21st May 2013

How will ST’s new two product oriented business segments organization strategy pan out?

Georges Penalver, chief strategy officer for ST, told the analysts community recently that ST is being constructed as two product-oriented business segments organization. The first block encompasses ST’s sensor, power and automotive products and is essentially ST’s successful analog business and its digital automotive business. The second block is ST’s embedded processing business and is the non-automotive digital business including microcontrollers and processors for digital consumer applications.

 

Focusing on the Embedded processing segment and ST’s manufacturing strategy, let’s look into some statements from the earnings call last month:

·       The 1st segment i.e. Sensor, Power & Automotive represented 56% of net revenues and the 2nd segment (Embedded Processing Solutions) 44%

·       Wireless saw a significant decrease due to ST-Ericsson and this will continue. LTE Modem development activity and biz has moved to Ericsson

·       ST will not compete in the application processor market in smartphones

·       Microcontrollers are a key driver in the Embedded Segment; the others are STB (set top boxes), TVs, digital ASICs, Imaging etc.

·       ST will focus on 2 segments in Microcontrollers. The first one is wearable electronics (healthcare, automotive, gaming) where it caters to diverse and small size customers (requirement is for low power microcontrollers, sensors and connectivity). The second one is secure microcontrollers (which is more for smartphone applications (NFC), banking - both contact and contactless) catering to a smaller number of customers but for a likely high volume

·       Digital biz will be in 300mm wafer fab in Crolles

·       Manufacturing distribution in Crolles: 1/3rd each into MCU, CMOS image sensors and dig consumer products

·       ST is betting big on FD-SOI tech. It has second source agreement with GlobalFoundries for selected customers for this techno. Here it is working aggressively on 2 fronts – 1st is communication infrastructure where low power dissipation is important along with strong performance. The other is portable equipment (outside smartphones, tablets)

 

Add to that the fact that the major semiconductor growth (last year and projected this year too) are the mobile consumer devices especially smartphones and tablets as well as the wireless communication sector.

 

Keeping the above in mind, it will be a big challenge for the company to support leading edge technologies in Crolles and that too with an allocation of a third of its capacity for digital consumer products – case of an expensive leading edge digital technology without targeting aggressive margins. So, how ST can keep its IDM model, especially on the leading digital edge with this kind of a product segment organization strategy, economically viable – that’d be interesting to watch.

 

What are your thoughts?

posted in Semiconductor, Business, Foundry, Communciation, Blogroll, Technology, MIDs, chip design, connectivity, Mobile, STM, IDM | 0 Comments

25th June 2012

Mediatek’s offer to buy MStar

Two compatriots for long at loggerheads have decided to join forces and take on the competition. News about Taiwanese chip designer MediaTek’s offer to buy rival MStar has created quite a buzz and water cooler speculation…. and of course the stock market. MStar was up 6.85 percent (maximum allowed in a session), while MediaTek gained 2.37 percent today.

My two cents’ worth addition to the buzz …..
- This acquisition will create the world’s fourth largest chip designer with total annual sales of US$4.2 billion in 2011

- The combined entity will have an almost 70% market share (a monopoly position??) in the TV SoC biz (DisplaySearch’s Q4’11 data put the two companies’ combined market share as 68.8%).

- Combined R&D resources and not looking over the shoulder for price cutting competition from the previous arch rivals can potentially sharpen the focus and product offering

- On the mobile phones arena: High end 3G smartphone chips along side the 2G ones for feature phones will consolidate & expand MediaTek’s mobile phone chip offering, especially in the emerging markets – more so in China where it has seen its once dominant position threatened by Spreadtrum and the likes (incidentally, MediaTek recently lost a TDSCDMA/WCDMA 3G chip socket in Samsung smartphone to Spreadtrum)

