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Cypress chief on the art of reinvention

Posted: 01 Feb 2006 ?? ?Print Version ?Bookmark and Share

Keywords:loring wirbel? ee times? t.j. rodgers? cypress semiconductor corp.? cypress?

Cypress Semiconductor Corp. CEO T.J. Rodgers surprised a conference audience when he focused his speech on subsidiary sunpower Corp., which completed an IPO in November 2005. Rodgers is convinced that SunPower can do more than grab a chunk of the market for solar-generated electricity; he believes Cypress' return on investment in high-throughput silicon wafers for solar cells might transform its revenue makeup. While skeptics might say that Rodgers was just touting another of Cypress' specialty investments, the CEO was frank with EE Times about investment mistakes he's made. "We put $54 million into Silicon Magnetics before deciding that ruthenium didn't need to be on a wafer. That's when I pulled the plug," he said.

EE Times: It seems like Cypress is one of the few companies, along with Cisco and a few systems makers, that will still risk jumping into areas well outside their realm. Do you think that's related to the maturation of Silicon Valley?
T.J. Rodgers: I do. One of the reasons I decided to come to a Colorado conference on venture-backed startups is that, first of all, the maturation of Silicon Valley relates to bigger and successful companies. If you look at the fabric of Silicon Valley!seething, boiling with ideas and startups!that certainly hasn't changed. But when I was at AMI, we all realized that we could make watches from transistors. So simultaneously, AMI, Intel and National Semiconductor all brought out watches to make a splash in the watch world, since if we could make a chip, we could make an electronic watch.
Of course, that didn't work out because we didn't understand anything about jewelry. But those were the cowboy days in Silicon Valley, when we would crash headlong into new markets, intending to take them over.

You had to put some of your own money into SunPower before the Cypress board would back you up. If other CEOs were to push for investment outside companies' general areas of expertise, would there be a general reluctance among modern boards?
Absolutely, especially in today's world, where boards are overly concerned with trivia about the Sarbanes-Oxley financial and accounting act!and I do mean trivia because a huge amount of bandwidth has been taken away from companies as a result of that. You think, OK, it's another regulation!who cares?' But the fact is that I've lost 30 percent of my board time to that kind of stuff.

It sounds like SunPower is on the verge of achieving much greater conversion efficiencies. If you could be looking at a two-thirds uptick or a doubling over Sharp, Sanyo or other competitors, the market could shift.
Maybe if you assume they're going to stand still. But you have to assume that the very competent people at Sharp and Sanyo are not going to do that. Basically, we're going to raise the ante on efficiency. And right now, it's a big silicon push. We use 9g of silicon to generate a watt!they're at something like 13g per watt. And since silicon is scarce and will be for a couple of years, we're going to ride that advantage.

Do you see it as feasible that, within a few years, Cypress might be defined to a certain extent by its SunPower subsidiary?
I have no doubt that people will see a large component of Cypress, even in 2006, as being dedicated to solar energy.

As early as next year?
As early as next year.

Let's get to other aspects of your business. Will Cypress ever say that it will be a fabless company?
No. We're not going to be a fabless company. We will make silicon for a living. Our manufacturing costs are way below those of foundries and we think it's one of our competitive advantages. There's another phenomenon going on and that is: What technology can you afford?' We think we can stay in mainstream technologies forever.
The bigger question for us is: What technology level do you really need? For example, if you look at solar cells and microcontrollers!two of our biggest ventures!they certainly don't work on a 65nm technology. They don't need it. We'll always manufacture, but whether or not we will continue process migration node after node will depend on our business needs.

The mere fact that you are using screen printing for solar cells is a radical revision of the photolith evolution mindset.
You know how a mask might cost $50, right? Screen print? Five cents.

You had a fairly high-profile design win in the iPod Nano, and I'm wondering if that will allow the idea of the programmable system-on-chip, or PSoC, to catch on with other customers. Was Apple a one-shot, or do you think the concept will grow?
I can't talk about Apple. We have a bunch of other companies that are big deals that I also can't talk about. They all demand non-disclosure agreements. But I do think that the PSoC is another big winner coming up for us and I think it's just starting to really grow. The PSoC business is growing as fast as our solar business.

And it's relatively new?
We've been shipping it for three years.

