LAS VEGAS The pace of life for Frans Van Houten, president and CEO of NXP Semiconductors, is spinning 10 times faster since private-equity funds bought the company last summer, Van Houten told EE Times this week at the Consumer Electronics Show here.
"The whole cycle is go, go, gomoving very fast," he said. But he didn't forget to add, "That fits my character well."
If NXP needs to make certain management decisions, Van Houten said, "We will have meetings with guys at the private-equity funds three times a week, instead of a quarterly meeting with Kleisterlee." Gerard Kleisterlee, President and CEO of Royal Philips Electronics, was Van Houten's boss when NXP was Philips Semiconductors.
NXP, however, needs to deal with pressing agendasone of which is the fate of the Crolles2 Alliance.
The alliance is a partnership that was created in 2002 in Crolles, France, by STMicroelectronics, Philips and Freescale, to collaborate on the research, development and industrialization of CMOS process technologies, begun at 90 nanometers and ultimately attaining the 32-nm node.
In the Crolles2 contract among the three partners, one clause says that every party needs to come to a conclusion about the future of the alliance one year before the contract runs out. That deadline was the end of 2006.
Van Houten said, "I have already made a decision on what I would like to do" with the Crolles2 Alliance. He added that there are "other parties who have not made up their minds."
Despite speculation that NXP may exit the group, NXP has not said so explicitly. And Van Houten is not talking. He said, "We have to respect the decision-making process we have, and we are not prepared to announce."
Last month it was reported that IBM Corp. was in talks with ST Microelectronics and Freescale Semiconductor Inc. to join the Crolles2 Alliance.
Because the partners have already met several times to discuss the alliance's future, Van Houten believes that missing the 2006 deadline in the contract is unlikely to be a serious issue.
Meanwhile, NXP's asset-lite strategy is no secret. Van Houten said that NXP will increase its outsourcing ratio to 40 percent by 2010. Currently, that ratio is "below 20 percentsomewhere between 10 and 20 percent," he said.
Much of the outsourcing will involve front-end fabs, he said, while back-end processes such as testing, which NXP regards as a competitive differentiation, will stay home.
NXP has no plans to make major changes in a corporate portfolio that consists of mobile, personal, home, auto/identification and multimarket products. "There will be no redirection," said Van Houten. "No plans to spin out or divest." However, of the 40 product lines NXP has today within its portfolio, "one or two may be dropped," he said, because "it may not be practical to make them internally. We'd rather leverage our partnerships with other companies." NXP will announce those changes in the next few months.
Product line reviews, however, take place continually. For example, NXP, which previously worked with Metalink Ltd. closely on 802.11n chips, has decided not to pursue its own semiconductor opportunity for the 802.11n-based home connectivity market. Rather than going after what will eventually become "an extremely low-cost commodity market" for set-tops and other consumer electronics products, Van Houten said, "We've decided to focus on wireless-LAN chips for portable applications" such as mobile handsets. "It's a matter of scale."
Private-equity companies are primarily attracted to semiconductor companies for three reasons, according to Van Houten: the chip companies' operational excellence, the semiconductor industry's above-GDP growth rate and prospects for consolidation.
Comparing NXP with Freescale, also bought with private-equity funds last year, Van Houten said, "We are still not as good as Freescale in terms of operational excellence." Take, for example, the ratio of R&D over sales. NXP's R&D over sales ratio today is 19 percent. The target figure is 16 to 17 percent, Van Houten said. While this is not to make light of R&D activities, the company needs to grow its sales more effectively, he added.
The consolidation game will continue in 2007, with NXP on the hunt for both big and small acquisitions. "This is something not possible when we were with Philips," said Van Houten. "Now the cash we generate can be invested for acquisition," rather than having it return to Philips.
When asked about potential acquisition targets, Van Houten said that technology companies "to enhance the scale of our mobile business may be obvious, but the company is also on the lookout for even bigger deals. "We are getting a lot of phone calls and I know our investors are getting even more calls" from companies that hope to negotiate.