|
|||
|
|
|
Chip Makers on the Block European semiconductor companies for sale By Peter Clarke, EE Times London -- It's looking more and more as if a significant part of Europe's semiconductor industry is on the block. The latest moves: "For Sale" signs went up last month at Telefunken Microelectronic GmbH (Heilbronn, Germany) and GEC Plessey Semiconductors (Swindon, England), two of Europe's largest chip makers. That follows two other deals. ITT Semiconductors (Freiburg, Germany), a European branch of ITT Industries Inc., to sell its discrete semiconductor operations, with annual sales of about $75 million, to General Semiconductor (Melville, N.Y.) for $8 million. And Zentrum Mikroelektronik Dresden GmbH, the remains of a state-owned East German R&D center, is seeking partners to help it move to a next-generation process and build a new fab. Except in the case of GEC Plessey, whose action is driven by the arrival of a new managing director at parent General Electric Co. of the U.K., three factors could be behind the plans by parent companies to unload their troublesome semiconductor subsidiaries now: the turn in the semiconductor business cycle, gently rising chip prices and the promise of a better second half in 1997. Although the timing of the moves is partly coincidental, analysts and executives agree that they are the consequence of a deep-rooted and long-term malaise in Europe compounded by global trends. The conclusion is that the semiconductor operations of Philips, SGS-Thomson Microelectronics and Siemens are viable for now, with each making good efforts to compete on the world stage, more sell-offs or closures are likely further down the European pecking order. The sell-offs are not an indication of overall economic problems, said J.P. Dauvin, chief economist for SGS-Thomson. In fact, the concentration of technical talent and the relatively low cost of labor (albeit higher than in much of Asia) makes Europe a good breeding ground for fabs, he said. For example, Telefunken Microelectronic, or Temic, has a fab due to go on line near Hamburg on Sept. 4. The "European problem" is that politicians, bankers, and senior managers at systems companies do not value semiconductor manufacturing and have shied away from the large R&D and capital investments that companies in other regions have been prepared to make. As a result, many European chip makers have slipped off the leading edge. IC margins are much thinner away from that edge, leaving small companies hard pressed to make an operating profit, let alone invest in the R&D and capital expenditures for next-generation processes. A new wafer fab today, even a small one, costs several times the annual sales revenue of some of the European companies. "Under-investment over the previous decade has left companies exposed," said Joe D'Elia, senior industry analyst at Dataquest Europe Ltd. , a market research firm. "Semiconductor manufacturing is not valued as a core product here. Ironically, the European semiconductor industry has never looked stronger than it does at the moment." But Europe's chip strength is due mainly to the successful efforts of Philips, SGS-Thomson and Siemens, D'Elia said. They have been supported by European-wide collaborative research programs such as Jessi and Esprit on the grounds that they are global competitors with a chance of success. Both Temic and GPS are much smaller. And less than half of Temic's $865 million semiconductor sales in 1996 came from ICs, with the bulk coming from lower-margin power, RF and optoelectronic discretes. Neither company has the critical mass for self-sufficiency, said Dauvin. GEC is too small to run with the technology, while Temic's separate organizational entities are each too small to survive in their respective markets, he said. Temic's parent, Daimler-Benz AG, suffered record losses in 1995 and has been restructured. "It has stanched the major flows," D'Elia said, but must still "look at the little veins which are still bleeding." While the turning business cycle is making these companies look more attractive, "don't expect the flood gates to open," Smith said. "As margins improve, other chip companies may be able to struggle through to the next down cycle, prolonging the agony." --Additional reporting by Craig Matsumoto. (Next article.)
[This article comes from EE Times in a joint cooperative effort with the Motley Fool. For more articles like it, please look at Fool's Gold every weekend or simply go to the Fool's Gold Mine and page through our back issues, which all have clever and cool EE Times articles in them.]
|
|
|
© Copyright 1995-2000, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool. The Motley Fool is a registered trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us
..
..
..
..
..
..
..
..