Time was when a semiconductor CEO who said he couldn’t see how to grow his company was seen as a wuss.
After all, the whole point about the semiconductor industry is that its product is pervasive – always finding new places to go, always finding new applications, always developing new functions and uses.
With such a product how can you not grow your company?
But now CEOs are saying they have to shrink their companies to survive.
STMicroelectronics says it is going to concentrate on things like MEMS, automotive, STB, microcontrollers, analogue and discretes where it can still make a profit. “The new ST will be more focussed,” says CEO Carlo Bozotti. It is cutting opex by one third.
Over at Freescale it’s the same story – focusing for 2013. “You have to focus on what you’re good at”, says Freescale CEO Gregg Lowe.
At the other private equity owned semiconductor company, NXP, CEO Rick Clemmer says that private equity ownership provided the opportunity to focus. Six years after being bought by private equity, NXP is still focussing. It hasn’t grown its revenues in all that time.
All this focusing is coming from companies which share a characteristic- they are financially challenged and they are controlled by people who prioritise the financials.
Financially focused people can only look at what is and try and make it more profitable – they can’t look at what might be and try and make their companies bigger.
You look at Pat Haggerty at TI funding the development of a pocket transistor radio to make people understand what transistors can do; you look at Intel marketing the 4004 to show people what microprocessors can do; you even look at the old ST when it was showing customers, well ahead of the market, what MEMS could do for them.
This is what great CEOs do – they find ways to grow their companies through applying imagination, creativity and intellect.
Once a company decides to go ex-growth, as ST, Freescale and NXP have gone, it’s the beginning of the end for a semiconductor company. You have to have growth to fund the next generation of products.
Like so many of the strategies proposed by the financial community, the focus strategy is a strategy for failure.
“There’s a limit to niche,” says Peter Bauer, the outstanding former CEO of Infineon, “when you become too niche you disappear – you can’t make it.”