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OEM Business Strategy Shifts Underscore Ongoing Shifts in Semi


With global economic news still volatile and the 'R' word still lingering, the latest buzz around the world is the HP news (see this Bloomberg comment, among the first to break early buzz).  HP has disclosed it is spinning off its PC business while acquiring a business analytics software company, Autonomy (see this PCWorld review of the M&A).

So, what does the HP news tell us in semi?  Well, particularly since the acquisition of Compaq, HP has been one of the iconic PC OEMs (as well as an icon for other electronics sectors).  However, as we've seen the larger tech OEMs such as IBM and Dell do in the recent past, the M&A activity eventually leads to a divestiture that coincides with market shifts.  As we've been reporting for the past few weeks here and here at MarketWatch Commentary, there have been significant shifts away from the 'stationed' PC to smart wireless devices (SWDs).  The Tablet PC has been well discussed as the next computing device and as having significant impacts on the semi value chain, such as this recent issue from MarketWatch Quarterly.

The current economic squeamishness has perhaps precipitated the business shifts that we see presently exemplified by HP's divestiture of its PC business.  As we have discussed, the market inundation of tablets and smartphones does lead to a shakeout of players. The importance of cloud computing and the expanding services sector supporting cloud offerings is an obvious move for HP, as it follows early movers to this rapidly growing tech sector.  Importantly, the cloud arena should not be seen as a non-semiconductor opportunity though; that would be missing new growth moves for semi.

Clearly, the melding of semi and software has been building in earnest for a number years, as discussed even in this MarketWatch Quarterly report from 2009 and continuing to this latest Quarterly report.  Rather than being seen as a major shift, HP's strategic move may better be understood as a confirmation of the shift in our industry toward multi-tasking devices that are highly portable and require a hosting service to perform the array of tasks demanded by users.

The resulting semi value chain shifts are important and will be noteworthy.  Certainly the dominance of leading OEMs' chips are in question and the requirement for new chipsets to include and/or be (co-)designed with software requirements in mind, will result in realignments along the entire semi value chain.  These are healthy shifts for semi, and new R&D and component designs will move the semi sectors into healthy growth sectors.  Relieving pressure from mature and now slow-growth semi sectors will provide the healthier growth our industry is capable of realizing by providing the tech solutions that global consumers are demanding.

Lisa Ann Cairns, Ph.D.
Written on Friday, 19 August 2011 08:18 by Lisa Ann Cairns, Ph.D.

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