The Hindu Business Line : Fall in chip demand is temporary: Freescale chief

Bangalore, Nov. 17 The global economic recession that created a deep dent in consumer confidence has hurt the semiconductor industry as demand plummeted, but Freescale Semiconductor, a maker of embedded semiconductor for the automobile, communications, industrial and consumer electronics sectors, said the dip is temporary.

Mr Henri Richard, Senior Vice-President and Chief Sales and Marketing Officer, is confident of an upswing as soon as consumer confidence is restored, and said growth would be led by the emerging markets. In an interview with Business Line, Mr Richard talks about trends in the semiconductor industry. Excerpts from the interview:

Are there any particular verticals where you see more pain?

This slowdown is not the result of people needing less things, but due to customer confidence. So the impact of the current crisis is far more important in the consumer space than in the industrial or commercial space.

On the consumer side, we are seeing a more dramatic impact. People have just stopped spending completely; they have postponed their purchases. One of the most resilient sectors has been networking, where relatively spending has been a little more solid.

How does the future look to you?

It is painful right now, but I don’t think that demand has vanished. Yes, companies are curtailing their expenses, but I do not see a lot of complete cancellations. It is not going down to zero. They are just being cautious. What this creates, is a temporary dip. Consumer demand will pick up when the confidence comes back.

People may have postponed the decision to buy a new car and make do with their existing car, but eventually they will have to upgrade or change. Once this crisis is over, we will see a very positive uptrend because it has created pent-up demand.

You have said Freescale would comparatively spend more on R&D as well as on sales and marketing in emerging markets. Is there a shift in the focus of your R&D?

If you want to be successful in penetrating new markets, I think it is very important that a part of your product portfolio is designed from the ground-up. Until recently, products sold in the emerging markets were scaled-down versions of initial designs done for the mature markets.

I think that model is an obsolete one. As we go forward, we will have products designed from the ground-up for emerging markets rather than just end-of-life versions that were initially designed for the mature markets. That is a big change.

Are there any particular kinds of products that would be developed in these emerging geographies?

Most of the engineers I talk to in the mature markets love to design for performance. It is a very fulfilling experience to build the best product in the world.

I think it takes a different mindset to make a product that is cost-efficient.

You will have more cutting edge products in terms of performance and capability developed in some parts of the world and leading edge cost efficiency being developed in the other parts. I am not suggesting that only cost-effective products would be developed here. Countries such as India and China are very capable of developing high-end products. But they are culturally better equipped to right-size products for these markets.

What are your plans for the India R&D?

We are looking how to best optimise our R&D effort around the world. Increasingly, the semiconductor industry is moving away from just making chips to developing solutions.

A large part of the solutions are software and India’s reputation for software development makes it a very privileged area for us to concentrate our R&D effort on.

As the industry continues to evolve and more integrated packages with hardware and software is created, India R&D will becomes a logical answer to our challenges.

Related Stories:
Chip demand gaining critical mass: AMD
Special package approved for semiconductor sector
Draft policy for sops to semiconductor sector soon
`Electronics growth to propel chip demand to $36.3 b, create 3.5 m jobs'
`Convergence poses biggest challenge for chip designers'