Hocus-Focus

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.”

Tags: analogue, rick clemmer, transistors

Related Tech News

9 Comments

  1. David Manners
    January 02, 2013 10:55

    Thanks Dave, you’re absolutely right of course Bauer’s success came from focussing but he re-invested the proceeds from the disposals in the focussed businesses – he didn’t have to ship the proceeds from the divestments back to America to pay down private equity imposed debt – and he’s got the focussed businesses growing again – whereas the private equity owned businesses are still at the same level of revenues as they were when they were bought by private equity in 2006. So there’s good focus and bad focus, I suppose, and good focus gets you back on a growth path. As Bauer says there’s a limit to focussing – at some stage you have to invest to get back to growth. After 6 years the PE guys haven’t managed that.

  2. Dave
    January 02, 2013 04:16

    I’m glad you included the comment from Peter Bauer. After all, he sold Infineon’s wireline segment (now Lantiq) and then the wireless segment (now with Intel), to focus on the things Infineon always did best, that is, Automotive, Power and Chipcard. Before that, he was also on the board when they spun off the memory division (Qimonda). Infineon today has much smaller revenues than before all that. But whereas in their first 10 years of existence they did not make a profit for even a single year, now they make regularly around 15%. Bauer proved that there is a case for focus. After all, you are better doing a few things very well than doing everything OK. Yes, it would be nice to do everything very well, but not many companies (or people) have the resources to do that.

  3. December 30, 2012 12:01

    I should agree with “find ways to grow business through applying imagination, creativity and intellect”, but also understand that companies need to be more focused on some points like sales strategies in global basis: It is not necessary to invest in own sales offices in regions where 0% decision is taken regarding to use a key component. It’s a completely nonsense… Sales persons need to act all the time to justify their jobs where the sales results are fully dependent on market variations.

  4. David Manners
    December 21, 2012 11:38

    An excellent point Dick. It’s a sheep-like mantra from people bereft of ideas of their own.

  5. David Manners
    December 21, 2012 11:34

    Yes indeed, Dr Bob, there are good CEOs out there who will capitalise on these counsels of despair emitting from these once-great companies.

  6. David Manners
    December 21, 2012 11:30

    What a girl, Bitter, she’d make a great semi CEO.

  7. Dr Bob
    December 21, 2012 11:15

    In confusion there is opportunity
    For others!

  8. dick.selwood
    December 21, 2012 10:53

    Maybe its my poor memory, but when you sit through the briefings and read the releases, they all seem to want to focus on the same markets.
    If you want to be positive – this is good news for their customers in those markets, since it will play merrry hell with the pricing, and it is good news for people who decide to cherry-pick the “orphaned” segments. Not such good news for the vultures or, sadly, the people working in these focused companies.

  9. Bitter
    December 21, 2012 09:05

    If we all reacted the same way, we’d be predictable, and there’s always more than one way to view a situation. What’s true for the group is also true for the individual. It’s simple: overspecialize, and you breed in weakness. It’s slow death.
    -Major Motoko Kusanagi

Share your knowledge - Leave a comment