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Consumers may feed robust IC growth

Posted: 29 Oct 2004 ?? ?Print Version ?Bookmark and Share

Keywords:asic? dvd? cellphone? pc? it?

Corrigan: Everybody talked about the convergence of the three C's: consumer, computers and communication. Then the Internet came and instantly connected those three circles.

Wilfred Corrigan, chairman and chief executive officer of ASIC vendor LSI Logic Corp., is one of the semiconductor industry's few remaining active executives with a direct link to the industry's early days, having served as director of discrete products at Fairchild Semiconductor. Corrigan helped develop the commercial ASIC business when he founded LSI Logic Corp. more than 20 years ago, and remains a major force within the Semiconductor Industry Association.

EE Times: We're coming out of what you could call the WDE, the Worst Downturn Ever. What lessons did we learn, if any?

Wilfred Corrigan: When some people say this may have been the worst, well, there was no question this was unequivocally the worst downturn we have ever experienced. In 1970, 1974 to 1975, we experienced the first big oil crisis. But even in that environment, the extent of the downturn was just 17 percent.

This downturn was 35 percent. This is a real change. This is like an earthquake. That's why it's difficult to project going forward. A lot of people are into this, 'Gee, the industry is going to change, there's going to be single-digit growth rates from here on out.' I don't think they know. Certainly, we have started to see recovery in the past few months and it's gathered some momentum. But it'll be next year before we're even back to where we were in 2000 because we're really almost starting a reconstruction period right now.

I think it's difficult for us to project. I'm not a believer in the high single-digit growth.

You don't buy high single-digit growth, but is it a fait accompli that the growth rates are going to be lower than they were historically?

I don't think so. One of the things that a lot of analysts are saying is that the IT industry is only growing so much. Hewlett-Packard Co. chairman and CEO Carly Fiorina was saying 1.5 percent. Others are saying 3 percent to 4 percent as a whole.

If the IT industry is only growing at this rate, how can semiconductors grow this year somewhere between 20 percent and 30 percent? What's happening is, if anything, inventories are too lean right now. Clearly the semiconductor content is growing rapidly than the end market. I don't think an IT industry growing at 1 percent to 3 percent to 4 percent has returned to its strength. But clearly you've got a stronger participation of semiconductors.

The camera didn't have much electronics in it 10 years ago. Now it's all semiconductors. If you look at a PC, its semiconductor content just keeps on growing. Even the availability of low-cost DVD playback devices has radically changed the whole supply chain. If you go into Blockbuster or any of the other guys that used to be all-tape, there used to be a little tiny DVD section, and now it's mostly DVDs. And a major portion of that is for sale, as opposed to for rent. This is because you have extremely cheap DVD playback devices that may sell from $20 to $40, but there will be 100 million of those shipped this year.

Another is the ubiquitous cellphones. You go to China and we think that people are using cellphones there. Truth is, we've only begun to use cellphones there. In Scandinavia, cellphones are the majority of phones and the majority of phone numbers. There are different ways in which semiconductors are being used. The whole infrastructure to support cellphones is full of semiconductors.

For 20 years, everybody talked about the convergence of the three C's: consumer, computers and communication. Then, everyone would show these Venn diagrams with these interconnecting circles and it never seemed to happen. Then the Internet came and instantly connected those three circles. There really is a huge synergy going on that's feeding demand for more electronics devices.

Offshoring has been going on for 40 years and China and India continue to become developing markets and developing powers in electronics. Do you think because this is an election year in the United States that the government will politicize the issue and make things difficult for U.S. managers?

They're not going to do that. Neither party is going to do that. Fundamentally the amount of offshoring as a percentage of the total jobs is relatively small. If you look at the U.S. semiconductor industry, 70 percent of the business is done outside of the United States. Seventy-five percent of the payroll of U.S. semiconductor companies is within the United States. Now I think those are fairly compelling numbers.

In reality, the U.S. accounting rules have conspired to make it more difficult to make that capital investment in the United States. A few years ago, when you build a plant in the United States, you could capitalize the plant and the startup costs and you can't really do that any more. It has to go straight to earnings.

I remember when assembly moved offshore in the 1960s. I was at Motorola at the time. We were doing what then presidential candidate John Kerry would say is the right thing: We were putting capital investment in, we were automating transistor production. I got to Fairchild and I visited the Hong Kong plant and I looked at the costs and I said we were crazy. Fine if we're going to automate, let's automate the Hong Kong plant. Certain things are not going to be competitive if they're done in the United States.

- Brian Fuller

EE Times





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