- And most importantly, it positions MediaTek well in an increasingly connected device market. With the growing convergence across platforms – TV, mobile phones, tablets/computing devices – it is crucial to integrate the relevant technologies across them so as to optimally and cost effectively leverage the same across the various platforms (Qualcomm announced a new Snapdragon for smart TVs and set top boxes in CES early this year and then at Computex later, it demonstrated its Smart TV reference platform with its quad-core Snapdragon S4 APQ8064 and MPQ8064 playing games and slinging TV frames. In E3 ’12 (Electronic Entertainment Expo), Samsung’s Smart TV included access to Nvidia’s new cloud gaming platform, GeForce Grid. Marvell too showcased its total solutions across Smart TVs, cloud computing and connectivity at Mobile World Congress)

- Concern: Talent retention/Integration of the combined work force. With almost 80% of MStar’s engineers doing the same work as folks at MediaTek, how will the parent entity avoid overlapping resources and address the potential loss (if not exodus) of talent?

posted in Semiconductor, Business, Communciation, Fabless, Industry Events, Mergers & Acquistions, 3G, MIDs, Samsung, Qualcomm, MediaTek, Spreadtrum, MStar | 0 Comments

25th January 2012

Capex disparity…. and the fortifications of the leaders

Add the 2012 planned capex spending of the world’s top two IDMs and you get an almost half of the total ’12 planned semiconductor capital expenditures. Add to it the world’s top pure play foundry’s planned capex and you end up with nearly thrice the amount the group spent in 2009.
This month saw a slew of capex announcements – Intel’s $12.1 to 12.9 billion, Samsung’s 1$2.2 billion and TSMC’s $6 billion; the first two an increase and the last a decrease (18%) from their 2011 capex numbers.

TSMC had already reported their plan to slash their 2012 capex in September last year. The major chunk of their capex this year will be spent on ramping up their 28nm process and their Gigafabs. Incidentally, 28nm accounted for 2% of TSMC’s 2011 revenues while 40nm and 65nm accounted for 27% and 30% each. And remember, they had an oversupply on 65nm capacity while seeing a demand exceeding supply on 28nm. TSMC’s 2012 outlook – a challenging year.

Intel and Samsung have a lot at stake in the mobile internet devices (MID) market. Intel is betting high on its ultrabooks while Samsung owes much of its lucrative foundry biz to Apple. In addition, it is aggressively ramping up for its in-house application processor to ride on the surging MIDs wave.

These two have an advantage of their in-house designs to test and ramp up on leading edge processes while the pure play foundries like TSMC rely much on their customers’ designs for this.

One thing that is getting increasingly visible – the chasm between the leaders and the ROP (Rest of Pack) is steadily increasing. While this beckons consolidation, it also serves as an innovation catalyst for the smaller but niche companies and strategies emerging in and filling this gap.

posted in Semiconductor, Business, Foundry, MIDs, Intel | 0 Comments

16th August 2011

So what’s the deal with the Google –Motorola Mobility deal, eh?

The cyberspace is abuzz with news about Google acquiring Motorola Mobility for a whopping $12.5 billion. Speculations on Google’s motive behind the deal are mainly skewed towards 2 issues – access to patents and the other whether Google has plans to set up another end-to-end mobile empire akin to Apple. Add to that the buzzing concern of a high potential for conflict - mainly whether there still will be a “level playing field” amongst different Android handset vendors.

My two cents….

1. Access to patents: Motorola deal gives Google access to more than 17000 patents. This helps Google lend a legal hand to the embroiled Android handset vendors like HTC and Samsung as well as prepare itself against potential infringement law suits.

Flip side: If that was the main point, would Google not have been better off with just buying the patents like it did from IBM?

2. Potential conflict of interest – open OS partner or a handset competitor?? Now that can indeed be a worrying factor amongst the Android handset vendors - in spite of the prompt support statements from Samsung, HTC etc. Will these companies who had flocked towards Android to compete against Apple now gravitate towards Microsoft’s Windows Mobile? Google has stated that the handset biz will be kept as a separate independent biz and Android platform as an open one as before but the company will have a tough time treading this slippery slope in order to retain the Android handset vendors’ support.

