and secure design-wins with these massive chips, semiconductor companies are forced into "bundling" significant amounts of software that is not accounted for in the traditional semiconductor pricing model, which is based on materials costs and processing. The only way that OEMs and product manufacturers can differentiate their own product based on such an SoC, in terms of functionality and feature set is by customisation of the embedded software. Since most are unwilling, or even unable to undertake all necessary software development themselves, the task falls back to the chip supplier. In short, fierce competition in the market forces chip vendors into supplying their customers with bespoke solutions, which have to be maintained over the total lifetime of the customer's product. In return, the customer expects to pay a standard volume-based price, which erodes over time and total volume growth. Whilst many semiconductor companies are perfectly capable of creating such solutions, none of them seems willing or capable to achieve the revenue from the market that such a solution demands in order to represent a profitable long-term business. A business that supplies and supports customised products over lifecycles of many years at standard high-volume prices is not sustainable; the ongoing support costs are largely unknown, and not taken into account in the chip pricing. We have already seen several semiconductor companies withdraw from high-volume markets where the huge software costs render their business unprofitable. I believe we will see more of this over the coming years....unless that is the semiconductor guys also have the balls to either say "no", or to ask their customers to pay the appropriate price for the products and bespoke service they are getting

 

Tom writes: Hi David, I agree that producing better products is necessary but it is not sufficient. The problem is that it is far less expensive to copy a good product or idea that it is to develop it from scratch. Developing an excellent new product gets you to market first but it is not clear a startup can make enough money from that time lead to justify the R&D expenditure when larger competitors simply copy its advantages. An extreme example is open source developers implementing the latest features of novel commercial software into free software or Microsoft building them into Windows or Office. These actions do not just increase competition they destroy the commercial value of the innovation. Patent law is intended to make innovation a profitable activity. It is a law which recognises the essential contribution that creative engineers make to society and sets out to make innovation a lucrative activity

 

Tim writes: "Having started to work with NXP in the last few months, I can see some changes from the old Philips Semi days, but too many of the 'old guard' still remain...and more importantly, the old thinking. NXP sold their wireless business 'at the peak' and got a good price. Their auto business is in pretty good shape, but if you keep selling the crown jewels, you're left with the box (which is usually discarded, along with the instructions!). Private Equity companies cannot operate in a declining (semi) market, the burden of the debt placed on NXP is crippling - Clemmer is a money man, a KKR man, (a hatchet man?), and as such I don't see any future for NXP."

 

Fresher writes: "So a new NXP is born (again) ? After two year's getting rid of competence, how do you want to build the future ? Of course there is M&A but up to now it proved to be a way to fill the roadmaps and have something to sell. From inside, most of us are just expecting to be part of a branch that will be sold to someone else. That's how we see the future: outside NXP. Things may change for sure. But it will take time and not sure KKR can afford this. And how will NXP pay back its debt meanwhile ? Either they re-negotiate the debt now, or they sell BUs or both. My bet: automotive & ID sold during first half of the year."

 

Anonymous writes: "Bottom line improvements in semi conductor companies are largely contributed by optimizing the R&D cost, as the impact of other variables such as cyclicality and rising capital costs are almost uniform for all players. R&D cost in a typical semiconductor company is about 15-25% of the Top line. A 1% optimization in R&D costs translates into a 1.5 M$ savings for a 1 B$ company. NXP is a glaring example where the R&D team and Business team were not actively collaborating. In some of the Business Unit, the CTOs are mere "administrators". They are neither updated with Technology nor aware of Business / market trends. Major activity for these CTOs are budget /resource number crunching !!The biggest challenge for Clemmer (Richard Clemmer, the new CEO appointed to replace Frans van Houten) is to start from R&D team clean-up !! It is common to find only handful of projects contributing 70 to 80% of the company's revenue, while there are a few thousand projects which are being pursued. As a result, companies are unable to take up "disruptive innovation" projects since most resources are engaged in projects of lesser strategic impact."

