ESC: Seven takeaways from Microchip CEO

SAN JOSE, Calif. - At last year's Embedded Systems Conference (ESC) here, business was booming for most chip makers.

Heading into 2011, experts predicted a relatively flat year for ICs. Then, the demand picture improved and many research houses bumped up their IC forecasts for 2011.

However, in March, the tragic earthquake hit Japan, which rattled the industry. Going into the second half of 2011, there is cautious optimism in the IC industry. Others are more bullish. ''I am very optimistic about the industry,’’ said Steve Sanghi, Microchip Technology Inc.'s president and CEO.

During an interview at this week’s ESC, Sanghi sat down with EE Times and discussed several subjects. Here’s just a sample of the topics:

1. MCU supply chain

Following the recent tragic earthquake in Japan, there has been some uncertainty in the microcontroller supply chain. The supply/demand picture in MCUs was ‘’normal’’ in Q1, but there was ''small negative impact in Q2.’’

Going forward, there are some worries as current inventories are being depleted. ''The September quarter could be worse’’ in terms of the MCU supply chain, Sanghi said.

2. Touch controller business

Microchip’s rivals, namely Atmel and Cypress, are seeing huge growth in the touch controller business for cell phones and tablets. Several years ago, Microchip made an acquisition in the touch controller business. Some say Microchip missed the market window in the touch controller market for cell phones.

But as before, Microchip continues to go after the ''industrial market,’’ Sanghi said. There are plenty of high-growth and high-margin opportunities in industrial, he said.

''We let the other guys chase after the low margin (cell phone) market,’’ he said.  

3. MCUs go universal

Texas Instruments this week rolled out a new suite of ultra-low-power ferroelectric random access memory (FRAM) microcontrollers. Regarding TI’s FRAM announcement, ''I don’t see a market need. If there is a market, it will be a small one,’’ he said.

Microchip is working on an MCU with a next-generation memory.  The Shanghai Institute of Microsystem and Information Technology (SIMIT) at the Chinese Academy of Sciences – working with foundry chipmaker SMIC and Microchip – has announced it has developed phase-change random access memory (PCRAM) that is based on Chinese intellectual property, according to a Xinhua report.

Asked to comment on this effort, he said: ''No comment.’’

4. ARM vs. MIPS

Not long ago, Microchip bucked the trend and licensed 32-bit technology from MIPS Technology Inc. Microchip is fielding 32-bit MCU products based on MIPS. Microchip’s ''32-bit business is doing very well,’’ he said.  

Microchip has no plans to license ARM’s technology, he said. A plethora of companies have licensed ARM’s technology, making it difficult to differentiate the products in the market, he said.

''Our products are better than ARM,’’ he said. ''We are beating ARM. We have more preferred customers than ARM.’’

5. Mergers and acquisitions

Microchip has made numerous acquisitions. There has been much speculation about the next big acquisition in the IC space following Texas Instruments Inc.’s move to buy National Semiconductor Corp. for $6.5 billion.

Because of the high premium that TI is paying for National, the stock prices for many companies have soared, thereby creating a seller’s market in the M&A world. The TI-National deal ''hurt the M&A industry,’’ Sanghi said.  ''I think TI killed’’ the M&A market.

Following that blockbuster, several chip makers saw their stock prices jump by up to ''35 percent to 40 percent without even getting an offer,’’ he said.

6. U.S. economy

''I am optimistic about the industry, but I’m concerned about the U.S. The debt is growing and growing. We need to get our act together,’’ he said.   

7. Fabs in India

Several years ago, India attempted to build semiconductor fabs. There were a number of fab announcements, creating some buzz in the market. ''It was a complete failure,’’ he said.

Recently, India announced a $5 billion project to build two fabs. ''It’s never too late’’ to build fabs in India, he said.

As before, India faces a challenge to develop the ''ecosystem’’ to build fabs, he said. This includes a major effort to attract the semiconductor equipment and materials vendors to set up shop in India.       

In reality, India is strong in software and services-''not hardware,’’ he said.