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The Covid-19 pandemic has impacted regions and industries differently, and some semiconductor companies have been more exposed that others. Analog Devices has half its business in the industrial market with a growing automotive engagement, particularly with electric vehicle battery systems and saw stronger results recently than expected.

“What we have seen is that the demand has been more robust than we would have expected. Automotive is more of a focus in Europe and that suffered a big decline but the interesting thing is the healthcare went up dramatically, an orders of magnitude increase, and the infrastructure communications business remains strong in 4G and now 5G.

“I think the interesting piece is industrial wasn’t as weak – European industrial are less exposed to oil and gas, and we didn’t see the decline that the US did.”

There are increasing expectations for the rest of the year. “As factories reopen that plays to our strength in EVs, battery monitoring systems, cabin communications, with growth in the A2B audio bus for the premium car market,” he said.

While the pandemic is global the effects were regional. “There is counter regional aspect where as Europe shut down, China was coming out,” he said. “I think overall the impact was not as big as anticipated but we did have to manage our supply chain – we did see some issues with some various rules on movement of people in Asia and we had to work through that.”

“Industrial is perhaps where the danger will be,” he said. “Our customers are reacting differently. The Mittelstand [smaller companies] in Germany didn’t shut down, they went to 70, 80 percent and have been figuring out different ways of engaging during the pandemic. Companies where there was significant automation and robotics were able to achieve more social distancing better than the ‘old school’ factory lines and that suggests there will be a lot of people looking at how they automate.”

There is also a Covid-19 impact on customer relationships, he says.

“Less face to face meeting makes us think about how to engage, more virtual demos, it makes it important to have all the firmware and software in place, so it changes the way we have to interact,” he said. “We are seeing a move back to some countries opening up – in Denmark, most customers are slowly opening, and Germany too, the UK less so. Sweden and Finland are also more cautious. I think our customers are realising that interaction is needed, and in the longer term there will be a different mix of face to face and virtual.”

Distribution has been a key issue during the pandemic, with inventory building up at semiconductor suppliers.

“We are continuously evaluating the distribution model,” said Britchfield. “We have one global distributor and a number of smaller regional partners. We cover one portion direct and ship to them direct, and some for logistics. We have direct people assigned to customers with distributors and that’s a combination of logistics and demand creation. Then there’s the third tier, we stills see the value in that with small to medium customers in UK and Germany where we wouldn’t be able to give the right focus to the bigger guys. We do rely on partners and the dedicated resource they have to work with those customers,” he said.

“I think that model still holds, whether its collaborative or distribution led, perhaps more integration of what ADI is doing onto the bigger distributor platforms. The channel will have to think about the way they operate too.”

The pandemic also showed up the global nature of the semiconductor fabs, foundries and assembly and packaging plants and the need to have regional capability.

“We have a manufacturing footprint world wide and a mix of internal and external fabs but the real issue for semiconductor manufacturing in Europe is the scale required for assembly and test as a service. There are fabs in Europe that operate at a reasonable level and provide foundry services but the issue is we don’t have any assembly and test facilities of a scale to compete. Whether we need it nor not is another questions but that would require significant support from governments to do that,” he said.

“We have three internal fabs – two in the US and one in Ireland and these are focused on specific processes, while we work with foundry partners for lower geometry designs and that’s in Asia, although they are moving some to north America,” he said.

“From an EU perspective I can see why it [regional capability] is a good idea but there’s a lot required,” he said. “It’s also good not just for manufacturing but to support R&D in semiconductors.”

There is also a drive to a sustainable recovery.  

“The pandemic has shown us what can happen when there’s les economic activity and if we want to return to higher levels of economic activity that has to come with the lower levels of pollution – so I think the pandemic will drive all companies to accelerate sustainability plans,” he said.

“How the pandemic has been handled has been as positive as it could be, we just want to get back to the same deep level of engagement we had with the customers beforehand,” he said, “Anything we can do on that is positive for ADI and for the economy and that’s what we will be looking for.”

www.analog.com

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