Semiconductor IP industry - ready for restructuring?

Part one: layoffs from Dublin, through Bristol and onto Cambridge

Harrow, UK, November 2002 - ARM Holdings' (LSE: ARM) recent announcement of a weakening quarter and subsequent reduction of up to 10% of its workforce, has sent shudders in the SIP industry. ARM had until recently been reporting positive revenues and profit growth, and one wonders if the recent announcement is a manifestation of some fundamental underlying structural problem, that the industry has so far avoided discussing out in the open. This is the first part of a series of articles in The Chilli, which will examine the recent trends, challenges and some of the possible solutions for the SIP industry.

Reliable industry sources have indicated that the ARM news has resulted in investors and stockholders openly questioning the fundamental business model of the SIP industry and has already resulted in a number of planned and actual layoffs. Some recent examples:

• Tensilica - cost reduction
• Silaria - cost reduction
• Elixent - cost reduction and funding round
• Siroyan - cost issues and funding round
• ARC - consolidation of two software divisions
• Lisatek - on hold
• MIPS - valuation concerns and downturn in revenue
• Parthus - recent merger and rationalization issues with Ceva
• Hitachi - project consolidations

Layoffs together with further tightening of private equity, venture capital and public financial markets is forcing many SIP companies to re-examine their strategies, re-focus efforts, and sometimes, even contemplate a re-assessment of their business model.

The regional impact is further complicated by the massive lay-offs at some large multinational companies, such as Marconi, Nortel, WorldCom, HP-Compaq and others. This does not bode well for enhancing the opportunities for in-house corporate entrepreneurs. For those of you, who are fed up by the perceived weaknesses and mistakes of others, contemplate spinning out, or consider going out on your own. Now is a good time to dust off those old ideas, business plans, and start articulating them. You may want to start testing some of them with The Chilli Value Test, or take some helpful hints from the Trade Secrets section of this journal and of course Uncle Thakur is always there to provide some worldly advice and wisdom.

Click here for part two.

Comments on this story? Send an email to Picasso: picasso@thechilli.com

Picasso

14NOV2002