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Tuesday, June 22, 2010

What Happened to the Future?

For many people, especially those in United States, the future is decidedly less appealing than it once was.

The idea of the future as more bountiful, more peaceful, and more enjoyable than the past has been fundamental to most people’s outlook and perspective. It drove our careers, it gave us confidence to invest in families, in homes and education; and made many of us less cranky and more enjoyable to be around. We would live better than our parents, who lived better than theirs. Progress was inevitable.

Technology was a big part of this expectation. In the US, the mission to the moon gave birth to an entire generation of engineers and scientists who grew up believing nearly anything was possible. We directly and personally experienced technology’s progress in communications, entertainment and industry. We remember big, clunky black and white TVs and expect louder, larger, flatter, thinner, brighter, 3D TV in the coming years. We remember vinyl records and how impossible it was to create a playlist or carry around a thousand songs. We remember Pong and grew up with computers that got better every year. We even saw them turn into phones. We saw the Internet go high def and wireless, and technology become fashion accessories. Not only would our kids live better, easier lives, they would be smarter and cooler too.

Of course, the economic backdrop to all this progress was not entirely good. Japan lost a decade, middle class incomes in the US would stagnate for nearly a generation, and Western Europe GDPs would slow to a trickle. But the advance of technology would at least make it all more enjoyable: better movies, better cars, more friends in better touch. Economic statistics didn’t seem to correlate with obvious, tangible improvements to our quality of life that was as conspicuous as flat screen TVs, smart phones and 3D movies.

Yet today with an oil spill out of control in the Gulf of Mexico and global warming apparently beyond the scope of civilization’s grasp, the future—and the future of technology-- is not looking especially bright. Progress itself seems threatening. While chips sales are booming, it’s Asia that’s prospering. Silicon Valley’s unemployment rate is among the highest in the nation. A recent Department of Labor report estimates that the semiconductor industry will lose one-third of its jobs in the coming decade, the second worst employment sector in the country. We don’t see a next-big-thing on the horizon and jobs in technology are moving overseas faster than you can say CLEANTECH.

Of course, this isn’t really an accurate description of the state of the future. It’s a US perspective and technology doesn’t really care about borders. Silicon Valley remains the epicenter of venture capital funding and no one seems remotely challenging Intel, Apple and Cisco—not to mention Google, Facebook and Twitter. Chip sales are booming not because of Y2K, or Windows 7, or the adoption of smart phones by US road warriors. The technology world today rides on the rising tide of the global consumer, a consumer that’s increasingly from India, China, Russia and a hundred places in between. It’s not about the US anymore.

And, he future’s not about less electronics, its about more. The coming energy crunch is not going to put us in caves, its going to be solved by PV, solid state lighting, thin film batteries, and high tech energy harvesting and other microelectronic innovations. Chips are going to power smart grids, electric cars and other essential components of a cleaner, safer world.

Now, who going to specifically benefit from these products and innovations is another story. It won’t be a factor of where you live. It’s a small world and a flat world--and if you’re not smart enough or clever enough, or industrious enough--it’s going to be a cruel world.

The ebb and flow of the technology industry today is not being driven by Fortune 500 IT spending or the latest high priced gadget for that tiny group of mobile executives, its about hundreds of millions of people leaving poverty and joining the urban workforce. It’s about the ubiquitous place that technology has in the lives of average people in Cairo, Mumbai, Chengdu and Johannesburg.

There’s plenty of things disfunctional in the US political economy today, but it doesn’t have anything to do with technology. There’s no use blaming other companies or other countries for not playing fair or having low wages. The US chooses not to have a robust pro-technology policy. The federal government chooses not compete for fabs or with other countries in various technology sectors. It could, but does not. And I’m not sure it really matters to the vast majority of the human population whose lives are enhanced by microelectronics, or the infinitesimally small percentage of people whose brains and brilliance enable the industry to grow and prosper.

If you have a global perspective, if you have a human perspective, “the future” may never look as promising as today. And chips, solar, LEDs, and other advanced technologies have played and will play an enormously central role in that human progress. And that’s a good thing, no matter where you live.

Monday, June 14, 2010

The Center of Gravity os Changing--PricewaterhouseCoopers

“The center of gravity is changing. The only question is how fast…”

This was the theme of the presentation given to the SEMI Sales and Marketing Council (SSMC) at last Tuesday’s lunch meeting by Raman Chitkara, Sr. Partner at PricewaterhouseCoopers, the world’s largest professional services firm.

As part of our regular monthly networking lunch, SSMC often has outside speakers join the group to share their perspective on important industry issues. This month we were extremely fortunate to welcome Raman Chitkara who has had a ring side seat in the key developments in Silicon Valley, and an insider’s knowledge of many of the leading companies in the semiconductor industry. He’s also leading expert on CleanTech, having been a principal leader in PwC’s informative “CleanTech Comes of Age" report. Raman is also one PwC's experts on China as leader of the "China's Impact on the Global Semiconductor Industry" report.

The center of gravity that Raman refers to is geographic. The move of high tech industries to Asia has been relentless. “As US companies extend globally, they spawn indigenous technology companies,” said Raman. Of the 29 firms that went IPO in the Q1 of this year, 1 was on Germany’s exchange, 3 on NASDAQ, and 24 were in China. The China firms raised over $2.5 billion.

The growing importance of emerging markets is part of this shift in gravity, not just in production, but consumption as well. The growing middle class in BRIC countries is driving world chip demand. Even during the recent semiconductor downturn, electronic systems manufacturers in China continued to increase their consumption of semiconductors at a rate three to five times the worldwide rate. As a result, China is remains the largest consumer of semiconductors for the fourth year in a row. In the past, much of this consumption was from US, Japanese and other global OEMs, now it is increasingly dominated by China electronic manufacturing firms with local sourcing authority. Raman sees China chip manufacturing sector to continue to grow, especially if the success of other international fab ventures continues.

The other major shift in the IC industry discussed by Raman was consumerization—not just in total chip consumption—but the fact that new technologies now appear first in consumer markets, not in business IT. Among the impacts this brings is the decline in vertical integration. “How can you sustain competitive advantage when everyone can get the same chips?” Apple is focusing on software differentiation with emphasis on only a few key components.

Raman sees a convergence of software and hardware services—complete solutions that allow companies to achieve dominant market shares. But he admits, “the rules are still being written…”

Another important impact on SEMI members will be he transition from US GAAP to International Financial Reporting Standards (IFRS). China will make the change to IFRS in 2011, well before the US in 2013. Among this IFRS impact will be on leasing and capital equipment purchasing.