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European competition
The annual Industry Strategy Symposium (ISS) organised by SEMI Europe was held in March on the island of Malta, one of the European Union’s newer but fast growing members. David Ridsdale from EuroAsia Semiconductor went along to see how competitive the gathered minds felt Europe was.

ISS Europe is designed to stimulate industry executives from around Europe providing a forum for device manufacturers and suppliers to discuss future business and technology trends in Europe and the world's semiconductor markets. This year the event was held on the island of Malta in the middle of the Mediterranean, an area that has been key to the creation and continuation of the European identity for more than a millennium.

Generally these events are attended by the same people avoiding the same subjects as they congratulate themselves on their successes and studiously ignore any negative issues that impact on their business and ability to work together. At this ISS the tone was established in the introduction by Heinz Kundert, President of SEMI Europe, with his recapping of the usual problems and suspects for Europe and then his enthusiastic outlook of the European potential. This is obviously something close to Kundert's heart as he recounted his year as European SEMI President and all the amazing things that Europeans already do. He pointed out that the much touted cost of personnel is little different in Europe than elsewhere in the world and that much of the cause of relocation is due to state subsidies on offer. Something Europe needs to realistically look at.

Alain Dutheil, COO and Vice Chairman of the Corporate Executive Committee at STMicroelectronics was the opening speaker and he asked the question that defined the conference. Is Europe truly competitive? As a senior member of STMicro Dutheil was able to rightly point out that the company still produces 93% of its own product despite the fears of the fablite and fabless trends in the manufacturing sector. He was able to point out that the European economy soaks up 25% of the global electronics market and stated the real trend to move to Asia was to be closer to end customers rather than cost. He stressed the strong Euro is terrible for European companies still locked in a world that views the USA economy as the benchmark. Although STMicro has a strong and positive history of giving back to Europe, Dutheil was unable to expand on why Europe the continent was competitive.

Dutheil noted that the European approach was very different from other regions. This sentiment was echoed by other speakers, one in particular lamenting that Europe lacks the entrepreneurial spirit to be found elsewhere. Europe tended to have smaller companies that had difficulties achieving the critical mass of larger companies that would then sustain the required research. This is despite the many pan European programmes that have functioned over the years. Dultheil rightly pointed out that programmes such as JESSI and MEDEA have benefited European companies and Universities and have proven the cross border activities are possible, effective and profitable.

The next speaker, Jesper Meulengracht, Director of Technology, Strategy and Business Development at Nokia, inadvertently provided the opposite argument of European competitiveness by suggesting that Europe had little to do with the decisions of companies in a global landscape.

Meulengracht made it clear that the business decisions of Nokia were as a world player and Europe had little to do with it. This is not to say that companies such as Nokia do not provide socially responsible returns to the communities that support them but there is little company alliance to the concept of Europe.

These two sides of a similar discussion pervaded the rest of the conference and it was nice to see a broader approach than suppliers blaming manufacturers for the extremely tight margins. In fact I discussed this topic with someone from a major manufacturer and pointed out that traditionally there has been a culture of blame regarding the difficulty to correctly research and produce product at profit. He turned to me and said that I should try and sell chips to Dell if I wanted to know about tight margins.

This view of fiscal difficulties facing the entire industry value chain became more prominent. This ensured that discussions were directed more towards the European wide projects and programmes designed to improve the entire European industry but often only benefited the larger players in the game.

Presentations continued that outlined individual company successes, plans for the future or emerging technologies. These topics are key to viewing successes in Europe as well as emerging opportunities for companies. They did not necessarily answer the competitive question.

The real issues affecting companies started to filter through talks and the networking that such a conference provides. The reality is that since semiconductors left the control of engineers and under the wing of accountants margins have shrunk and research has decreased. Without the support of governments, the exodus of manufacturing and the value chain will continue to leave European shores.

Unfortunately there are now so many initiatives throughout Europe that overlap, there are no measures in place to ensure that the research done in any given area is not replicated in other parts of the world. History in this and other industries suggest much of the research efforts are being wasted without a concentrated approach. It is lack of cohesion and everyone wanting to be the next big thing that creates problems for Europe. This needs addressing at both the member level and European level. In one sense the blame moved from industry players to the lack of directed support from the European governments.

The last part of the conference was taken up with the financial outlooks with Richard Koo, Chief Economist at Nomura Research Institute sending chills up the participant's spines with his remarkable talk on the potential of a recession. A number of Americans were on the phone to real estate agents after that talk. Bill MacClean added a bit of sanity to the discussion pointing out that the increasing reliance on Asian foundries will see a shortage of foundry space and pointed out the potential disaster that an Asian earthquake would reek on the industry. His message was don't give up on Europe and avoid been dragged along by faddish trends. Malcolm Penn ended the financial session by pointing out that we are caught up in a year to year mentality and forget the positive growth that Europe has consistently provided. It may not be flashy but it is safer.

The panel were reticent to answer questions outside their PR people's comfort zone and nobody wanted to tackle the real issue of European competiveness, and that is the need to foster innovation which nearly always comes from small and medium enterprises. The real way to make Europe competitive is to foster innovation and not pander to the desires of the big players who readily admit they are global players who make decision based on company needs.

If it helps Europe it is a bonus.


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