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NXP seeks leadership in remaining units

Posted: 03 Nov 2008 ?? ?Print Version ?Bookmark and Share

Keywords:NXP restructuring? R&D? ST joint venture?

Van Houten: R&D is the lifeline of a semiconductor company, and innovation lies at the heart of our strategy.

NXP Semiconductors announced the restructuring of its manufacturing, R&D and support activities. In an interview with EE Times-Europe, NXP's CEO, Frans van Houten, talked about the causes and consequences of the restructuring measures. The executive implied that NXP's wireless joint venture with STMicroelectronics NV sparked off the move.

EE Times: How long will the restructuring take? When it is complete will it be time to close the Hamburg and Nijmegen fabs?
Van Houten: This restructuring plan covers a period between now and 2010, so roughly two years. We have announced that we will close parts of Nijmegen and Hamburg units. We will upgrade production from the 5-inch and 6-inch fabs in Nijmegen and Hamburg to 8-inch, so effectively upgrading to a higher technology base.

So, you have no intention to close those two units in two years?
No, we will close only some production facilities there.

The European semiconductor industry is on its way to becoming fabless. Will NXP become fabless?
We will not become fabless. We will continue manufacturing in areas where we can add value such as in our automotive and multimarket semiconductor activities. There, an integrated manufacturing operation still makes sense. In the area where we feel we cannot compete, such as the advanced CMOS areas and in the 300mm wafers, this is where we will use external foundries.

What is NXP's fab utilization rate today? What will it be once the redesign program is ended?

Our loading is now, depending on the factory, in the low 70 percent. We expect or we strive to reach the loading after we take capacity out towards 90 percent.

What foundries are you currently working with? Will they be the same tomorrow?
We have partnerships with TSMC and a few others like ASMC in China. We will review from time to time who the most competitive partner is and adjust our outsourcing accordingly.

NXP made billions from the sale of the wireless business. What is the money being saved for?
We want to be profitable and not burning the cash that we have gotten from the joint venture. Therefore, the restructuring measures are necessary. All semiconductor firms in the world have also taken severe measures and layoffs to have a profitable operation.

We would like to use the proceeds of the wireless business for acquisitions to strengthen our four main business units. By the way, we have already made our first acquisition, which is Conexant's STB business. That was a business we acquired in August for $110 million.

How much did you get from the wireless sale?
We got, at the end of July, $1.55 billion. There is a co-option on the remaining 20 percent stake, for which we will also get money. But the amount is not final as it depends on the performance of the joint venture.

What is NXP's strategy to survive the harsh economic environment? Is NXP banking on a paradigm shift?
We are in the process of creating a large-scale leadership in each of our businesses. In wireless, we were number six. ST was number five. Both companies had big troubles in wireless. Together we have created a very viable number three player in wireless. That is a positive move.

For the rest of NXP, the four business units where we remain active, we have more than 75 percent of leadership positions where we are number one or two.

So, we are not a skeleton of ourselves. We are a leader in the industry where we play. What we are doing is we create a portfolio of businesses where we are number one or two, and customers appreciate that. They say that's good because then at least we know what you stand for. You clean up and you become a very clear leader in certain areas.

We will continue with that strategy. So, we are not banking on a paradigm shift. On the contrary, we are a shaper in the industry.

Do you intend to centralize your R&D in Europe?
No, this is not the case. We will continue to use the talent in the various locations that we have.

Are there any plans for expanding in Singapore?
We think SSMC is a very good fab and plan to continue to use it for a long time. We expect to bring overtime more products to this location. Utilization will increase in SSMC compared to current levels.

You have four business units remaining. How important is each unit to your operations?

The four business unitshome, automotive, identification and multimarket semiconductorsare key. We intend to further strengthen and extend these.

To give more color to this, in the home business we recently acquired the STB business of Conexant, making us instantly a number three player in the DTV activities.

In automotive business, we are a leader in areas such as car entertainment. And in identification, we were recently ranked as No. 1 supplier by research company IMS.

Is there a particularly bright research area that serves as a beacon of hope for NXP? Let me be clear: We are not touching the R&D related to the four business units in which we continue. R&D is the lifeline of a semiconductor company, and innovation lies at the heart of our strategy. We are, however, making changes to our R&D program to reflect the changing nature of our business following the move of our wireless business into the joint venture with ST. Specifically, R&D related to advanced CMOS and wireless technologies are not in the primary scope of our business anymore. We have now matched the requirements of our core businesses to our R&D and support resources. As a result, we can effectively serve our customer needs at much lower operating expense levels.

After the restructuring, NXP will still invest 16-17 percent of sales in R&D, which is in line with other leading chip companies. It will ensure that we continue to bring innovative products and technologies to the market. In automotive and identification, we have more than doubled our R&D efforts, and in MMS we raised it by 50 percent.

Does NXP have any plans for Asia?
We already have a strong presence in Asia with almost 18,000 employees in the region. We have strong presence in, among others, China, Singapore, India, Thailand, Malaysia and the Philippines. We expect that our R&D in Asia will further grow. Besides our own activities, we also have outsourcing partnerships with TSMC, ASE, ASMC and many others.

-Anne-Francoise Pele
EE Times

- Additional reporting by EE Times-Asia





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