A question of Europe

Interviews |
By eeNews Europe

Hanns Windele: European Commissioner for Digital Agenda Neelie Kroes wants Europe to produce 20% of the world’s semiconductor devices, while Chancellor Angela Merkel wants to make a million electric cars by 2020. Is this only political wishful thinking?

Peter Bonfield:
I believe that to have a big vision is useful. For Kroes and Merkel to be ambitious is generally the right thing to do, except they focus too much on manufacturing. To focus on market share in the manufacture of chips is too restrictive. We need to ask where is the big push to make sure that Europe stays competitive in the whole eco-system of technology. This should include education, R&D, patents: all of these. Europe is more competitive than they think, but needs to do more.

HW: What do you think should be the mechanism for promoting these visions?

PB: I’m not sure that governments need to be involved in the details; they should focus big on eco systems.  The European car industry is currently very vibrant in electronics, not just in control systems, but in communications too. Manufacturers such as BMW, Mercedes, Audi and Jaguar are leading the world in terms of electronics in cars.

This is an area where we can be extremely proud and keep pushing. In terms of electric cars, per se, if you have an overall approach, that will start to become a focus in itself. If you look at the congestion charge in London it is cheaper for hybrid vehicles to come into the city. So electric car use goes up. Can governments make tax allowances to kick-start this? Absolutely. But in the longer term they need to make sure that there is outstanding education focused on engineering, science and technology in Europe, to build a long term competitive advantage.

HW: Where are the European companies when it comes to smartphones today? Have they all disappeared?

PB: Maybe in terms of the handsets themselves. But when it comes to what goes into the handsets, Europe is still pretty good at that. ARM is in 98% of all handsets. Yes, maybe we’ve missed out on the actual hardware of the final unit, but we should not underestimate the value of the European contribution to what goes inside the product.

HW: Do you think that ARM could replace Intel at some point in time?

PB: I would think that they are going to give Intel a pretty good focus, because they have been particularly successful in anything to do with low power. I think that as the market moves into Cloud and the Internet of Things, the importance of low power will increase.

ARM has a significant advantage architecturally. Do I think they’ll exploit that? Yes. Do I think they’ll be successful? Yes, I do. How successful, I don’t know. But they have some smart people and the market place is going in their direction, rather than the previous Intel domination direction.

HW: Would you agree that being smart about power is more difficult than being smart about other things?

PB: Absolutely, because you have to look at the whole system. As we get more into Cloud computing where everything is networked together, the size of data centres is going to be massive and the biggest issue will be power. If you can reduce the power consumption by, say, 20% then you’ll save yourself a bundle of money. Do I think that’s going to be a trend going forward? Absolutely. It’s the same thing in wearables. It’s all about low power.

HW: The next wave of systems will come in the form of wearable electronics such as Google Glasses. I don’t see any European companies in the lead here either…

PB: I think you’re right. But in terms of some of the wraparound stuff we shouldn’t be too pessimistic. ARM and Imagination still have a lot to do. In terms of the security aspects: making sure that these devices aren’t hacked into is all going to be part of the development of the Internet of Things. And we can play a big part in that, too. Security is an area where Europe has a long history in technology with companies like NXP and yet we are only in the foothills of some pretty big mountains at the moment. It’s going to be a very big issue.

HW: China has announced it will invest billions per annum in technology. What effect will this have on European markets?

PB: To ignore China as a competitor would clearly be mad. They are going to be a big competitor, as were Japan and Korea. Competition is what drives industry and so we should welcome them putting more money into it.

But it is not a foregone conclusion that just because they are putting big money into it that they will be successful. It’s going to be a question of where the money goes and how successful they are in getting sufficient engineers involved, their links with universities and patent protection. What this says to Europe is that we’ve got to keep the top end of innovation up there and will have to be into smart differentiation and not just focused on manufacturing.

HW: As a board member of TSMC located in the Far East would it make sense for you to team up with a European initiative and set up a fab over here?

PB: TSMC works on the assumption that it can have efficient manufacturing by starting up gigafabs. The thesis is that the capital expenditure is large while the cost in direct labour is small. TSMC believes that by having engineers in close proximity, they can move from fab to fab.

A big hub in Taiwan is extremely important to achieve what they are doing. They’ve started another fab 90 minutes from Taipei, which allows thousands of engineers to be involved in starting up a new fab, and they can travel by train. You can’t do that in Europe.

HW: Is success dependent on developing technology clusters?

PB: The point is that clusters work. It’s a bit like Silicon Valley: you get more innovation and spin-off from a concentration of engineers working in the same area, because if one company goes down the talent can move somewhere else. If you’re the only person in town, it’s going to be much harder to attract engineers because if anything happens, they’re out of work.

We have to work on developing clusters across Europe as happened in Cambridge and Tech City in the UK.

HW: What will the European semiconductor business look like in the next 5 to 10 years? Will there be more startups than mergers and acquisitions?

PB: I’m optimistic. I think that innovation will accelerate because governments have worked out that if they can harness the universities and clusters then Europe can develop in a better way than just trying to pick a winner on straight manufacturing. In terms of M&A, for the bigger companies the normal things will happen: if they can’t invent it, they’ll buy it. If you look at the EDA industry, the three big companies grow by acquiring small ones. And you think: why can’t they invent new stuff, they’ve got smart engineers? But none of this will stop small companies springing to life.

HW: You sit on many boards of technology companies worldwide and have advisory roles. What are the criteria for selecting a good candidate for M&A?

PB: You have to be clear that you are not in it for size vanity. That’s the thing that most boards guard against. If you can see an opportunity to get into a new market or technology more quickly than if you developed it yourself, then that works. Also, you are looking for synergies that will pay back pretty quickly. In classic larger scale manufacturing this might not be so important, but when it comes to smaller companies you also have to be very careful to bring the people with you.

This is because their ideas have feet and they can very quickly go off and do something else. I do believe that there are certain companies that are better than others at bringing in and creating acceptance for new people. It depends on the flexibility and style of the company. You have to make sure that your company doesn’t have a ‘not invented here’ syndrome.

HW: What advice would you give to David Cameron, Angela Merkel and François Hollande about how to get Europe to stay ahead of the game?

PB: I would be very clear in saying that I want the eco-systems in Europe all joined together to produce the best available background for engineering and technology development, and in a wider sense, science development. Make it the place to be with fantastic universities, good government support of R&D, good regimes for supporting intellectual property, tax incentives in support of tech startups.

These are the things they should really be concentrating on. Europe has 560 million people with good universities and large companies, as well as some excellent small companies. We have a tendency to do ourselves down, but we are actually a lot more innovative than we think.

Sir Peter, thank you.

HANNS WINDELE is Vice President, Europe and India at Mentor Graphics.


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