Chip firms play a dangerous short term game
My blogging colleague David Manners has written a brilliant blog on the subject of chip firms getting out of basic process development. In NXP, TI, STMicro and the end of process development, David points out that ending fundamental process development puts semiconductor companies firmly into the hands of foundries. This might not seem such a bad thing, but in the long term will leave the big chip firms very exposed:
Will prices go up? Will terms get harsher? You bet they will. What looks like a saving in overhead today for the big companies could come back and hit them between the eyes in higher prices tomorrow.
It’s not as if it actually costs very much to do some basic R&D, with Texas Instruments saying it will save the firm about $150m a year. For firms such as NXP, ST and TI, says David:
For a small contribution to the bottom line in 2008, they are prepared to sacrifice their long-term independence.