When you look at product lines like PSoC, USB and some of the timing products, they seem to be products with a big consumer payoff that are relatively immune from ups and downs. When the recent J.P. Morgan report raised questions about whether Cypress is too dependent on cyclical product lines, it seemed like Morgan was talking about an old Cypress.
You're right. Well, at the same time, they're right, too. The businesses we just talked about are consumer-oriented!they don't crash and burn like a dot-com. On the other hand, we are in other businesses, such as memories, network search engines and products, that are very communications-oriented and have cycles.
Part of our reasoning for getting into solar cells and PSoCs was to not get caught so bad. We don't want another 2001 to happen. We literally got cut in half in six months that year. That was pretty ugly and we wanted to avoid that in the future. We're placing bets in other areas so that we don't end up with all our eggs in one basket.

Speaking of network search engines, some people have said that after so many router and switch architectures went south in the crash, ternary content-addressable memory became a dumb and expensive idea. More recently, we've heard that despite the number of SRAM-like alternatives out there, there will always be a unique purpose for a ternary CAM and it will always have a pretty good average selling price.
I don't see ternary CAMs being replaced. We do have an SRAM alternative internally in the Sahasra architecture!Sahasra is basically a large logic engine with several blocks of high-speed static RAM embedded in it!and CAM. It is twice as silicon-efficient as standard CAM, but the penalty is that the latency for the first answer is longer. It can serve in some functions, but not others. But it is cheaper by a lot than standard CAM.

You recently celebrated the 10th anniversary of Cypress' presence in India and opened your first design center in China. Design engineers get really frightened at offshore trends, saying, Gosh, my CEO is telling me that if I can't give him the exact functions I serve that can't be replaced by a worker in China, I will be out of a job. Should I be worried that there are no more U.S. design jobs?'
We have 17 design centers. Offshore, we have India, China and Ireland. So most of our design centers are in the United States,and we would be crippled if we didn't have them. There is a warning to the engineer, but the warning is a little bit different. It's the same warning for any company: Tell me what you're going to do when you recognize we can get something offshore.
You must change, you must move to the next level of value creation. If it's just turning the crank on me-too chips, that can get done anywhere in the world. So the challenge for our design centers is to embed software and systems knowledge to move to the next level.

Do you worry that the venture community is getting too regimented about saying, OK, I just want four or five guys in management here, and everybody else in your startup should be based in Bangalore and Shenzhen'?
I don't see that too much in Silicon Valley. They give you credit for having a low-cost deployment, but the fact is, Silicon Valley is still Silicon Valley. There are still thousands of engineers there, and they're very smart. They're embedded in a highly value-added matrix. You can't just go somewhere in the technical hinterland and necessarily compete. But they do have to come up with a better idea. They can't just turn the crank on something that's already there.

More innovation is coming out of the Asian ODM and OEM community, to the point where if a company is in communication ICs alone, it might be saying that its main customer is now in China and North America is just a backwater. Has it gotten to that point for Cypress yet?
There's plenty of innovation here. We still see more design in the United States. What we see is that manufacturing is gone. Surely, there's innovation in Asia as well, and that innovation counts for a lot. You cannot afford to be arrogant.

With Cypress constantly reinventing itself, your board might try to say you're a memory company, a communications company or a solar-power company. You seem to say, Don't get too strict with your definitions!we might morph into something else.'
Absolutely right. Everybody was a mainframe company 20 years ago; everybody was a PC company 10 years ago; everybody was a communications company five years ago.
Wake up! We're a silicon company. And when AMD founder Jerry Sanders talked about silicon being the crude oil of the electronics industry, he meant, Wherever the action is, we're going to be there.'
I just had a guy walk up to me tonight, complaining that he can't get enough PSoCs. He makes equipment for automated car washes. So, I'm a car wash company.
To me, what entrepreneurs do is different from what big companies do. They ask themselves, What do I do that's special and different, and how can I use my skills to create value-a company that has value for its people and value to sell?'
Entrepreneurs are in a constant mode of mapping their skills and the core competencies of the company onto the market and finding different ways to add value.
A lot of big companies just don't do that. They're like a Kodak: They've made film, they make film, they're always going to make film.

- Loring Wirbel
EE Times




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