Predictions are a Better Bet Than Resolutions
by Paul McGoldrick
I can be a perverse fellow. I remember when I was at school and the English master set an essay homework about "Hero Worship." All the rest of my class turned in pieces about their idols in the latest pop group, or the newest Hollywood starlets. I turned in a piece about why I had no heroes, and therefore had none to worship. While most people are therefore going through their list of New Year's resolutions -- with little or no hope of keeping them -- I'm going to get into the prediction business, without any astrological assistance. And I promise at the end of the year 2002 I will re-visit my words to see how I did.
I must, of course, stay with my specialty. I might believe the House of Saud will fall this year, and that the former Soviet territories will become the dominant supplier of the world's energy -- but I wouldn't dare say so.
First, business climate. The analog world has not suffered to nearly the same extent as other parts of electronics, and the semiconductor industry in general. But there have been victims, while some other companies have taken the overall business climate as a good cover, or excuse, for some major housekeeping chores to be quietly achieved. The analysts do not recognize these facts, of course, because they are too focused on semiconductors being all to do with the PC world.
The manufacturers who seem to have been suffering most are those involved with too much of their business as suppliers to the PC industry, and also those in the optical end of communications. The perception is that the fiber networks are overbuilt, and certainly that is one of the major excuses for the downfall of Enron. That perception is probably incorrect but I don't think that is going to be realized for at least six months into the year; unfortunately, by that time, a couple of suppliers could be in serious jeopardy with a lot of their core employees lost by attrition, both voluntary and involuntary. One of those vendors has other operations and may even spin off the optical business.
The remainder of the analog supply chain is going to be out of the doldrums by the end of the first quarter. There are indicators that a number of companies have already seen the turnaround as delivery times lengthen out and the orders have been forced to come in. The distributors are not reacting to the new world order of supply, however. Every analog semiconductor manufacturer has set a mandate -- of one sort or another -- to sell a portion of components through their web sites. Some of those will be more successful than others. A couple are already doing really well, learning that the depth of their sites' resources lead to "community" and…orders. Other sites are slower learners: Kudos go to an "I" company that sorted out its cookie-heavy, session-heavy site literally overnight in the last quarter of 2001. A "C" company now figures as the singularly-worst site in our industry; you should know your site is bad when you have to find things on it using Google over the site's own navigation. The distributors' attempts to match the good analog sites have been rather pathetic, and I predict that at least one distributor will disappear as a discrete name this year. It is pouring more money after bad in trying solutions that have no chance of success from the get-go.
Distribution will never be the same again, and those companies need to completely re-invent what they are doing; they were created with the blessing of the industry (in much the same way as travel agents were created by the major airlines) and they can be destroyed by the industry (in the same way, again, that the major airlines are destroying travel agents who are not learning new tricks.)
I will also predict that an analog manufacturer ("M") will be acquired by another company ("T") before the summer is over. Also, another "M" company will basically implode from acquiring too many products designed by other operations without having the necessary foundations in place to peddle the products on the street. Two founders will also retire this year, leaving their companies healthy but rather rudderless.
Another company with an initial letter way towards the end of alphabet will, I predict, finally reorganize, with a much simpler management structure, and will seek to acquire design houses to broaden its product line (at long last.) The confidence of its investors will not stretch another year without such changes.
Fab resources will tighten up by summer and there will be a major shortage of facilities by year end. We will probably see a couple of the larger fabless vendors in trouble by that time -- except those that with foresight have been wise enough to line up a mainstream manufacturer as one their investors. As the Asian fabs move more and more onto the Chinese mainland we are also going to see, inevitably, more confidentiality issues -- and proven breaches, to the sole benefit of the PRC. Within a couple of years I can foresee that more and more vendors will only allow the manufacture of mainstream, screamingly-large-volume products to be produced in these fabs.
As I noted, I promise to revisit this page in a year's time. If I'm perverse
enough to forget I'm sure someone will remind me.