Å®ÉúСÊÓƵ

OVER THE past two weeks, Europe’s three main electronics companies have
been preparing the ground for a major shake-up of the semiconductor industry
in Europe. It now looks increasingly likely that Siemens of West Germany,
and SGS-Thomson, the Franco/Italian joint venture, will work together to
design and develop memory chips, as a way of fending off competition from
Japan.

At the same time, Philips, the Dutch electronics giant, is reeling from
the decision by its new president, Jan Timmer, to cut around 10 000 jobs
and radically change the course of its loss-making information systems and
components division. Timmer also intends to cut Philips’ spending on R&D,
which will increase the pressure on the company to collaborate with either
Siemens or SGS-Thomson on the development of semiconductors.

These dramatic changes have raised fears over the status of the Pounds
sterling 3 billion joint European programme of research on microprocessor
and memory devices known as Jessi (the Joint European Submicron Silicon
Initiative). The three companies met this week to discuss the future of
the venture.

Philips says it is too early for it to comment on how its recent restructuring
will affect individual projects such as Jessi. Philips set up Jessi, and
has around 250 employees and an annual budget of DFl 130 million (about
Pounds sterling 39 million) committed to the project.

The research conducted under Jessi is fundamental to Philips’s plans
to develop high-definition television. Neither SGS-Thomson nor Siemens have
been told of any plans by Philips to withdraw from Jessi, although Philippe
Geyres, corporate vice president of SGS-Thomson, said last week that he
is willing to consider the need of any member of the programme to ‘redistribute’
their role.

Timmer is keen to steady nerves both within Philips and in the European
semiconductor industry. In a speech last week, he stressed the need for
Philips to pursue alliances to cover the expense of R&D in integrated
circuits. But he added that he would not pursue such alliances ‘at any cost’.

At Siemens’ annual review meeting last week, Karlheinz Kaske, the company’s
president and chief executive officer, said the electronics industry is
undergoing profound changes. As developments in electronics become increasingly
sophisticated, semiconductor manufacturers have to produce hardware much
more quickly. ‘Capacities can often be maintained only by taking on partners,’
he explained.

He said that discussions were under way to find a way of fending off
the Far East. But he would not discuss the form that any joint ventures
might take adding that he is in no hurry to push for a joint venture with
SGS-Thomson, because their strengths complement each other so well at present.