New execs describe their vision for Motorola chip operations

New execs describe their vision for Motorola chip operations
By David Lammers, EE Times
September 8, 2000 (7:30 p.m. EST)
URL: http://www.eetimes.com/story/OEG20000908S0054

AUSTIN, Texas — A changing of the guard at Motorola's semiconductor operations Wednesday (Sept. 6) comes as the $7.4 billion chip maker stands at a crossroads. It could trade on its status, in the Internet era, as the grandfather of communications silicon. Or, as one of the last vertically integrated electronics companies, it could find smarter, nimbler organizations chipping away at its talent.

Shepherding the group is now the job of veterans Fred Shlapak and Bill Walker, who were promoted to the top posts this past week at Motorola Inc.'s Semiconductor Products Sector, based here.

Shlapak was named president of the unit. He will team up with Walker in a two-person office of the president.

Since early this year, Motoola's Semiconductor Products Sector (SPS), which operates 38 factories in eight countries, had been under the interim stewardship of longtime Motorolan Fred Tucker. < P> Shlapak will be in charge of strategic direction for the sector while Walker, who has 32 years' experience running manufacturing operations at the company, will handle day-to-day operations as general manager.

They inherit a number of challenges. Motorola's growth in chip sales recently has lagged behind the industry's. Last year, when semiconductor sales overall rose 19 percent, Motorola's climbed only 1 percent, dropping the company from third to fifth among those ranked by IC Insights (Scottsdale, Ariz.). Spinning out Moto's components business into ON Semiconductor, which accounts for some $700 million in revenue, was part of that falloff.

The company is doing better this year but still trails the industry boom. For the first half of 2000, Motorola chip sales grew 25 percent compared with the industry's 37 percent. That dropped Motorola to sixth place in IC Insights' rankings for the first half.

In a statement announcing the promotions, Robert L. Growney, Motorola's corporate chief operati ng officer, said, "After a rigorous internal and external search, we determined that Fred Shlapak and Bill Walker are the ideal choices to lead SPS."

Shlapak, 56, has spent 30 years at Motorola, rising to the No. 2 position under Hector Ruiz, who turned over the operating reins to Shlapak two years ago after a number of internal reorganizations in the chip unit left employees and customers alike confused. Ruiz left in January to take the president's job at Advanced Micro Devices Inc.

While many Motorolans regarded Ruiz as unpredictable, Shlapak is considered a fast-moving, straight-talking manager, respected by engineers for his work in turning around the wireless-IC division after Motorola fell behind the curve in digital cellular technology. He also spent many years managing Motorola chip operations in Europe.

Strategy for growth

In separate interviews, Shlapak and Walker responded to questions about today's hiring environment, the move to 300-mm wafers and their strategy for gro wth at SPS, which employs 35,000 people.

While companies like Intel and Broadcom have sought to create a broad portfolio of communications ICs, Shlapak said, Motorola doesn't get the recognition it deserves. "Motorola invented the whole sector of networking ICs 10 or 15 years ago. Dataquest says our PowerQuicc [network controller] line has more than 80 percent market share. Intel and others may come in and try to do a good job, but we have at least a 10-year head start on them. We are in a very, very strong position," he said.

"When it comes to networking, Motorola is legendary in its experience and capabilities," Shlapak said, adding that "our position is known by people who know what is going on in this industry."

Motorola also has become known as a place to find experienced technical talent. Lured by stock options at hot startups, or by recruiters searching for microprocessor designers for an Intel design center in downtown Austin, too many Motorola engineers have been striking out for greener pastures.

Specifically, Moto lost to Intel the senior engineer driving its design-reuse strategy, Mark McDermott, who is now reportedly designing a new X86 processor at Intel's Austin center. That high-profile loss, following others, eventually brought the two companies to legal blows.

Shlapak said Motorola is improving its stock-option packages, and Walker pointed to a Fortune magazine article that ranks Motorola among the top 15 companies in terms of benefits packages.

Beyond financial returns, Shlapak said SPS attracts engineers by offering them "the opportunity to work with the latest technology. We are designing products now that will take advantage of our 0.13-micron process that comes on-stream next July. We have a leadership position in different architectures, and that is very important to many of our engineers."

A new design center, on Palmer Lane in North Austin, includes a recreation center with pool and Ping-Pong tables, he noted.

Engineering defections

Responding to reports of engineering defections, Walker said, "It is true that we've been targeted in areas like design and software, areas where it is pretty hard to find people. But in other areas we haven't lost many people." To fend off recruiters, Walker said, Motorola must work harder to "put in place a culture where rewards come with success."

