Captain Morgan quoted in the article.
Jeff
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European Chip Makers Pick Up Speed With New Wafers
By Kevin J. Delaney
Paris -- WHILE EUROPE'S much-vaunted leadership of the wireless sector slips away, the region's chip makers are stealing a step on their global competitors.
They grabbed an early lead in production of a new generation of cutting-edge semiconductor wafers, are selling their chip designs to U.S. and Asian manufacturers, and have gathered critical mass in targeting non-personal-computer uses for chips.
Three of the top 10 chip makers world-wide now are European, up from just one in 1995. French-Italian STMicroelectronics NV has shot to third place from No. 13 since then, today trailing only Intel Corp. of the U.S. and Japan's Toshiba Corp. Last year, Infineon Technologies AG, which was spun off from Germany's Siemens AG, and Philips Electronics NV of the Netherlands ranked Nos. 9 and 10, respectively. The European chip makers account for about 10% of the global market, compared with 7% in 1995, according to Gartner's Dataquest research unit.
That rise can be explained by factors that include government aid and broad technology cooperation among the biggest players and with their key customers. But the biggest reason may be the European companies' focus on uses for chips beside personal computers.
ST, for example, derived 61% of its revenue in the third quarter from the telecom, automotive and consumer-electronics sectors. Its PC-related activities are limited to peripherals, such as chips for printers, accounting for 21.5% of sales.
The reasons behind this focus are largely historical. In the 1980s, the U.S. manufacturers were dominating the computer industry and the Japanese the consumer-electronics area. The European chip makers were badly lagging behind their overseas counterparts.
"At that time, the sign on the wall was the European semiconductor industry was dead," says Pasquale Pistorio, ST's president and CEO, who left Motorola Inc. in 1980 to head Italian chip maker SGS Microelettronica SpA, which was merged with the semiconductor business of France's Thomson SA to create ST. At the time of the 1987 merger, Mr. Pistorio decided to direct the efforts of the unprofitable state-owned companies on new, non-PC markets such as chips for wireless handsets.
"It's fortunate that where Europe is traditionally strong are now the booming applications," says Andrew Norwood, a senior analyst with Gartner Dataquest's semiconductor group in London. "The days of the PC leading the semiconductor industry are gone."
The resurgence is a matter of regional pride at a moment when Europe's much vaunted lead on the U.S. and Asia in the wireless sector is slipping away. Europe still boasts the world's No. 1 handset maker in Nokia Corp. and major network-equipment makers in Telefon AB L.M. Ericsson, Siemens and Alcatel SA. But Asia's cellular consumer services are much more advanced than those currently available in Europe. In the area of the short-range wireless networks using so-called Wi-Fi technology, the U.S. is the undisputed leader.
Not all Europeans are rising in the rankings. Philips's share of the global chip market actually has shrunk during the past decade, dropping to 2.8% last year from 3.5% in 1990, according to Dataquest.
In the U.S., Europe's success hasn't prompted the sort of hand-wringing that accompanied the rise of Japan and South Korea as chip competitors. Yet U.S. companies see the same opportunities outside of PCs. Texas Instruments Inc. remains a potent contender in cellphone chips. Intel, with the industry's largest budget for manufacturing and product technology, plans to play a much bigger role in communications.
But the Europeans' early bet on mobile telephones, cars, digital music and video players, and smart credit cards is paying off.
"The Europeans have really worked hard on technology," says Jim Morgan, chairman of Applied Materials Inc. of Santa Clara, Calif., the leading supplier of chip-making equipment. "Where the Japanese and some U.S. companies have held back, they have taken the risk."
Mr. Morgan points to Dresden, Germany, and the environs of Grenoble, France, as trendsetters for the industry. Dresden, bombed out in World War II, today is home to chip maker Advanced Micro Devices Inc.'s only wholly owned plant outside the U.S. and an Infineon factory that grabbed an early lead in cranking out the newest generation of semiconductor wafers.
Crolles, near Grenoble, is where Motorola, of Schaumburg, Ill., has joined ST and Philips in a research and development alliance. The European chip makers point to that with pride, saying it is the first time Americans have come to the region looking for chip technology.
Meanwhile, European companies are doing more of their own manufacturing in Asia and Latin America, where labor costs are lower. And they often ship more orders to Asia and the Americas than end up in Europe.
"At some point they all stopped focusing on the European market and realized it was a global market," says Steve Cullen, principal analyst for semiconductor research at In-Stat/MDR in Massachusetts.
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David Pringle in London Dan Bilefsky in Amsterdam and Don Clark in San Francisco contributed to this article.
(END) DOW JONES NEWS 10-29-02 |
