Electronics: Semiconductors Poised For ComebackElectronics: Semiconductors Poised For Comeback

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 information 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: information 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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