 

Tom writes: "The problem is that semiconductor companies have lost the ability to charge for the value of their products. Prices are set entirely by competition rather than value - for example a Bluetooth chip is priced about the same level as two tracks from iTunes. To get prices which reflect value semiconductor companies need to create scarcity and the way to create scarcity in a knowledge based business is through patents. The alternative to enforcing intellectual property rights is that engineering will become a worthless activity that can only be carried out in low cost economies and by open-source hobbyists. There is a lot wrong with the patent system but the central issue is that it is far too hard, for creative companies to get paid a reasonable royalty for access to their inventions. An increase in patent litigation is a healthy sign that the industry has decided it is time that customers should pay what the products are worth."

 

Big Softie adds: "I believe there is another aspect which deserves inclusion here, and that is the disruptive effect that (embedded) software technology has had on the mass-market semiconductor business model. The unrelenting march of semiconductor integration means that most mainstream applications now consist of one large multi-core SoC device, and a huge stack of enormously complex software. In order to demonstrate and secure design-wins with these massive chips, semiconductor companies are forced into "bundling" significant amounts of software that is not accounted for in the traditional semiconductor pricing model, which is based on materials costs and processing.

The only way that OEMs and product manufacturers can differentiate their own product based on such an SoC, in terms of functionality and feature set is by customisation of the embedded software. Since most are unwilling, or even unable to undertake all necessary software development themselves, the task falls back to the chip supplier. In short, fierce competition in the market forces chip vendors into supplying their customers with bespoke solutions, which have to be maintained over the total lifetime of the customer's product. In return, the customer expects to pay a standard volume-based price, which erodes over time and total volume growth.

Whilst many semiconductor companies are perfectly capable of creating such solutions, none of them seems willing or capable to achieve the revenue from the market that such a solution demands in order to represent a profitable long-term business. A business that supplies and supports customised products over lifecycles of many years at standard high-volume prices is not sustainable; the ongoing support costs are largely unknown, and not taken into account in the chip pricing. We have already seen several semiconductor companies withdraw from high-volume markets where the huge software costs render their business unprofitable. I believe we will see more of this over the coming years....unless that is the semiconductor guys also have the balls to either say "no", or to ask their customers to pay the appropriate price for the products and bespoke service they are getting."

 

Hw writes: "Just an info for Softie: most of NXP profit comes from simple multimarket chips from BU MMS and NXP is currently moving out of SOC chips, investing in BU MMS activities."

 

Cheese writes: All the criticism of young MBAs brandishing their bottom line awareness in the tech-rich semicon industry is fair...but the tech closets have held some demons, for some time... While being managed by Philips, the semiconductor unit (before it became NXP) slept over waves of market innovation - missing the boat on several occasions, and letting newcomers take over emerging business, with little resistance. Let's list the top three 1. The flat panel (Plasma and LCD) wave of 2002-2004 2. The digital reception wave (2003-2006) 3.The DVD commoditization wave (2002-2004) A tech-rich company that allows for such blunders deserves to be run by CFOs, with little awareness of / patience for technology evolution. These blunders happened as Philips Semi stayed locked-in to established market concepts and a lead customer (in-house)who had rapidly diminishing market share, and chose to focus on high-margin rather than high-volume segments. Meanwhile, new customers (for chips) emerged, creating a new (chip) supply chain which took both Philips Semi / NXP and Philips CE by surprise. Inevitably, the semicon industry is a high-investment industry, and focusing on high margin rather than high-volume doesn't help the cause of high investments. The technology and marketing guys at NXP missed the boat. And so, the red carpet is rolled out for the CFO boys..almost for a catharsis.

 

Alan Weiss writes: Actually, the way things are done, largely, in semiconductor companies is to encourage a kill or be killed mindset where "teamwork" is temporary at best. I used to work for a fellow who helped build Motorola-SPS (pre-Freescale) into a powerhouse of a company, Tom G. Tom knew his people and had them mapped out into what they used to do, what they do now, and their next job. Like Patton planning an invasion, Tom G. was a master chess player and his people rewarded him with their loyalty, because they knew he was keeping an eye out for them. Those days are *long* gone in most semicon companies where they can't wait to (fire) North American and (just don't replace) European workers while hiring in the Far East. Loyalty is a two-way street, something that we managers growing up in the 1980's with our first teams and staff used to have hammered into us. Remember "In Search of Excellence" and "Theory Z" and "Total Quality Management" and W. Edwards Deming? I do. Today you get a large guffaw/laugh if you mention the word "loyalty." Rather a pity. I run my company "old school" and it works, but then again it might just be I'm old-fashioned. :-) Alan in Austin

