News Article
Asia and China: a challenge or a big opportunity?
The growth and development of Asian economies, and China’s in particular, will represent the major driving force for the growth of the semiconductor market between now and 2010.
In the next five years, the Asian economies plus India’s will exercise a massive influence on the market. The first projections for 2010 suggest that Asian companies will comprise 40% of the total semiconductor market in the next five years, driven by companies in China and India, which together will represent 40% of the total Asian market.
Asian countries, with China at the forefront, are investing a large amount of money to encourage and support their high-tech industries. China in particular is no longer simply a place for low-cost manufacturing. Based on current trends, China will be the largest single semiconductor market in the world within 5 years. Therefore, today’s semiconductor giants must develop new strategies in order to capitalise both on China as a market, and on China as the global research and development hub that it is moving to become over the next decade.
Companies like Huawei and Lenovo, for instance, are just the tip of the iceberg of what is happening, and will happen in China. Chinese OEMs will take a huge share of the market and they will generate a stream of local suppliers. Western companies that want to succeed in this scenario have to change their approach to Asia and to China to fit this model.
Talking about China, ST’s strategy in this country has been global from the start. The Company has not only been able to exploit the favourable conditions for setting-up manufacturing plants, but to deploy its worldwide resources and broad portfolio of leading-edge technologies to meet the particular local needs of the Chinese market.
As a matter of fact, ST established its first assembly and test plant there in 1996 through a joint-venture agreement called Shenzhen STS Microelectronics. Since then, ST’s strategy has been to set up design and competence centres in China to handle the design and development of reference solutions, technical support, and joint development work for a wide range of applications through competence centres located in Shanghai, Beijing, and Shenzhen. In 2005, ST established a dedicated geographical organization called Greater China Region, a vital step to strengthen ST’s success in the world’s fastest growing economic zone.
The Company sees the efforts towards Asia as an integral part of its worldwide strategy, and not as an alternative to its presence in the other regions of the world. Today, ST not only is increasing the Asian portion of its manufacturing, but is also expanding its supplier base to qualified Asian suppliers. ST has created a specific market region for China and has moved Corporate Back-End to Singapore.
On the other hand, ST is not moving out of the western world and its European roots. There are several good reasons for ST’s presence in Europe and in the US. The first consideration is that several of ST’s larger customers are headquartered in Europe or the US, and the Company must work closely with them to understand their markets and needs -what I call “the ability to stand in our customers’ shoes.”
The second consideration is the complexity of technology R&D and state-of-the-art manufacturing modules. Both R&D and manufacturing not only need massive investments in building and equipment, but also require a solid local know-how of all the disciplines involved, including electronic engineering, solid-state and molecular physics, chemistry, and others, and the ability to work closely with top-class researchers. In Europe, ST has developed a true technology and manufacturing culture at the sites of Agrate and Catania in Italy, and in Crolles in France.
The third factor is the complexity of system solutions, from systems-on-chips to systems-in-packages to systems-above-chips and platforms, which integrate a large number of hardware and software Intellectual Property, originally developed for specific applications. To succeed in this effort, semiconductor companies should possess solid competences in different key fields. The creation of competences is a long-lasting process, and the final result is the creation of competence centres with strong links to local resources and institutions. Over the years, ST has built strong competence centres: for example, digital video in Grenoble (France), automotive in Agrate, and smart power and RF components in Catania.
In short, a knowledge base, such as the one ST has in France and Italy in the areas around Catania, Grenoble, Milan, Rousset and Tours, are the roots of the Company, and unique assets that have to be strengthened and that are very difficult to build elsewhere.
To conclude, let me say that the real challenge of the future is the ability to learn from the world. The new big opportunity is to build competitive advantage by connecting different sorts of knowledge which is globally dispersed, and offering this knowledge to our customers worldwide. And to complement our roots with new and fresh branches.
March 2, 2006
Article for European Semiconductor
Asian countries, with China at the forefront, are investing a large amount of money to encourage and support their high-tech industries. China in particular is no longer simply a place for low-cost manufacturing. Based on current trends, China will be the largest single semiconductor market in the world within 5 years. Therefore, today’s semiconductor giants must develop new strategies in order to capitalise both on China as a market, and on China as the global research and development hub that it is moving to become over the next decade.
Companies like Huawei and Lenovo, for instance, are just the tip of the iceberg of what is happening, and will happen in China. Chinese OEMs will take a huge share of the market and they will generate a stream of local suppliers. Western companies that want to succeed in this scenario have to change their approach to Asia and to China to fit this model.
Talking about China, ST’s strategy in this country has been global from the start. The Company has not only been able to exploit the favourable conditions for setting-up manufacturing plants, but to deploy its worldwide resources and broad portfolio of leading-edge technologies to meet the particular local needs of the Chinese market.
As a matter of fact, ST established its first assembly and test plant there in 1996 through a joint-venture agreement called Shenzhen STS Microelectronics. Since then, ST’s strategy has been to set up design and competence centres in China to handle the design and development of reference solutions, technical support, and joint development work for a wide range of applications through competence centres located in Shanghai, Beijing, and Shenzhen. In 2005, ST established a dedicated geographical organization called Greater China Region, a vital step to strengthen ST’s success in the world’s fastest growing economic zone.
The Company sees the efforts towards Asia as an integral part of its worldwide strategy, and not as an alternative to its presence in the other regions of the world. Today, ST not only is increasing the Asian portion of its manufacturing, but is also expanding its supplier base to qualified Asian suppliers. ST has created a specific market region for China and has moved Corporate Back-End to Singapore.
On the other hand, ST is not moving out of the western world and its European roots. There are several good reasons for ST’s presence in Europe and in the US. The first consideration is that several of ST’s larger customers are headquartered in Europe or the US, and the Company must work closely with them to understand their markets and needs -what I call “the ability to stand in our customers’ shoes.”
The second consideration is the complexity of technology R&D and state-of-the-art manufacturing modules. Both R&D and manufacturing not only need massive investments in building and equipment, but also require a solid local know-how of all the disciplines involved, including electronic engineering, solid-state and molecular physics, chemistry, and others, and the ability to work closely with top-class researchers. In Europe, ST has developed a true technology and manufacturing culture at the sites of Agrate and Catania in Italy, and in Crolles in France.
The third factor is the complexity of system solutions, from systems-on-chips to systems-in-packages to systems-above-chips and platforms, which integrate a large number of hardware and software Intellectual Property, originally developed for specific applications. To succeed in this effort, semiconductor companies should possess solid competences in different key fields. The creation of competences is a long-lasting process, and the final result is the creation of competence centres with strong links to local resources and institutions. Over the years, ST has built strong competence centres: for example, digital video in Grenoble (France), automotive in Agrate, and smart power and RF components in Catania.
In short, a knowledge base, such as the one ST has in France and Italy in the areas around Catania, Grenoble, Milan, Rousset and Tours, are the roots of the Company, and unique assets that have to be strengthened and that are very difficult to build elsewhere.
To conclude, let me say that the real challenge of the future is the ability to learn from the world. The new big opportunity is to build competitive advantage by connecting different sorts of knowledge which is globally dispersed, and offering this knowledge to our customers worldwide. And to complement our roots with new and fresh branches.
March 2, 2006
Article for European Semiconductor
