At the electronica 2020 CEO roundtable, the CEOs of Infineon Technologies, NXP Semiconductors, STMicroelectronics and Pepperl + Fuchs provided their thoughts on the impact of Covid-19 on the electronics industry. The consensus was that despite the pandemic been a big issue for 2020, the long term strategic outlook was good...
At the electronica 2020 CEO roundtable, the CEOs of Infineon Technologies, NXP Semiconductors, STMicroelectronics and Pepperl + Fuchs provided their thoughts on the impact of Covid-19 on the electronics industry. The consensus was that despite the pandemic, the semiconductor industry was a key benefactor of the effect of business and consumer demand for everything digital and virtual, and while the pandemic has been a big issue for 2020, the long term strategic outlook was good.
The executives on the roundtable, moderated by Joachim Hofer, Munich correspondent of the German business newspaper Handelsblatt, were:
Gunther Kegel – CEO, Pepperl + Fuchs
Jean-Marc Chery – president & CEO, STMicroelectronics
Reinhard Ploss – president & CEO, Infineon Technologies
Kurt Sievers – president & CEO, NXP Semiconductors
The executives were asked a series of questions related to the response of the semiconductor industry to Covid-19, what has changed as a result and impact going forward. In addition, they were also asked about the US-China tension, how the new President-elect might affect this, and about mega acquisitions.
EE Times Europe attended the live session to hear what they had to say, and we present below abridged summaries of the executives’ responses.
Growth despite the pandemic
On the first question, the semiconductor industry was doing relatively well despite the pandemic. What did the CEOs think were the drivers for this?
Kurt Sievers: The main driver was that end consumer demand for the type of products that are being adopted by people to stay in touch and in business has benefited the semiconductor industry. In addition, since we work in a lot of contactless technologies, that is also a beneficiary – people don’t want to touch cash anymore and are relying more on contactless payments. The third factor is that the car industry is actually recovering fast because people are trying to avoid public transport.
Gunther Kegel: The car industry has recovered since June. With the lack of ability to forecast, we did some scenario setting and we picked a scenario in the early days of the pandemic forecasting recovery at end of year – and that worked well. It’s questionable if we can recover what we lost in 2020, but there is a positive outlook in 2021. One positive aspect is from the effect of everyone turning to buying online – that has seen intra-logistics, one of our large customer segments, as a booming market sector (people all buying online)
Jean-Marc Chery: We do believe that next year the market will come back to a growth path. Some verticals are going well – such as personal electronics, computers and infrastructure. We are seeing some megatrends, such as in the electrification of cars. There are also good signs in Europe and America for the industrial market. So, we are building a plan for Q4 next year, and the plan on which we are working is showing some growth in 2021.
US-China tensions and trade deals
Despite the US election result, there may be some fundamental aspects of the US-China tensions that will stay, according to the CEOs. What is the impact on their businesses, and what can be done going forward?
Reinhard Ploss: There have always been some elements of political intervention in the semiconductor industry, but the race for 5G, artificial intelligence (AI), and compute capability leadership have driven this even more in recent times. From our point of view, the semiconductor industry has evolved well in addressing the challenges. We have already seen the value chain significantly changing and moving around. As an industry, we need to avoid being dependent on single source suppliers. The tech war is on, and we in Europe have to get our act together and strengthen our position both locally and globally.
Kurt Sievers: I agree with Reinhard. The trade tensions are driving us backward in globalization. Technology has a potential to do good for the world and going backward in globalization will drift us a bit further away in terms of making the advances we would have expected. From a supply chain perspective, our supply chains are quite robust, so we don’t need to make too many changes. But we need to be more thoughtful about the IP supply chain, which is what really gets into the wheels of those trade tensions. I hope that the US election results mean things will get more diplomatic. And Europe needs to leverage a bit more as a joint union, especially with the continued US-China tensions.
We have a very deep vertical semiconductor supply chain in Europe, which provides us with massive value in Europe, and we need to leverage that a bit more. Very specifically, the one area where the most massive change was the ban on Huawei. Yes, to be very specific, in our case it does impact our sales to Huawei in Q4 to zero, and I believe that others will also be impacted. However, market forces will come into play – demand for mobile phones won’t go away, so competitors to Huawei will still be producing mobile phones, so we will still be able to supply those competitors.