 

 

Big Softie writes: Maybe NXP Employee has the honour of serving in that layer of people we mentioned earlier, or is destined to get there. They are quite easy folks to spot. They generally leave a trail of disaster behind them, which somehow never sticks, and is only visible to the people below them in the hierarchy. They consistently spout the bleeding obvious, as though it is some great revelation they are bestowing on humanity. For them, the glass is perennially "half full", and they spin everything as "positive". Shutting fabs is a "good thing". Decimating the sales organisation is a "vital step to recovery". These are the people who "never look back, only forwards..." Unfortunately, with such people at the helm of middle management, it also means that the company is destined to make the same mistakes again...and again...and again...

 

Anonymous writes: View of "NXP EMPLOYEE" could be one of its kind.Appreciate the optimism and energy radiated . Cannot represent the larger picture. The Employee Engagement Survey results does not reflect the same. The discussion here is on what needs to be on "high priority" list and not portray a hypocritical view

 

NXP employee writes: There is a lot of whining going in these pages, with a picture which is not fair nor balanced. 1) In the current environment it is positive that the mobile business was sold as it was, would not all other Semi makers wish they had made that coup? Frans van Houten negotiated a golden deal 2) Yes additionally many people were asked to leave, but frankly all those decisions were to my opinion at >90% justified by sound business or performance reasons 3) The atmosphere at NXP is not as these pages paint it. I love coming to work every day, and that is because of my colleagues. The enthusiasm, competency, friendliness, openness, love of doing the right thing, are just fantastic! I never experienced unjust or arbitrary ratings from my managers, I have always been listened to and with an opportunity to have an impact. Beware of thinking that the grass is greener elswere. NXP colleagues: would you rather work at Infineon?? Of course not! 4) I disagree that you need a techie to run a semiconductor company. You certainly need a manager who ensures that technical talent has the right position, but there is a clear difference between a CEO and a CTO. Philips Semiconductors / NXP was in much worse shape when the techies had free reins. Remember Nexperia? Do you honestly believe that Scott McGregor was a better Philips Semiconductors CEO than Frans van Houten? 5) Frans has cleaned up the company, things are run much better than they were before him. Of course it is obvious that there is still much to do, in hindsight things coulda/shoulda/woulda but please be fair. Compare with the reality at other Semi makers, quite a number of businesses are in an excellent position at NXP. Clearly the company as it is today will be transformed, but in our quest to derive lessons from this, let's be fair and realistic. NXP colleagues: let's continue to work hard and do the right thing, the fundamentals always pay!

 

 

Anonymous writes: Whoever comes to this company as boss will have to 1) trim sales and administration, too big for a $4B company, 2) trim middle level management especially at r&d; 3) remove the "polder-nation" (agreement culture) as it does not fit the dynamic nature of semis and certainly not the philips-less nxp, 4) enforce the boss-employee culture, 5) reduce employee count but ensurue they are more comptetent, at 30,000 nxp is crowded for a $4B company, at the end I see nothing wrong with kkr being all about dollar. I don think Steve Jobs, Dirk Meyer or Irwin Jacobs (visionary technical leaders) are less about money. Point is kkr chose to make money in semis, naturally they have to act like a semis' owner. Are they?.

 

 

 

Goody writes: Very interesting input to Clemmer in this blog. Hope Clemmer or MT see this blog. David, can you trigger Clemmer to take good input from this blog. Also, FVH should see this blog to know the improvement levers. Good job David !!!

 

 

Paradio writes : Hi, David, Besides my above (previous) message, I would like to highlight the following points: 1) A "good" company always treat the technical talent as an investment & treasure; 2) IMHO, FvH treat the technical talent/engineers as a "cost". I think you will agree with me, if you can review his behaviour when he was in CE and PS. Of course, he (or others) has the reason/excuse; 3) KKR cares nothing but dollars. New CEO might be a suitable candidate, since he is so goooood at M&A. KKR doesn't have any patient to wait, especially under current worldwide financial crisis---make money, and take money back asap. 4) Anyhow, NXP so far is still an EU company, although KKR is the owner. KKR never believe that FvH can fully obey the "order" and put the gun on his European colleagues. That is also a key to have a new CEO I think. How do you think abt?

