Here's a snapshot of wireless design trends in Europe which adds context to that Nokia article which described its working relationship with CoWare and IDCC.
Europe's independent chip designers thrive
By Rhonda Cornell
Electronic Buyers' News
(07/07/00, 04:45:59 PM EST)
Europe is emerging as a design powerhouse, but is weakening in the manufacturing sector relative to Asia, as economic conditions force companies to outsource abroad.
A mounting design-skills shortage and a mix of fiscal conditions are driving the startling growth of Europe's independent IC-design houses, which are forecast to grow 33.2% annually over the next five years-nearly twice the rate of the worldwide semiconductor industry and eight times that of Europe's chip sector, according to analysts.
Last year, the 181 companies that make up the region's independent-design industry saw revenue grow 72.4%, to $1.84 billion, according to a report to be released this month by Future Horizons Inc., Kent, England.
The scarcity of IC designers stems from the narrowing of market windows and the growing complexity of chips, said Future Horizons analyst Chris Ryan.
Whatever the root cause, as talent has become increasingly hard to find, European companies have undertaken a dramatic shift by establishing supply-chain structures that benefit from, and depend on, the availability of specialist design houses. In some ways, the expansion of the independent-design industry has benefited the supply chain by enabling smaller companies to provide full turnkey operations, according to Jon Howes, managing director of design company NEuW Ltd., Oldham, England.
“Before Europe's design-house population grew dramatically, all OEMs and other product manufacturers were fighting to gather engineers into their internal development groups,” Howes said. “There's now a focus in Europe on relationships and smooth interfacing throughout the supply chain.”
The paucity of design talent has contributed to component shortages and has drawn out design windows, said Michael Sanderson, chief executive of the EMTA, the London-based National Training Organization for engineering manufacture. He contends the skills shortage has resulted from the downsizing of large electronics companies.
“This is creating a two- or three-tier supply chain of really small companies, of which many employ five people or less who are specializing in a highly particular task,” Sanderson said. “This means larger companies have to do a great deal of work to hold the hands of-and to mentor-their supply chains in assisting them to change their skills as changes in technology take place.”
In a market where skilled labor is at a premium, however, design houses themselves are tackling worker shortages.
PACE Micro Technology plc, a Saltaire, England, developer and manufacturer of digital set-top-box technology, acknowledged a lack of R&D engineers, while IP house ARM Holdings plc, Cambridge, England, said microprocessor designers have been difficult to source for the past three years.
Skill clusters exist in places like Belgium, England, and Ireland, while Denmark has a concentration of RF engineers, according to Future Horizons. This year, such pockets have resulted in an estimated $1.68 billion in products and technology sales to large, vertically integrated electronics juggernauts, including Intel Corp. and Texas Instruments Inc. “The skill shortage in IC design is being met by independent design companies,” Ryan said.
By application, Europe is radio-oriented, with independent IC-design houses reporting that mobile-phone handsets and base stations represent 23.4% of their business, according to Future Horizons. Wireline telecommunications and consumer products like TV set-top boxes are also in demand, while networking products are seen as a revenue generator in the next five years.
Such diversity speaks to an industry that is fragmenting into smaller, more specialized groups, Ryan said. “The industry's getting more used to subcontracting,” he said, “so why not subcontract design as well?”
In addition to the inability of large companies to obtain engineering talent, localized economic conditions-such as high capital, facilities and land-lease costs, and more expensive natural resources-may explain why Europe is seeing a steeper rise in independent design houses rather than semiconductor manufacturing, Ryan added.
The cost of wages for engineers in Europe, relative to factory operators, is also low compared with the Far East and North America, according to Ryan. Based on this, “It is advantageous for Europe to design and not manufacture,” he said.
European electronics manufacturing is projected to achieve a compound annual growth rate (CAGR) of 5.8%, lagging behind the worldwide CAGR forecast of 7.7%, according to Joe D'Elia, an analyst at Dataquest Inc. in Surrey, England.
“A lot of the slowdown in European growth will be accounted for by the switch to manufacturing in Asia-Pacific, which will grow at 12.8% CAGR over the same period,” he said. North American electronics manufacturing is forecast to grow at a CAGR of 6.4%.
Alba plc, Barking, England, expects to design its consumer electronics products in Europe but will manufacture predominantly abroad, said John Edwards, director of communications. He noted the benefits of manufacturing overseas-particularly in Asia-in terms of lower costs, faster operation, available capacity, and greater flexibility.
“I'd say 80% to 85% of our products are outsourced outside the EU [European Union],” Edwards said.
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