Electronics: Semiconductors Poised For Comeback - InformationWeek

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9/17/2003
02:33 PM
David Ewalt
David Ewalt
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Electronics: Semiconductors Poised For Comeback

Cost-cutting, increased productivity are helping the industry turn the corner

Chances are it's been a long time since anyone's read a story about the state of the electronics industry that didn't use words like "dismal," "depressed," "hard," or "awful." This year won't be any exception.

"If last year was the hardest year in the history of the industry, this is the second hardest," says Will Strauss, president of research firm Forward Concepts. "It's still a struggle. We're still seeing layoffs; everybody is still cutting costs like crazy."

But the good news is that the industry has put the worst behind it, in more ways than one. The huge inventory glut that paralyzed profits during 2002 has been worn away by time and smart investments in supply-chain technologies. And sales, while still depressed, are on the rise: The Semiconductor Industry Association has predicted 10% growth for 2003--below average but a real improvement from last year's 2% growth.

"There's been a lot of stabilization, and I wouldn't say we're on a smooth-paved road, but we've had the opportunity to get focused," says Ron Roberts, CIO of Agere Systems Inc. "We've had heavy cost reduction, but we're also investing."

Agere's cost-cutting programs include consolidating servers, building new statistical demand models, and creating supply-planning software. Its investments include extensive wireless technology, enabling all its offices and factories with 802.11x wireless networks. That lets employees and customers who visit Agere's plants increase productivity, reduce remote-access costs, and respond to business needs closer to real time.

National Semiconductor Corp. has learned that you can also increase productivity by consolidating the tools employees need to do their jobs. National was a legacy-rich enterprise full of systems that required too much training, CIO Ulrich Seif says. So the company built a portal called One National Environment. By using Web services and open-source platforms, National built a platform that pulls in functions from all its disparate systems.

That sort of strategy is what's helping the industry get ready for an inevitable comeback.

INDUSTRY LEADERS
Rank Company Revenue in millions Income (loss)
in millions
IT
employees
23 Micron Technology Inc. $2,589 ($907) 1,154
61 National Semiconductor Corp. $1,672 ($133) 429
125 Cadence Design Systems Inc. $1,293 $72 300
140 Brother International Corp. -- -- --
156 Analog Devices Inc. $1,708 $105 325
165 Applied Materials Inc. $5,062 $269 750
200 Fairchild Semiconductor International $1,412 ($3) 350
268 Synnex Information Technologies Inc. $3,800 -- 124
271 Panasonic USA $74,681 ($354) 1,875
287 Raytheon Co. $16,760 ($640) 1,580
325 LSI Logic Corp. $1,817 ($292) 310
330 Texas Instruments Inc. $8,383 ($344) 1,100
348 Sanmina-SCI $8,762 ($2,697) 825
428 Agere Systems Inc. $2,177 ($1,811) 352
464 American Power Conversion Corp. $1,300 $82 196
487 Cooper Industries, Ltd. -- -- 21
Financial data is from public sources and company supplied.
Revenue is for latest fiscal year.
Employee data is from InformationWeek 500 qualifying survey.

SNAPSHOT
INSIDE COMPANIES
Average portion of revenue spent on IT 3%
Average percentage of industry applications and business
processes that have Web-based front ends
35%
Companies with real-time business processes in place 81%
HOW COMPANIES DIVIDE THEIR I.T. BUDGETS
Hardware purchases 19%
Services or outsourcing 13%
Research and development 2%
Salaries and benefits 33%
Applications 19%
Everything else 14%
INDUSTRY FINANCIALS
Average year-over-year revenue change -10%
Average year-over-year net income change -23%
DATA: INFORMATIONWEEK RESEARCH
See year-over-year shifts in business-technology practices for this industry. Compare and contrast this year's data with last year's.

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