NORWOOD, Mass. While the success of private-equity buyouts in the semiconductor arena remains to be seen, it will likely push companies still holding onto fabs to go fabless.
That's the assessment of Analog Devices Inc. chief executive Jerald Fishman, who spoke on a range topics Monday (Sept. 25) during an interview with EE Times at ADI headquarters here.
Fishman, who runs a company with its own analog manufacturing capability, said the cost of building digital fabs today is prohibitive.
"When you start looking at $3 [billion] to $4 billion to put up a fab, and you look at the companies who can put up the scale in the U.S. to be able to absorb that kind of investmentwhich in five years turns mostly obsoleteit's a very short list," Fishman said. As more chip makers go private, the pressure to reduce costs and leverage a world-class foundry infrastructure will mount, he added.
Fishman withheld judgment on the emerging trend of private-equity companies buying public semiconductor vendors and taking them private in an effort to improve returns and efficiency.
"Historically, technology has not been great private-equity investment. But for the overall industry, the growth rate has slowed. And the cash generation of companies is tremendous," he said. ADI has roughly $2 billion in cash on hand. Fishman declined to say whether ADI has been approached by private-equity investors. ADI, whose stock is trading at about $30 a share, is considered among virtually all semiconductor vendors as a target for a private-equity buyout.
While going private has its benefits in managing a company, it's not necessarily a panacea, Fishman acknowledged.
"Your boss changes," Fishman said. "In one sense, it's public stockholders [and quarterly earnings targets]. On the other hand, it's private equity guys. It's easier in that you're out of the spotlight. On the other hand, you have a pile of debt you have to pay back every month. You never control your own destiny."