A few lessons from ISS
03/01/2008
It’s easy to think of the semiconductor industry as an anomaly in the history of business because, in fact, it is.
But to assume there are no models to look to when semiconductor businesses need inspiration is to unnecessarily cut ourselves off from lessons available in the wider business world.
At SEMI’s Industry Strategy Symposium (ISS, January 14-16 in Half Moon Bay, CA), Lam Research president Steve Newberry presented a number of quotes-statements, he said, “that could describe our industry.” Here are a few:
- In fact, the faster the growth rate, the faster the entire industry will be driven down the cost curve.
- What is dangerous is that, as an industry, we may have been over-investing by trying to force-feed and subsidize an industry many times larger than us-and, in the process, diluting the focus we require to properly serve it-and therefore diluting the returns to our shareholders.
- The misconception [is] that our major competition is from other alternatives (SSD vs HDD). While this may be partially true in some cases, it is completely untrue for most, where the real competition is in ideas, namely customer solutions. Here the opportunity is tremendous-but only if we start thinking in terms of value-and stop thinking solely in terms of output.
After getting many nods from the audience that these statements do, indeed, describe the semiconductor industry, Newberry revealed their source: a presentation by Richard B. Evans of Alcan Corp. called “The Seven Sirens of the Aluminum Industry,” which he presented at the International Aluminum Forum in May 2001.
So how can chipmakers overcome the era of “profitless prosperity” (a term Newberry borrowed, too, from the aluminum industry)? Among his suggestions:
- Keep supply and demand in check (which is difficult with the current number of players, he said-and which leads to his next recommendation)
- Consolidate to significantly fewer players
- Change your business model to fab-light or fabless or a market focused segmentation strategy
(And then Newberry stepped attendees through an explanation of how equipment suppliers would not be able to turn the situation around if they sacrificed all their profits.)
But attendees had earlier heard from Bill McClean, president of IC Insights, who said the industry is on a “collision course” brought on partially by the “fab-lite” model (which he cited chipmakers embracing not only in increasing numbers, but also increasing degrees) and foundries reducing capex spending. This, he says, will exert pressure to increase wafer prices.
As chipmakers struggle to resolve the impact of these factors (and the world economy overall), Solid State Technology is focused on helping you succeed. The team I’m now proud to be a part of has earned its excellent reputation for delving deep into technology issues to help you make sense of the industry’s latest developments and leverage its offerings. News Editor Jim Montgomery updates SST’s website (www.solid-state.com) daily with key news announcements and analysis, and compiles the award-winning weekly WaferNEWS (www.wafernews.com). In addition, SST offers renowned lithography innovator Marc Levenson’s Microlithography World; the Ed’s Threads blog, with insights by semiconductor production insider Ed Korczynski (www.pennwellblogs.com/sst/eds_threads); Debra Vogler’s SST On the Scene videocasts (http://sst.pennnet.com/vod/sst_on_the_scene.cfm); plus PV Times, Solid State Technology Review, and Solid State Technology Global: Asia Pacific edition newsletters (http://newsletters.pennnet.com/semiweekly/archives/). Beyond that are sister publications Advanced Packaging (www.apmag.com) and Small Times (www.smalltimes.com) and their associated websites, newsletters, and webcasts; and global affiliates Nikkei Microdevices, SST China, SST Japan, and Semi-FPD Monthly Korea.
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Barbara G. Goode
Editor in Chief
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