“Everything that is important to this world will be solved by semiconductor technology.” That was the claim of National Semiconductor (s NSM) CEO and Chairman Brian Halla at the EcoChip forum hosted at chipmaker Actel’s (s ACTL) Silicon Valley campus on Monday. It’s a tall order, of course, not least of all for an industry expecting to see its annual sales plummet by 5.6 percent to $246.7 billion in 2009 compared to 2008. For the fourth quarter alone, the Semiconductor Industry Association anticipates sales will drop 5.9 percent from the previous 3-month period.
But Halla sees the seemingly unfavorable set of circumstances — good profit margins, bad markets, and a “butt-ugly economy” — as something of a perfect storm that will allow the semiconductor industry to do for renewable energy and zero-emissions vehicles what it did for consumer electronics: make them practical, affordable and profitable. Here’s how:
The Good: The big semiconductor companies are good at making money, Halla said. Good enough, anyway, that they have R&D budgets even for clean technology. These companies don’t need a government aid package (ahem, Big Three) to develop products that manage energy use and prolong battery life, although more funding for pre-competitive research in universities would be nice.
The Bad: The semiconductor industry’s core markets have stalled. “Too many of us were chasing the easy money,” Halla said, citing cell phones, video games and gadgets. According to SIA, consumers now drive about half of all semiconductor sales. This reliance on consumer spending has already dealt serious blows to chip manufacturers in Asia, as the Wall Street Journal reports:
Rapidly declining demand for semiconductors because of the global economic slowdown is squeezing Asian chip makers already bruised by a supply glut and losses, forcing them to scramble to stay afloat.
Halla left “bruised,” “glut,” and “scramble” out of his talk at Actel. Rather, he referenced the semiconductor industry’s cyclical nature, saying the growth phase of consumer electronics is now behind us, and that chipmakers stand poised to seize the next opportunity. By the accounts of the EcoChip panelists — Halla, TJ Rodgers of Cypress Semiconductor (s CY), and John East of Actel — semiconductors in the service of energy storage, efficiency, and generation is the cycle to catch. Potential applications for the technology include photovoltaics, fuel cells, intelligent devices like National’s SolarMagic, and vehicle-to-grid systems.
The Ugly: “We’ve been hit by a butt ugly economy here,” which means reduced demand for the cell phones and gadgets that use semiconductors from companies like National, according to Halla. But that also means opportunity. “We’ve all got a chance in this industry to put our dollars into solving real problems,” he said, listing the “quality-of-life megatrends” he’s been talking about for nearly a year (since shortly after National launched its PowerWise brand of energy management products), including instant battery-charging (for cell phone and electric car batteries, for example) and power management.