Gunther Kegel: The peaceful world of multi-lateral global trade is really in danger. Additional tariffs and costs will lead to a loss of business for small and medium sized companies. For us, 50% of what we do is still inside Europe, but the other 50% is outside so this will impact us. We are asking EU governments to help companies here. For example, we don’t’ have to grant free access to the EU market to everyone without something in return. We need to have ways of maintaining multi-lateral trade.
Jean-Marc Chery: Of course, the Chinese authorities want a better balance [in terms of capabilities, technology and so on]. But there is no place for economies to be siloed, and we have to fight against the decoupling of the economy, otherwise it will cut innovation.
Reinhard Ploss: What we see is that there is uneven competition – not level playing field in terms of subsidies, grants. Europe can think more about how to do R&D programs. In China we see a certain amount of product stay in China, with others exported. Nevertheless, China will remain an important market. Competing with local subsidized companies in China will not be successful. With the acquisition of Cypress, we will establish a better presence in the US. [This will help better balance our business.] We also want to grow our market in Japan, US, Korea. We cannot depend on growth in China as a long term formula for success.
Kurt Sievers: We always monitor all the risks across the supply chain. With regard to your question about TSMC, it is a global company. If there is more tension between China and Taiwan, there will be ways to deal with that. We have to constantly adjust to address the various changes
Gunther Kegel: We don’t think Covid-19 will be our largest problem in the coming years. Maybe the US-China tension could be more worrying. It’s quite possible that with the new administration there may be more talking. But the root cause of the tension will stay, and it will depend on whether they can resolve things in a diplomatic way.
On acquisitions and mega-deals
There was a question about the drivers behind mega-deals and acquisitions, such as Nvidia and Arm, which was answered mainly by Jean-Marc Chery.
Jean-Marc Chery: Behind the mega-deals there is always a strategy. With Nvidia, it is around AI in the cloud and edge: if you want to attack this market successfully, having control of key enablers is important. For ST, a recent example is our acquisition in silicon carbide. If you want to become a leader in your market, scale is important.
The e-mobility market opportunity
With a question targeted specifically for Reinhard Ploss, the moderator asked whether e-mobility was the biggest opportunity for Infineon.
Reinhard Ploss: Yes and no. It’s automotive more generally. Driver assistance is continuing to grow. Electric vehicle (EV) demand has grown significantly – particularly in Europe, but also in China. What we see though is that technologies are also shared between segments. For example, SiC expertise is shared between industrial, power and automotive. On the consumer side, sentiment is changing. Electromobility is getting more and more adopted, so we can benefit significantly from this trend. European automotive companies are very strong in driving automotive innovation – in both driver assistance and EVs. But digitization will be biggest driver of the business
Will we ever get back to pre-pandemic conditions?
A big question is: what will it be like when we don’t have Covid-19 related restrictions anymore, or when we are able to freely travel again. Will we ever get back to what it was before. The general consensus seemed to be no.
Kurt Sievers: The experience over this year has shown it is certainly different, but I take that as a positive learning point. Things will never go back a 100% to what it was before the pandemic. We have learned how to achieve the same results or be more productive. It’s a change which we will learn from.
What about the future for the semiconductor industry?Kurt Sievers: The next 10 years in microelectronics is all about secure edge processing. Especially for European companies, this is a fantastic opportunity. The opportunity for the future is far outweighing the challenges caused by the pandemic. And it doesn’t impact the long-term strategic outlook either.
Gunther Kegel: The world will definitely be different after Covid-19. International travel for example, was cross subsidized by business travel. But business travel will not come back to the same level.
Jean-Marc Chery: We have adapted. We will always find a way to communicate. However, the biggest challenge is the impact on our future workforce [especially when we consider this against the backdrop of schools, universities and education being seriously set back because of disruption and closures resulting from lockdown restrictions around Europe and the world]. We will need to work on the opportunities for the youth to have a future.
This article was first published on EE Times Europe