 

Anonymous writes: I am ex-NXPian too. Regarding the inefficiency of the management. I always felt this is the problem localized to Bangalore where i used to work, looking at comments i am tempted to believe its a global problem(oh god! let this not be true). To my experience the employee morale has declined to a very low level since separation from Philips. This is clearly reflected in increased attrition in the company which was once envied for its low attrition in industry. Management here seems to have no interest in fixing managerial problems. As Big softie already told, they are interested in their own wellness and not of the company and its future. If Clemmer is thinking to bring back profitability then he should start with removing inefficient managers, else any amount of effort would go waste. Although there are many clients in pipeline to be engaged, the R&D cost has increased enormously because of customizing the too complex software/middleware. However there is lot of interest in simplifying things and getting back the software on track to increase profitability, but it would take lot of time before that happens(I hope investors are having enough patience for this). All the best NXP for your future

 

Anonymous writes: A friend and former colleague of mine who stayed at NXP just told me that cost saving guys (so not engineering oriented minds) had shut down access to scientific papers/articles from IEEE without any consultation with the engineers who need them for their daily work. Pretty amazing isn't it?

 

Anonymous writes: Yes its true:-( no more access to IEEE papers!

 

Anonymousse writes: Actually, IEEE access hasn't been completely withdrawn - if you work in the research labs in Eindhoven then you still have a subscription. It's just us peasants who don't need access (apparently). They'll be collecting in the soldering irons next...

 

Titanic Survivor writes: Dear David, A late but perhaps not last comment. As an 'early retired'Mullard/Philips Components/Philips Semis/NXP employee I find it sad to see an organization with a 50 year history, many of which were spent in the top 10 list, go down the tubes in just over 2 years. I am sad that an organization with talented people, excellent record of innovation and execution is sinking beneath the waves - because they built a Titanic, instead of a fleet of fast, stealthy patrol boats. I think that one thing missing from the launch of the new organization was a 'start-up', can do mindset. I see NXP as essentially a start-up with a long history. That mindset was certainly present when Philips Semiconductors split from the then Philips Components in the early 90's, and from then on it was rarely out of the top ten ratings. Those were the days when anyone in the company might get a call or a visit from the CEO, even lunch with him. But we never learn from history do we? I fully agree with previous posts about some senior managers, the so-called Top 100 VPs (who thought of themselves as VIPs), many of whom were elevated into their new positions even though they lacked the training, experience and proven track record that should have been a major requirement for their new functions. The result of this was to turn what was a flatish, fast, friendly organization with great ideas/products into a clunky, top-heavy hierarchy with its what's in it for me/watch your back culture-but still with great products. This is no way for any hi-tec company to go, let alone a new company with new owners, and with new challenges. Of course KKR et al and the global economic crisis has had a major impact on the company's fortunes as it is having on so many around the World, but I can't help thinking that a smarter, slimmed downed company structure with a savvy, go-for-it mentality, might just have figured out a way on how to better weather out the storm. They stll might and I sincerely hope they do - they have just got a major ID order from Germany, but sadly I think it is a case of too little, too late now as I agree that the iceberg man cometh. Kind regards, Titanic survivour.

 

 

NXP Employee writes: Hello David, I am not saying that things go so well, but rather that they are not as bad. Next to this the departure of Frans may well have been that he was trying to protect NXP's long term interest (aka semiconductor vision) against KKR's short term requests (cost cutting), and lost that battle. Shades of grey, that's life...

