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Friday, August 28, 2009

Are You Ready for the Rebound?

The Silicon Valley Lunch Forum was held last week and it confirmed to me some fundamental truths about the semiconductor market. One truth was that what goes up must come down (and must go back up again). Surprise! We live in a cyclical marketplace. Whether it be inventories or consumer demand, capital spending in this industry is on a yo yo, fluctuating with the emotions of financial markets and the ebb and flow of the classic business cycles.

But like the general state of humanity, despite the downturns, chips are always on an upward trend. Just when you think the world is collapsing and we’re heading toward the stone age, the market will turn.

The other truth is that we always forget the first truth.

Bill McClean knows these truths like he knows his mother. He was absolutely ebullient at the Forum. While no one saw the suddenness and depth of the last swoon, in January he forecasted the cycle with the precision of watchmaker. This is his fifth cycle, so he’s been wise to the semi yo yo for at least the last cycle or two.

“Think quarterly,” he says, and points out that the aftermath of every global recession is pent-up demand, with “two great years of semiconductor growth.”

Next year, he sees at least 15% growth, and possibly 20% growth. “As bad as that downturn was… but it could work in reverse, as strong upwards as it was downwards,”

Bill’s more positive, of course, than most people. Lots of people in the semiconductor industry are still struggling with radical downsizing, more quarters of loss, and trends that point to a leaner, more consolidated industry. “It’s the new normal,” many of them claim and carry a glum about them like Pig Pen from the old Charlie Brown cartoons.

But business is business its time to suck it up and remember how the game is played. Growth and profitability in the industry is going to come from innovation, differentiation, diversification and stealing share the ol’ fashioned way through grit, spit and hustle.

I sense a lot of paralysis out there today. People have been so focused on surviving, they’ve forgotten how to thrive. But winter’s over folks; its warming up and time to come out and play.

If you are not laser focused on competing on the upturn, you will become instinct. If you are not actively, creatively, and aggressively planning to increase share in your key segments, then you are road kill, an artifact, a casualty of time. If you’re waiting for your customers’ spending, your R&D team or some clever refresh of PowerPoint slides to save what remains of your semiconductor business, then you might as well step aside now.

If you’re going to win in this roller coaster business, you have to learn how to get over the queasiness of the downside and enjoy the exhilarating ride to the top of the next cycle.

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