Chipmaker expects over 20% Asian revenue growth

Canada-based Zarlink Semiconductor said its revenue growth in Asia Pacific (including Japan) could top 20 percent in the next fiscal year (April 2002 to March 2003), when the semiconductor sector recovers from the current slump.

"We see Asia Pacific as the region with the fastest growth once the industry turns around," Zarlink Asia Pacific vice president and general manager Sunny Arora said. "The markets we play in--communications--is a big thrust in Asia as countries like China, India and Iran, amongst others, will install the infrastructure and will make investments in this area as capital becomes available."

Zarlink, formerly known as Mitel Corp, makes chips for digital TV, cell phones and switching in the communications sectors. It also makes chips for pacemakers and hearing aids.

Arora was speaking at the sidelines of the company's media roundtable here today. Some of Zarlink's customers include Samsung, LG Electronics, Fujitsu, NEC, Huawei and Panasonic.

According to Zarlink president and CEO Patrick Brockett, Asia Pacific will be its fastest growing region over the next 10 years.

However, he said, the company was not making aggressive investments worldwide at present due to the ongoing economic downturn. Nevertheless, Zarlink is hiring more technical talent in the region because of its growing customer base across Asia. Without revealing specifics, he said Zarlink was keen to access technical talent in applications and design areas, and that it would open design and technology centers in Asia.

Arora said Zarlink Asia Pacific was targeting US$100 million in revenues for fiscal year 2001 compared with the US$110 million it achieved in fiscal year 2000. According to Brockett, the company generated worldwide revenues of about US$441 million in fiscal year 2000.

Semicon slump, job cuts
On the state of the worldwide semiconductor industry, Brockett said the current slump is not the worst he has seen in his 35-year experience.

The industry goes through a cycle every three to four years, he explained, and what is happening today is not any different from the last 30 years. "If we look back at industry growth rates, every time the industry grows more than 25 percent, it drops and corrects itself," he said.

He noted that the semiconductor industry grew by about 40 percent last year. Fundamentals like over-inventory and over-capacity were driving the current downturn, he said, and this was exactly the same as in previous cycles he had seen.

However, he declined to say when he expected the industry to recover, despite some analysts saying that the sector may have finally hit bottom.

Brockett said that for Zarlink, the first signs that it has probably seen a recovery is from the company's turn business bookings. "The first sign that you're coming to the bottom of the cycle is that the percentage of orders you get for immediate delivery goes up," he said. "In recent weeks, we are seeing that trend, but that is not long enough to say that this is the bottom."

On headcount, Brockett said the company--which currently has about 2,000 workers worldwide--had laid off about 500 workers in the past six months due to a drop in demand for its chips. He added that most of the cuts were made in manufacturing, where it has a total of three silicon foundry wafer fabs in Canada and the UK.

When asked if Asia Pacific, which at present has 40 employees, was impacted by the job slash, Brockett would only say: "People were affected in Asia, but out of the 500 (cuts), it would be a tiny portion".

In the US, shares of Zarlink last traded at US$10.00, down US$0.24.