Infineon Technologies
Dare to be different.
“Dare to be different,” urges Ulrich Schumacher of Infineon. “It is easy for managers to simply administer their responsibilities and meet expectations. Real leadership, however, requires a pioneering spirit and the courage to take risks. You’ve got to have the competitive drive to take on challenges that other colleagues think are almost impossible— and then pursue your vision of the future realistically but relentlessly.
“As a young man, I worked my way up through the ladder of Siemens Corporation, armed with an engineering Ph.D., by volunteering to take on struggling areas of the business that I believed could be turned around in two years. Because traditional corporate culture tends to discourage entrepreneurial risk-taking, relatively few people were interested in associating themselves challenging projects.
“In the mid-1990s I was given a high degree of freedom to turn the Siemens semiconductor memory and standard IC division around. Of course, there were many challenges along the way, but with a dedicated team working hard we were able to deliver success where other people saw only obstacles.
“Siemens eventually decided to spin off its semiconductor division into a separate company called Infineon. In March 2000, with the worldwide markets at their peak, we were listed on the Frankfurt and New York Stock Exchange. Our stock price more than tripled in that environment of exaggerated valuations, but amid all the dot-com and IT industry hype few people could have known that a few months later the semiconductor industry was about to begin the most dramatic downturn in its history.
“It is important to understand that the semiconductor industry is volatile even in the best of times. We have the highest average annualized growth (15 percent) of any industry over the past 40 years (by comparison, the second fastest growing industry, pharmaceutical, averages only 10 percent). But we experience steep downturns and recoveries that occur 8 to 12 months ahead of the rest of the economy.
“When the storm clouds began to appear on the horizon in the fall of 2000, I knew from experience we could not afford to be complacent. Infineon is a $5 billion dollar company, with 30,000 patents and more than 30,000 employees worldwide.
“Coming off strong annual revenue growth of 72 percent in 2000, I was determined that we would make tough decisions proactively from a position of strength—doing whatever it took to cut costs, maintain our financial solidity, and concentrate on our core competencies— ensuring that Infineon remained at the leading edge of the semiconductor industry.
“Counter to traditional European management models, I decided that Infineon would not mortgage its future by seeking savings in reduced research and development budgets. By thinking differently and acting aggressively, Infineon was able to continue to significantly invest in the development of new technology.
“Our decision to improve productivity while cutting costs in the early days of the worldwide downturn saved Infineon. The initiative, known as Impact, was a rapid reaction to the worst market slump, and achieved about 2.8 billion euro in cash-effective cost reduction, and more than 1.3 billion euro in EBIT-effective savings in record time. These strong cost-cutting measures also required the cutting of over 5,500 jobs worldwide on the heels of a company-wide expansion.
“Other companies that initially criticized our drastic measures eventually found they had to follow our example. While other companies were slashing their R&D budget, Infineon was relentless in seeking out cost-savings in other areas, preserving and ensuring our competitive advantage, and maintaining our high level of research and development at approximately 1 billion euro annually throughout the downturn cycle.
“As a follow-on program we launched Impact to strengthen our long-term competitiveness through further process improvements, best practice, and benchmarking, as well as transferring and outsourcing measures with a potential of another 500 million euro in savings.
“As a result of this contrarian strategy, Infineon maintained its strategic commitment to be a technology innovator and cost leader. One striking example for this is the successful development of the world’s most advanced production technology on 300 mm wafers—which enables Infineon today to make the smallest chips on the biggest wafers for the lowest cost available anywhere in the world, more than one year ahead of the competition.
“Many armchair experts said 300 mm volume production couldn’t be accomplished without huge investments. All of our competitors declined to pursue its development as aggressively as we did, given the tough economic times.
“But now 300 mm is a reality and a real industry benchmark, offeringa strategic advantage to Infineon’s customers, employees, and shareholders. After all, there are 2.5 times as many chips on 300 mm wafers as on 200 mm wafers, amounting to a cost advantage of more than 30 percent.
“By daring to think and act differently from our competitors, Infineon is well position indeed to profit first from the next market upturn while maintaining its technological pole position. Our success as a technology and cost leader would not have been possible without aggressive change-management, allowing Infineon to emerge strengthened from the worldwide downturn in the semiconductor market.
“I can only speak from my own experience, but I think the most important way to become a better leader is to have unshakable faith in your vision of the future. If you know your field well and are willing to run yourself and your organization hard enough, you can get ahead of what other people think is possible. Just like in auto racing—which is one of my hobbies—staying ahead of the competition is the essence of winning; whenever you lose commitment you’ve already lost the race.
“For example, increasing productivity while dramatically reducing overall spending in the middle of the worst downturn in semiconductor industry history was not only a tremendous challenge, especially when the downturn in 2001 with more than 30 percent was compounded by the unimaginable global impact of the terrorist attacks of September 11th.
“We endured a dramatic fall in D-RAM prices from $15 a chip in September 2000 to slightly above $1 a year later, and maintained our strategic investments into the future. We were motivated by our firm belief that there would be another market upturn, and we intended to be fully prepared for it, because at Infineon we understand that only technologically advanced companies will remain major players in our highly competitive industry.
“I’ve remained committed to my vision of Infineon as far more than being a cost-competitive chip manufacturer, branching deep our core competencies in the automotive electronics, communications, and memory semiconductor industries. Infineon is working to build on its position as a cutting-edge innovator, offering smart chip solutions that improve the quality of people’s lives in ways they don’t yet expect from a semiconductor company.
“That’s why our patented products increasingly include innovations that are outside the realm of traditional semiconductors, with items like carbon-based nanotubes, neuro-chips, and new market applications such as smart textiles and e-farming.
“What sounds like science fiction is now science fact. Carbon-based nanotubes in particular promise to revolutionize the way we’ve been building semiconductors for the past 50-years by making it possible to integrate circuits naturally in patterns smaller than 100 nanometers, rather than etching them into silicon.
“This quantum leap forward will be matched on a more personal scale through the increased use of neuro-chips and bio-chips, which will be used to enable immediate and accurate disease identification, prediction of individual side effects, and predisposition for certain types of cancer. They will make medical diagnosis in hospitals not only far less costly, but much faster and more efficient.
“At Infineon, we are committed to creating a leadership culture based on a shared vision of our company five years down the road. We call it Agenda 5-to-1, because it communicates our commitment to focus within the next five years on becoming a top four global semiconductor player by achieving at least a top three position in each segment served, with a top two financial performance in all businesses compared to competition, and become the number one semiconductor company championing the solutions space.
“By directing our 30,000 employees worldwide toward a shared vision of our future, I believe Infineon will create an entrepreneurial culture of constant innovation and meet the future as a stronger company, a 21st century technology solutions provider with our best days ahead of us. Our company slogan, ‘Never Stop Thinking,’ very much reflects Infineon’s competitive and creative mindset, which is the driving engine for our future success.”