European Business News

Mobilizing Europe’s Strengths

SEMI’s Industry Strategy Symposium is a European conference with a history of bringing influential industry leaders together to address and collaborate on the important issues facing the European semiconductor industry. The 20th edition of ISS Europe will feature CEOs of leading device manufacturers’ representatives. EuroAsia publishes a preview based on speaker’s interviews.

Thanks to effective business strategies, regional collaborations and a diverse and growing end-user market—particularly in mobile and automotive electronics—we are pleased to report that the European semiconductor industry is alive, well and poised for growth. Total semiconductor consumption in Europe is expected to grow from $40.8 billion in 2006 to over $50 billion in 2010 surpassing both North and South America (McClellan Report 2006). Infineon, ST Microelectronics and NXP Semiconductors remain entrenched among the top 10 semiconductor manufacturers in the world and Europe continues to provide technical and application leadership in RF, advanced packaging, photovoltaic, micro-electromechanical systems, and other technologies.

Europe’s success is due in part to an overall global demand toward more sophisticated, economical and feature-rich products. The growing share of final product value contributed by electronics is striking. For example, 20 percent of an automobile’s value today is derived from embedded electronics. Likewise it is anticipated that 22% of the value of industrial automation systems, 41% of consumer electronics, and 33%1 of medical equipment will come from embedded electronics and software. These trends will only continue in the coming years, promising exciting opportunities for those that can create, produce and deliver the enabling technologies and manufacturing expertise.

As home to many of the world’s most demanding and prosperous consumers, as well as many of the leading edge companies in telecommunications, consumer electronics, automotive, energy and more, Europe will continue to be a centre of innovation and growth in advanced manufacturing. No other region in the world has Europe’s distinct strengths as an early adopter consumer market, a centre for R&D, a centre for analogue, mixed signal and RF circuitry design, and home to the most innovative and forward looking collaborations between industry and government in the world.

It is this combination of strengths—their interdependencies and synergies—that will sustain Europe’s position in a wide variety of technology markets.

Europe remains an essential, regional centre of innovation in the global technology industry. Continued efforts in mobilizing European strengths will lead to a prosperous, sustainable and enjoyable life for all of us.

SEMI Europe, the organizer of the ISS Europe, presents a preview based on interviews with some of the speakers.

Keynote Speaker: Frans Van Houten, President and Chief Executive Officer, NXP Semiconductors

Maintaining European Competitiveness Through Innovation
Innovation is vital for a technology company like NXP Semiconductors; and for a modern, Europe that can compete with Asia if it wants to. Innovation is the positive face of change, to add value. Innovation is the lifeblood of growth. But we have to work for it. We cannot be complacent.

Innovation is the foundation of NXP, which was born out of Philips Semiconductors just a few months ago. We started life as a top-ten player with almost EUR 5 billion in annual sales in an industry of big players. More than 80% of our engineers are in Europe. One third of our global workforce of 37000 are in Europe. We are the second largest semiconductor company in Europe and a top ten player globally. As such, I have a specific interest in ensuring Europe maintains its competitiveness.

It’s widely known that the European Commission (EC) articulated a “must do better” approach since the original Lisbon Commitments were agreed. Since the EC articulated the need for Europe to play a leading role in the knowledge economy, competition has increased markedly. What can Europe do to maintain a competitive edge? The answer is simple. We must add value through innovation, staying close to our markets and to those who consume the products and services that rely on our chips. We must constantly stay ahead of the curve, helping shape and predict the expectations, desires and needs of the marketplace.

For instance, customers who use our vibrant media technologies at the heart of their devices want to create better sensory experiences for consumers. Digital technologies must offer consumers rich yet pin-sharp sensory experiences. Better video on the mobile phone or in the car, better audio on the phone or MP3; crisper photo images. Makers of these devices need an underlying “chip intelligence” that can deliver a genuine “wow” factor. I truly believe the secret of success and to achieving this wow factor of inventiveness, is to never stop innovating. Innovation is about the marriage of technology breakthroughs to insights into the needs and wants of markets. It is not about creating technology in a vacuum, divorced from commercial realities.

I suggest that there are five critical success factors that will determine whether or not we, in Europe, succeed. We must improve education and get higher participation in technical studies. We must become more competitive. This translates, in my view, into working more intensely, more passionately. We need to review our working conditions and work longer, possibly for less. Governments should lend more support. Greater and stronger links must be forged between the academic hotbeds of research and the pragmatic industrial appliers of such thinking. And, finally, the leaders of European businesses must be strong, championing the spirit of entrepreneurship and showing robust and decisive leadership. We have to be brave, developing insights into market needs and then daring to innovate.

At NXP, we are active members of many Poles de Competitivite to ensure R&D effectiveness. We develop manufacturing partnerships to ensure we can deliver the innovative products to the market, when the market needs it.

So my philosophy is in partnership to promote the standard and therefore to develop the market; then to focus R&D on areas where you can differentiate. This is called co-opetition. Consider the Near Field Communication Forum. This is a clear example of industry successfully working together to lay the foundations for mutual prosperity and healthy competition. Nearly one hundred companies and organisations are creating an ecosystem with one aim in mind – the establishment of effective standards and protocols for smart contact-less electronic payments and transactions. And it’s working. Successful trials are running around the world and widespread commercial rollout is expected in 2007. This would not be possible without the involvement, commitment and commitment to innovation of its distinguished membership.

So what are the elements needed to ensure Europe thrives? We can reduce our challenge to four small yet powerful words. Partner, to increase effectiveness. Focus, to find differentiation. Differentiate, in response to market insights. Courage, to be entrepreneurs and have the passion to win. I sincerely believe that we can achieve this.

Guest Speaker: Professor Stéphane Garelli, IMD
Stéphane Garelli is professor at the IMD International Business School in Lausanne, he is the author of the World Competitiveness Report and has recently published his new book “Top Class Competitiveness”.
Question: What are the changes in the economic, business, market and social environment, which will affect companies in 2007 and beyond?
Answer: Competitiveness thrives on two capabilities: the management of efficiency, i.e. a flawless implementation of the strategy, and the management of change. Success, today, implies adapting to change better and faster than others.

Q: Why and how?
A: In 2007, two fundamental trends continue to underlie the economic environment: First, the United States over-consumes money because of the combined deficit of its balance of trade and its budget. Second, China over-consumes raw materials. Both trends mean that the world economy is facing the end of cheap money (i.e. higher interest rates), the end of cheap commodities, and maybe higher inflation.

Q: Where do we go from there? What does it mean for companies?
A: The world of competitiveness is not a cosy club any longer; new countries, new companies and new brands are redefining the name of the game. In such a global context, firms run the risk of remoteness from their customers. The complexity of business models has exploded. Procedures need to be simplified. Customers struggle with “options fatigue”. Today, less is often more. Successful business models are simple ones. Finally, this new world implies new competencies and skills. It emphasizes accomplishing more with fewer and better resources. Competent people will not be enough. Competitive people will prevail.

Q: Do you want to hear directly from the European leaders?
A: During the ISS Europe (scheduled from 4-6 February in Zurich) panel discussion, influential leaders from our industry will provide their vision of the electronics industry in Europe and debate on the future for high-volume manufacturing in Europe and what their companies are doing for mobilizing Europe’s strengths.