A massive investment in the Republic tops the Xilinx agenda, writes Una McCaffrey
Microchip and software designer, Xilinx, has moved to separate from rivals by claiming it could survive another serious tech downturn and remain profitable.
In Dublin, where Xilinx employs 360 people, chief financial officer Mr Kris Chellam said cost-cutting measures taken last year to allay the technology meltdown had made it sufficiently strong to "easily" survive a second downturn of up to 30 per cent.
"I think we took enough actions last year to take our break-even down to substantially lower than where we are today, so we could easily handle a 30 per cent downturn and still stay profitable," said Mr Chellam. "Even throughout all of last year, despite the fact that our revenue dropped from $415 million (€439 million) in December 2000 to $225 million in September 2001, we were able to take enough expense actions quickly enough to stay profitable."
The fighting talk comes during a tumultuous period for the semiconductor industry, where the still-ailing corporate sector is reluctant to set aside significant IT budgets and the semiconductor industry is issuing its own, closely-related, share of bad news.
Mr Chellam's bullishness against this backdrop comes in part from his reason for visiting Europe at this time - he wants to increase his company's shareholder base outside the US - and partly from the relative position of strength held by Xilinx in its corner of the schoolyard.
Figures from research firm Gartner show that Xilinx occupies fifth position in the broader custom chips sector, while Mr Chellam places his company first within its own programmable logic device (PLD) arena, pointing to a market value 25 per cent higher than that of the next four competitors combined.
It is on this basis that the future success of Xilinx, and of a €52 million investment it has earmarked for the Republic, is being banked. Such technology allows chips to be individually programmed for a range of devices or systems, from networks to wireless products found in the home.
The sub-sector - with the broader semiconductor market - is widely viewed as a rough barometer for the economy as a whole, largely because of the space it occupies in the chain of technological development. New products cannot begin to be designed without chips, never mind be delivered to a customer, corporate or otherwise. In an improving economy, the chip designers will be among the first to prosper.
The theory is only too obvious to Mr Chellam. "The corporate managements have still not had enough confidence to start making investments yet, so the big concern everybody has had was whether we were going to have a second recession: a double-dip recession," he says, immediately aligning himself more to the single-dip camp.
"Our expectation is that we will start to see some level of corporate spending come back in the second half and next year which I think leads to more IT spending."
Thus Mr Chellam is forecasting company growth of between 6 and 8 per cent for the current quarter, and 35 per cent for 2003.
Irish technology workers will be crossing their fingers for such a development, conscious of the massive investment that Xilinx has at the top of its agenda.
More than one tenth of Xilinx's entire workforce now work at its Dublin site, which ships more than 40 per cent of the company's total revenue. The long-term plan is to employ 2,000 people at an expanded campus. For the moment, the project is being taken in stages. The first is coming to a close, and will see Xilinx doubling its headcount by the middle of next year. How fast the rest of the expansion will go depends on the market, but the establishment by Xilinx of a €3 million European data centre in the Republic is taken as a sign of confidence.
