“We see the European market as very healthy. In fact in the quarter that finished in September, Europe was the only geography in the world that exceeded our expectations,” said Steve Sanghi, president and CEO of Microchip Technology. “In the summer quarter, due to the holidays, Europe is usually down but we saw flat results — which is the best performance we have ever had. The bigger economies like Germany are very strong.”
Sanghi also cites a European-driven initiative to introduce lead-free/RoHS compliance as Microchip’s incentive to ensure that all its products were compliant and shipping well ahead of a July 1 deadline. “We were shipping all of our products worldwide lead-free by Jan 1. We worked ahead of time to clean out our distribution inventory. But there is still a large amount of non-Microchip products in the distribution chain which do not meet the specifications.”
The biggest change — and biggest boost — for the European market has been the opening of Eastern Europe. “In the last five years this has accelerated significantly,” said Sanghi. “A lot of multinational U.S. corporations, after completing product design, go to Asia for manufacturing of products whereas a majority of Western European designs tend to be manufactured in Eastern Europe. So the business stays within Europe.”
He added, “We do significant business today in Poland, Hungary, Czech Republic and even Russia,” Until recently, Microchip provided little technical support to the emerging economies, but that is changing. “What we have seen from Asia, after manufacturing has been moved there, [is that] they start to build up design resources. Groundbreaking designs might still be done in the U.S. but subsequent designs — maybe smaller and less complicated — might be done in the manufacturing locations.”
This design movement is also hitting Europe. “We see some design activity in Turkey, Romania, Hungary, Poland and certainly Russia where we have had significant business for some time. This trend will continue.” Microchip opened a design center in Romania in July that has already completed design of several analog products. This joined an existing center in Switzerland that came to the company when it bought TelCom Semiconductor in 2001. This also does analog design and is doing “outstanding work” says Sanghi. While he won’t disclose the size of the Romanian facility, Sanghi says Microchip is already looking to expand.
Microchip has also recognized that the supply chain is changing in Europe. While it has been addressing this change for a couple of years it gain momentum in June when it signed new franchise agreements with local distributors across Europe: Melchioni in Italy, Anglia in the U.K. and Ireland, along with Burisch and Ineltro in Austria. Two of the larger Pan-European Distribution groups also expanded their relationships with Microchip. Rutronik was added in Spain, France, U.K., Benelux and Nordic (they are already franchised in Central Europe) while Acal Semiconductors expanded with coverage in the U.K., Benelux and Nordic, to add to the base they had in France. Distributors have also been added in some of the emerging geographies like Poland and Turkey but Sanghi said it was important that these could provide local technical support.
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