Flashing a Fair Smile

Electronic News, April 30, 2001 by David Manners

Fairchild president and CEO Kirk Pond gives a positive tale of the high-tech market

If ever there were a case for being a broadline semiconductor manufacturer, it is now. Kirk Pond, Fairchild Semiconductor Corp.'s president and chief executive officer, is seeing not only good business in some areas, he's also seeing positive signs of recovery in the bad areas.

Most of what Intel Corp. produces goes into the computer industry, but Fairchild (nyse: FCS) supplies products into every industry. Modern industry gurus may preach the need to specialize in market segments, but the best-performing companies are the broadliners.

Pond was in Europe recently on a tour of automotive customers. While passing through London, he took time to reflect on the state of the high-tech market and told a refreshingly positive tale compared to the sad litanies of CEOs dependent on the computer and communications industries.

"It's our communications and computer businesses that have been affected, but some of our other businesses, such as automotive, industrial and consumer, are doing OK," Pond said. "Our power business is doing really well."

It's about time someone reminded us that the electronics industry isn't solely comprised of Lucents, Nortels, Ciscos and Intels. Many other forms of high-tech life are out there, above and beyond the overhyped telecommunications whiz-kids and the quickly commoditizing computer community.

"We see the large U.S. and European OEMs in trouble and the manufacturing services people in trouble in Europe and the United States, but you don't see that in Asia," Pond said. "Asia is growing quicker and will recover quicker and has less of an inventory build-up and more robust growth. We do more than 50 percent of our business in Asia. Because of that, I expect you'll see our revenues recover fairly quickly."

The first telltale swallows of a market spring have been seen at Fairchild's South Portland, Maine, headquarters. "The rate of cancellations and reschedules is slowing a bit. Consumer sales are improving for us, especially in Asia, and we're starting to see in Taiwan that the build-rate for computer boards is starting to pick up. I'm hopeful that's a sign of good things," Pond said. "We expect an improvement in the late summer as people start to crank up for the Christmas season," he said.

Like foot-and-mouth disease, the current U.S. economic downturn started in one sector nine months ago and then jumped from sector to sector. "The U.S. slowdown in manufacturing started last summer -- the financial policies of the U.S. government wanted to slow things down. It started with the PC people, then moved to the telecommunications people, then to the support structure people, and now it's backing up through distribution," Pond said.

Pond said he doesn't see the telecommunications slump as a lasting thing. "High-speed communications makes all the difference -- it turns the Internet from a novelty into a very useful tool," he said. "The demand for bandwidth is still there, but it's moving slower than expected. They've laid all this fiber optic cable across the world and then found they can increase bandwidth by 64 times, so they have got all the fiber they need."