"Motorola is rethinking its whole manufacturing strategy," said Gary Smith, chief EDA analyst at Dataquest Inc. "It is building more fabs because, like everyone else, it can't get capacity in Taiwan. It's the same thing with other companies: NEC, Fujitsu and Toshiba are all adding capacity."

Smith said he believes Motorola is recovering from the reorganizations that are Ruiz's legacy. "Ruiz got rid of some top-level managers to stop the fight between the different kingdoms within SPS. But then the company lost direction because those guys weren't there to get things done. Now there seems to be more direction from the center."

Smith argued last year that Motorola's system-on-chip design technology effort was being sabotaged by managers reluctant to submit to a design-for-reuse methodology that threatened to slow down design teams.

"What I'm hearing from the EDA companies is that Motorola definitely is using more high-end tools, and they are keeping them in use when they get to the end of a project. I get the sense that they are getting it back together overall," Smith said.

While Intel, Texas Instruments and others are building 300-mm (12-inch) wafer fabs now, Motorola has decided to pause until the tool set becomes manufacturing-worthy, the executives said. Since 1993 Motorola, along with partner Infineon Technologies, has operated a 300-mm development and prototyping facility in Dresden, Germany, called SC300.

"Motorola had the foresight over the last nine years to research the whole 300-mm manufacturing question," Shlapak said. "We don't have DRAMs any more, or a single-product focus like Intel. We probably don't want to build a 300-mm w afer fab alone; we would like to do it with some form of partner. To get the economies of scale, you have to spend about $2.5 billion to $3 billion, and to justify that you have to get a product up to the billion-dollar run rate. For us that probably will be our wireless chip sets."

300-mm lessons

"In fact," Walker said, "what we learned from Dresden is that the tool set is not manufacturing-ready . . . According to our internal rating, there are two or three tools that are [far] from being ready, which is why I think it will be the 2002-2003 time frame before we are ready to begin producing on 300-mm wafers."

Walker declined to specify which tools are dragging the transition but said he believes Texas Instruments and others also are approaching the 300-mm move with a wary eye on tool maturity. "Our MOS 11 facility was one of the first fabs to convert to 200-mm wafers, and we suffered because the first-generation I-line steppers were just not manufacturing-ready on 200-mm wafers," Walk er said. "Our competitors entered with second-generation tools, and we learned that you have to enter at the right time."

During his tenure as president of SPS, Ruiz became well-known for predicting that 50 percent of Motorola's chip manufacturing would move outside the company. Indeed, Motorola has important relations with foundries TSMC, Chartered and UMC.

Shlapak said Motorola now outsources about 38 percent of its total chip manufacturing, but much of the outsourcing is in the back end, for test and assembly. Foundries handle only about 12 to 15 percent of front-end wafer processing. With some foundries strapped for capacity, Shlapak said, Motorola is moving "very, very aggressively" to bring up fabs capable of 0.13-micron processing. Rather than reiterate the 50-50 ratio that Ruiz espoused, Shlapak said he feels more comfortable with the term "balanced" manufacturing.

Walker said that whether the 38 percent outsourcing "goes to 50 percent, or to a 40:60 ratio, we are going to continue to uti lize subcontractors as reliable second sources. In that sense, the strategy hasn't changed."

"Hector [Ruiz] wanted to do a lot more outsourcing, and that would have set Motorola up to sell off or spin out the semiconductor operations," said Brian Matas, vice president of market research at IC Insights. "However, since he has left, Motorola has gone ahead with its plan to build a new fab in China. With that kind of thing now being approved, perhaps it is not necessarily Motorola's corporate strategy to spin off the semiconductor operations."

Semiconductors are now a "cash-generating" operation, Matas said, though he argued that making SPS an independent entity would bring in new financial investments.

With IBM, Motorola is now among the last of the vertically integrated electronics companies. Lucent and Siemens both split off their chip-making units into separate companies in the past year, saying the action decreases the spectre of competition with systems customers, makes the chip units nimbler and helps the silicon units get needed cash to drive investments in technology.

Asked if Motorola's vertical integration hinders SPS from selling to outside customers, Shlapak said, "Three or four years ago, that was the case. However, in the last year and a half, we are in a 'hands-free' kind of situation, in which we are free to compete externally despite the fact that we are part of a vertically integrated company. We are going out to the marketplace with our chip sets and reference platforms for the 2.5-generation and third-generation cellular platforms, and competing."

Shlapak said that several years ago, Motorola's digital cell phone division turned to a Texas Instruments DSP for a GSM-standard phone. "Motorola accounts for 20 percent of the SPS sales, and we have to be competitive or the systems divisions should select outside suppliers. That was one part, three or four years ago, but things like that keep us honest."

— Additional reporting by Margaret Quan.