 

 

Anonymous: France did not do a good job. He continuesly promised but accomplished nothing at the end. semis is a high tech field and you need 1) detailed vision and 2) will; he lacked both. Clemmer seems a capable guy, he may either try to clean the mess which will take a while before he knows he cannot; or he already knows the bitter fact and will get ride of nxp piece by piece asap. philips left hi tech bcoz its management lacked the "will". Perhaps bcoz they saw talent flow has been (long) disrubted to europe (netherlands). Best talent often ends up acorss the ocean

 

 

 

 

Paradio: FvH has not done a good job, from CE to PS+NXP; New CEO could be much worse than FvH, I do believe! Somebody perhaps still like PHILIPS, I should say: "me too", since I served for PHILIPS from the beginning of last decade. But, but......., it is PHILIPS, who is well known and recognized in the world as a company with plenty of knowledge and deep+wide compentency, finally gave up hi-tech oriented approach, that is why now we are called [b] NXP [/b] ~~~~~

 

 

Anonymous: First of all: happy and healthy new your to all. As an ex-NXP employe i want to make some comments; First of all after Philips sold the Semi-c in Nijmegen/Holland ,the most of the engineers losed their bleu heart (Philips-bleu), R&D went down (the profitmaker of the chip-industry), even the operators on the workfloor where not amused of the changing "workculture", like i'am a boss and you work like in China. Holland is a polder-nation (agreement culture) this is not possible in this country. How can a manager permit himself, at a time of bear market to close a factory at 2010 when it is the most loaded fab!! So you are killing at first your profit and the most important the motivations of the engineers and operators. And there is more, because of the shutdown the processes had to be tranfered, is this possible; no way it would take at least 4 years to do so. This was unfurtionatly not written in the handbook of managers. So is FvH an insperational leader, i would say no. So must NXP be sold, i would say YES. Not to an private equity fund but to an other Semi branche like ST or Infeneon, and when i had to choose which fab i would buy, the dissicion would be very fast and clear! thanks for this possiblity to make the comments. with regards

 

 

 

 

Big Softie writes: Yes, that's true in terms of profitability...but not in turnover, where the higher shares of revenue have by far come from mass market businesses like STB, TV, and telephony; key markets with large prestigious customers that play a pivotal role in driving the next wave of innovation and product development for the whole industry. Without the high volume/high turnover business a semiconductor player is reduced to either operating in a technical niche, or running a very modest "me-too" business at high risk of being assimilated by a bigger fish. With the divestment of the Mobile & Personal business, NXP started the move out of those areas in which the company had real potential and extensive tecnical experience, and where it had traditionally applied its R&D capability, which was always world class. The failure was in not being able to harness a long term view and manage the resources from a business perspective...which brings us back to David's original point; there was nobody at the helm with sufficient vision and balls to do it. Investment in MMS activities may well improve the balance sheet in the short term but is hardly an inspiring prospect for long term market positioning and influence for a company that once lead the world with ground-breaking and inspiring technology that had a very real impact on people's everyday lives.

 

 

Robert: My goodness, what a load of sanctimonious drivel! Anyone outside the Industry would think, upon reading this that the semi industry was a close kin to the boy scouts convention. Gimme a break! As an old boss of mine used to say, this is the only industry, he knows, of where some of the supposed smartest people in the world "go to the mattresses" for a few pennies. But it is those few pennies times a few million or Billion sockets which make it all worth while. Guys, nothing has changed, the only problem is that the last big down-turn (apart from 2001) was way back in 1990, so most of the industry has not lived through the periods of cyclically that characterized things in the 1970's and 1980's. BTW most semiconductor managers have not lived through the violent fluctuations that are now present in the industry, so it seems silly to me that they should be expected to act sensibly. Anyway, as I have said before, this is a huge opportunity, because instead of fighting for my place at the semi table, I suddenly find that my major competitors have started playing a private game of Russian roulette. Fortunately I was not invited to than party, but once it is over there'll be another feast waiting for me. Robert

 

 

 

NY NXPer: Like B. Clinton said "Its the economy stupid!" Private equity didn't ruin anything. Philips is very good at forecasting, so when I saw them getting out of semi's I knew that the glory days were over. Its looking more and more like I will be job hunting before the year is out

 

 

Anonymous: As current NXPian, i totally agree with Big Softie's comment. The middle and higher management is just rotten with no vision of any sort for the future. Most of the middle management are people who got promoted not because of their ability but because of the immediate requirements of that time. It will continue to ruin NXP.