Former Motorola semiconductor business unit, Freescale Semiconductor, opened its Canadian doors last month amid analyst fears of a chip slowdown.
Freescale Semiconductor Inc., which produces chips for the networking, industrial,
automotive and wireless markets, went public last July on the New York Stock Exchange and will officially separate from Motorola Inc. at the end of the year after more than 50 years. Its Canadian head office will be based in Markham, Ont.
The major reasons driving Freescale Semiconductor’s incorporation were the needs to be independent. In other words, to sell more products “”to whoever we want to”” and have market valuations untied to a larger conglomerate, explained Dino Dibernardo, Freescale Canada country manager and senior sales director for the Americas.
The value of Freescale’s IPO came in below expectations at about US$1.58 billion, said Dibernardo, adding it occurred at about the same time that Intel Corp. pre-announced (a situation in which companies decrease their share price earnings estimates), followed by Conexant Systems Inc. and a few others.
Although Dibernardo confessed it was “”a very difficult IPO market,”” he said it won’t have much bearing on Freescale’s plans. He said the semiconductor industry is cyclical, and he has seen two major downturns and a few big upturns during his time at the company.
“”In this business, you can’t think about just today. Yeah, operationally, we’ve got to be able to talk about today, but the investments going forward won’t change,”” said Dibernardo.
Freescale is focusing on high-growth areas like the PowerQUICC and PowerPC processor family, and just last week announced six new major processor architectures and PowerQUICC family derivatives, he said.
Freescale has Canadian staff specializing in marketing, applications and software development in these market areas, said Dibernardo. The semiconductor firm plans to add at least one salesperson who will expand its presence in the 8-, 16-, and 32-bit microcontroller realm. Other hiring plans for Freescale, which said it enjoys a 15-per cent market share, are uncertain.
“”So I think with the favourable exchange rate that we have in this country, the productivity, the software expertise, I think we’ll do well,”” Dibernardo said.
Despite Dibernardo’s optimism, analysts paint a bleak picture of the industry today. There’s been “”a wave of pre-announcements,”” said BMO Nesbitt Burns high-tech analyst Brian Piccioni.
“”Now investors seem to be blissfully ignoring these developments, but to my mind there’s quite clear signs of a downturn in the semiconductor industry. We have been cautioning investors for some time that the growth in revenues in the semi industry has been significantly higher than the growth in revenues of the industries that are using the chips.””
Piccioni said although the sector has improved over the last couple of years, in the last few months companies have taken a “”turn for the worst”” because the Chinese economy has likely slowed, in turn cutting demand for technology-related parts.
This is why Piccioni is concerned about an imminent inventory correction that he doubts will be as bad as the one the semiconductor business experienced in 2001. “”It’s hard to say who it’ll hurt and who it’ll spare, but probably the best guess would be it’s going to hurt most companies,”” he added.
Firms best poised to handle the downturn will be involved in consumer electronics, particularly high-definition television, because of increasing demand for these products, Piccioni explained. He said the adoption curve is beginning now for HDTV, which has high semiconductor content, and many broadcasters plan to switch to high-definition production.
“”So there’s a big transition happening, and that’s why we think that it’s a a comparatively safe place to hide.””