It’s all about adaptation

I admit to having paid too much attention to the financial headlines recently. Though naturally an optimist, even I am beginning to feel somewhat jaded by all the turmoil out there. With so many information sources at my fingertips, it's easy to see the same bad headlines repeated over and over, with the result that a 'decline in positive sentiment' is a fate accompli.

It is important to retain some perspective. The world is changing and our financial systems, and all the businesses that rely on them, are changing. Business models that have relied upon cheap lending are no longer sustainable, just as lifestyles that were built around debt. Everything is going through a process of, sometimes, uncomfortable adaptation. In the long run though, adaptation is the only answer.

Renesas said yesterday that it was in negotiations to divest its production facility in Germany. The prospective buyers are former managers and their plan is to turn the foundry into a specialised producer of lower volume, analog/mixed signal parts, with an emphasis on serving the European market. It takes a great deal of courage to invest in semiconductor production right now, but let's not forget that fortune favours the brave. In this case, let's hope the Landshut facility can adapt in time and that it isn't saddled with constricting debts.

Clearly, these managers are optimistic that they can adapt Renesas to the challenges of the post credit crunch analog electronics market and they have solid grounds for believing in a fundamentally bright outlook for the sector.

That's because alongside 2007 Analog Market Share data released by Databeans in April 2008, it said that the overall outlook for the analog market is positive. It added that 'the most successful analog suppliers for last year were those that reduced expenses, or found new opportunities for growth in other product areas, such as in the industrial market segments.'

Application-specific analog products lost 6 percent overall from 2006. However, the application-specific automotive segment had a strong year, seeing revenues grow 21 percent from $3.6 billion to $4.4 billion. Silicon Foundry Holdings (the buyout company) will be in a good position to capitalise on these sectors. While conditions in the industry are challenging and look set to remain that way for some time, those players that can adapt swiftly to exploit these growth segments appear to have a reasonable tailwind behind them.

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