Having said that, we have seen biz areas where the line between partner and competitor has blurred. Pure play foundries, IP vendors and IDMs is one such example. Market conditions have led to consolidation, fab lite etc. IDMs get the core process wafers done from foundries and keep some special process add-ons in-house to retain their specific niche. IP vendors work along with foundries in spite of foundries touting their own IP portfolio as well as specific design services.
Individually it has got very difficult to compete, with combining resources, there always lurk the spectre of “loss of level playing field”.

3. An Apple like end-to-end empire: Lucrative but an extremely difficult path ahead for the search engine giant in the hardware world… a tough act to follow!

But apart from these, the news throws up another nugget too:

The central point of computing is moving away from the desk towards mobile - and search engines do follow the computing devices. A tight integration between hardware and OS will make it easier to get the desired utilities and apps to the consumer – providing the coveted “unique user experience’.

The deal goes beyond handsets. Motorola Mobility is also into set top boxes – just to name another one. This will bring Google back into the home automation market. Gigaom’s Stacey Higginbotham & Katie Fehrenbacher has written a very good article on this; do read it. Getting your ads, location optimized and perhaps with dynamic relevance does require a tighter integration between the hardware and software.

And it is for this reason alone, my opinion is that it will very much be in Google’s interest to keep Motorola Mobility humming away as a separate unit within Google – especially as far as the level playing field of Android handset entities are concerned and leverage this hardware vendor acquisition to bolster its search ads revenues by making it’s ads more pervasive and relevant.
The patents are the special icing on the cake!!

posted in Semiconductor, Business, Industry Events, Mergers & Acquistions, MIDs, Hardware | 0 Comments

7th June 2011

Tablets and other MIDs: Commoditization of hardware??

A Tablet market report from Goldman Sachs states “The OS platform wars could drive greater hardware commoditization over time. We believe that over time the more open platform vendors may have to impose standard hardware and user interface specs on handset and tablet OEMs to ensure that software developers have a uniform installed base. This move to standardization would narrow the ability for hardware manufacturers to differentiate their technology over time and could result in hardware commoditization like that found in the traditional PC market.”

With the gaining importance of software in the Mobile Internet Devices (MIDs), hardware’s role as a differentiating factor is indeed diminishing. And with that, so do the profit margins for the chip industry incumbents. So, how are the chipset players reacting to survive, if not thrive, in this evolving market?

Qualcomm shows a recent example - “Qualcomm will give web apps a boost”.
As a part of the company’s effort to enable a shift away from today’s fragmented set of native mobile environments, it is set to release shortly a set of applications programming interfaces geared to give Web-based applications deeper links into hardware. The company already supports Android, Blackberry, Windows Phone and WebOS mobile OSes among others. A move to Web-based applications would help it reduce the variety of platforms for which it needs to write software supporting its chips.

Web vs. native apps - as the mobile usage increases, both will grow with it and become valuable factors of product road maps. The question the product strategists need to ponder upon, however, is “what does my target audience need?” While the debate of web vs. native apps is not new, it does throw some interesting options in this backdrop of looming hardware commoditization.

One option is - The chipset vendors start conforming to the standard specs set by the open platform vendors. The hardware is strongly connected to the OS platform and with a proliferation of various mobile OS in the market, it is not an easy task supporting them all or even hedging on a few. Not enticing.

But what if a chipset vendor were to make inroads into web apps and get a deep link between web apps and its native hardware through some popular browsers? it can potentially get some interesting revenues by tapping the right web apps based on their target market – and remember that web apps is an open platform – no waiting, no approval. Its success is hinged on its adoption by the user community.

Having said that, the speed comparison (of compiled vs. interpreted code/web vs. native) will be there as well as cases, especially till the near future, where native wins over web but companies are working on those too (Qualcomm has been working for two years to optimize software so that browsers run as fast as possible on its chips). What has happened to desktop apps, can also happen to native mobile apps. Hmmm…. This may be one escape route from the commoditization problem.

posted in Semiconductor, Technology, MIDs, Hardware | 0 Comments

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