Infineon Snubs Europe

The CEOs of Europe’s Big Three chip companies have been in a jam for the last year.

In May 2013, EC vp Neelie Kroes announced her goal for Europe to take a 20% share of the world chip market. She got an $80 billion budget approved by the EC to pursue it, and she got the CEOs of Europe’s Big Three chip companies to sit on a European Leaders Group (ELG) to draw up a plan to achieve the 20% share.

The snag was that none of the three CEOs believe in Kroes’ plan.

The CEOs want to shrink their businesses into their areas of core competence – not attack highly competitive digital markets requiring cutting edge technology.

The CEOs could hardly refuse to serve on the ELG. That would have looked a deliberate snub to the EC. So they served.

The ELG’s first report was so little to the liking of Neelie Kroes that she never published it and told the ELG to think again.

The ELG’s next report reiterated Kroes’ 20% aspiration. So far so good.

The ELG said it would compile a further report with a detailed plan on how to implement the 20% target.

Now, before that plan has seen the light of day, one of the CEOs has effectively jumped ship.

Yesterday Infineon’s CEO, Reinhard Ploss, said that, instead of increasing Infineon’s manufacturing capacity significantly to help meet Kroes’ 20% target, Infineon would reduce its capex from 15% of sales to 13% of sales.

The cut in the capex-sales ratio is accompanied by an increase in dividend. There could not be a bigger snub to the EC’s 20% plan. ‘We are putting our shareholders first’ is the implied message.

Fair enough, that’s Infineon’s prerogative.

But it’s put the fox well and truly among the chickens.

What will the EC do now? What will ST do?

Leave a Reply

Your email address will not be published. Required fields are marked *