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Strict 'surgery' on slate for electronics industry

Posted: 01 Mar 2001 ?? ?Print Version ?Bookmark and Share

Keywords:eda? electronics industry? streamline marketing?

Systems companies, chipmakers and EDA vendors alike are concerned about business conditions for this year, especially since the current slowdown appeared so abruptly and the Nasdaq index fell 38 percent during the past year. Some financial analysts have even said it may take 10 years for the index to return to its 1999 levels.

But I do not believe that prediction for a minute, any more than I believe that the magnitude of the Nasdaq nosedive accurately reflects the health of the industry, market demand for electronic products or future profit opportunities. The Nasdaq simply had no business climbing as fast as it did. Its rise was based on wild, unfounded speculation. There is no doubt that the electronics industry must undergo some much-needed restructuring and this is the time to do it. During boom times, any restructuring or adjustments that occur are typically cosmetic at best. Only when businesses are forced to perform serious surgery do they actually do so.

What kind of restructuring can we expect this year? First, deadwood needs to be trimmed. Most companies hired an abundance of personnel to meet their business needs in recent years. But in good times, like those we have experienced in the past, there is a labor shortage, so companies often settle for lower-quality talent. Letting employees go is among the most difficult and painful things for businesses. But it must be done, and it will be done. Companies that do not do it will pay the price later.

Next, business processes, product development processes and the infrastructure supporting them must be re-examined and either tuned or overhauled. Again, during good times, companies rarely put much focus on processes: The attitude is, "If it is working, do not fix it." The reality is that it is working only because strong profitability masks deficiencies. Being ready with streamlined processes that are tuned to the impending market dynamics is a recipe for success.

World-class time-to-market will remain the over-arching goal of systems houses and chipmakers for the next few years. EDA vendors will continue to play an important role here. Shortchanging them during the slowdown is a bad idea. EDA users that demonstrate a commitment to their vendors will reap tremendous benefit when the market picks up again.

? Ronald Collett

President

Collett International Research Inc.





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