Friday, November 2, 2007

Japan's technology giants are shedding their semiconductor units, sort of

From The Economist :

THE main ingredient of a semiconductor is silicon, but it might as well be pyrite, or fool's gold. That is because consistently making money out of chips is notoriously difficult. Cyclical demand means that profits are volatile, and new kinds of chips quickly become commoditised. The business is also highly capital-intensive: a new fabrication plant, or fab, costs $3 billion-5 billion, and new facilities must be built every few years as technology advances.

Accordingly, many Western technology firms, such as Philips, Hewlett-Packard, Motorola and Siemens, long ago spun off their chipmaking units in order to focus on the final products, rather than the bits inside them. Japan's huge electronics conglomerates have largely resisted this “fab lite” strategy. This now seems to be changing, though the companies' willingness to let go fully is still in doubt.

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