Cypress Semiconductor president and CEO T.J. Rodgers is one of Silicon Valley's most outspoken defenders of outsourcing. When it comes to maintaining the San Jose, Calif., company's competitive status at the leading edge of electronics design, "I have zero compunction about not being in the U.S.," Rodgers said in a recent interview.
Cypress opened its first design center outside Silicon Valley in Starksville, Miss., in the late 1980s and subsequently opened 14 other centers most of them in the United States. It currently has operations stretching from Colorado Springs and Boise, Idaho, to Lexington, Ky., as well as technology centers in Ireland, England, Turkey and India.
"In each case, when we opened a design center, it was because of a connection we had with a Cypress employee," Rodgers said. "Often it was a case of saving a manager who wanted to go somewhere outside of Silicon Valley," as in the case of the initial Mississippi center.
To stay competitive, Cypress may have to accelerate its move to design outsourcing, especially offshore, far from Silicon Valley.
Two weeks ago, Cypress reported a loss of approximately 13 cents per share for the 2004 fourth quarter, ended Jan. 2, and announced an extensive restructuring. The company plans to merge two units, the Timing Technology and Personal Communications divisions, into the Consumer and Computation Division. It also announced plans to close its CAD center in Austin, Texas, and reduce staff at the Minnesota-based Fab 4. In all, Cypress is laying off 250 employees in the United States, about 5 percent of its work force.
The closing of the Austin CAD center will most likely be offset by a recent expansion in design capabilities in India. Last September, Cypress announced a $2 million expansion of its year-old semiconductor design center in Hyderabad. That plan involved the addition of a silicon validation lab, equipment and engineering employees to support the center's new design-engineering functions. Cypress also employs 120 people at its design center in Bangalore.
Cypress has sales offices in and around China, but no design centers there yet. However, "We have to be in the China market," Rodgers said, acknowledging that Cypress has been slow in that regard compared with many of its competitors.
"We sell a lot of products into the China market, but we have to make products for the Chinese market," Rodgers said. He said the company recently added China-based engineers to its team with the intended purpose of setting up a design center in China. Rodgers gave no date or timetable for the move, but analysts suspect the recent financial troubles may accelerate Cypress' design diversification.