TD Economics: Manufacturing Industry in North Carolina Transitions to High Tech

TD Economics, a TD Bank affiliate, finds in its latest report that the economy of North Carolina continues its transition period and, while the economy diversifies, it will gradually become increasingly resistant to economic downturns.

The author of the TD Economics report, economist Christos Shiamptanis, said that the transition is a necessary evil, as the state’s manufacturing sector moves from traditional industries like apparel and textiles to biotechnology, high-tech and services. He added that the state’s economic output is boosted by the improved productivity and the enhanced efficiency of high-tech businesses. These businesses also require high-skilled workers, and high-skill jobs are more resilient to negative economic evolutions than middle-skilled positions.

The report identifies several growth opportunities for the state of North Carolina, which include a shift to industries with high potential, such as pharmaceutical and electronics, the strong research universities with world-class educational programs and the development of technology business clusters.

Shiamptani, explaining the potential of North Carolina, said that the decade of 1999-2009 the output of electronics and computer manufacturing increased by 569 percent, way above the national average, while production of chemicals grew by 9 percent, in the context of national production dropping 3 percent. He added that high-tech manufacturers and pharmaceutical companies tend to stay above the floating line even in crisis times. If the state’s economy were to transition to these types of businesses, the manufacturing jobs in this area of the country should not be as volatile as they currently are.

The transition to pharmaceutical, biotechnology and high-tech production is even more necessary since the traditional manufacturing businesses have a much less optimistic outlook and declines will most probably persist.

 

National Semiconductor to be Acquired by Texas Instruments Incorporated

texas instruments national semiconductorNational Semiconductor and Texas International announced that they would join forces and combine their complementary portfolios to push for further growth. This will be done through the acquisition by Texas Instrumental of National Semiconductor shares at 25 dollars per share, for a total amount in cash of 6.5 billion dollars.

Both companies are leaders in the industry of analog semiconductors and their boards have approved the transaction in unanimity.

While leaders from both companies acknowledged the advantages of combining their product portfolios, Texas Industries underscored the quality of National Semiconductor’s development team, while the company that is being acquired emphasized Texas Instruments’ market position and sales force.

The portfolio of Texas Instruments includes 30,000 products, supported by an extensive sales force and manufacturing facilities, which include the first factory for 300-millimeter analogs. These capabilities will be united with National Semiconductors’ 12,000 products and customers in the market of industrial power.

After the transaction, sales of analog products from the combined portfolios will represent about 50 percent of Texas Instruments’ revenues.

Furthermore, Texas Instruments will make use of the manufacturing capabilities of National Semiconductor from Malaysia and Scotland, each of them with possibilities of increased production. The headquarters of National Semiconductor will remain at its current location in Santa Clara, California.

The transaction will be funded in cash and by taking over debts at 25 dollars for each share of common stock, and it is expected to close in the following six to nine months.

The semiconductor market in 2010 was worth some 42 billion dollars. Texas Instruments was the market leader, holding a market share of 14 percent and revenues of six billion dollars. National Semiconductor had revenues of 1.6 billion dollars, giving the company a market share of 3 percent.

 

SMIC Results for 2010 Show Recovery Following Losses in 2009

semiconductorThe largest Chinese producer of semiconductors, Semiconductor Manufacturing International Corporation, announced the company’s audited financial results for 2010.

Last year, SMIC had net income of 14 million dollars, a considerable improvement from the results recorded in 2009, when the group had net losses amounting to 962.5 million dollars.

This was possible with a 45.3 percent increase of sales, to 1.55 billion dollars from the 2009 level of approximately one billion dollars. The sales increases came mostly from the growth of wafer shipments, which increased by 44.3 percent, to almost two million units.

The price of wafers had a modest year-on-year growth of less than one percent, from 778 dollars to 783 dollars per wafer. Revenues from wafer sales that used process technology of 0.13 microns or below increased their portion in total revenues from 47.5 percent to 54.5 percent from 2009 to 2010, excluding revenues from DRAM.

In 2010, the company continued expanding its customer base and product portfolio, and continued to benefit from its position in the Chinese market, which is one of the largest markets for integrated circuits. This market saw positive evolutions in 2010 owing to stimulants that managed to boost domestic demand.

Income from operations was of 694.6 million dollars while expenses amounted to 728 million dollars. Expenses were generated mostly by investments in the research and development of 32-nanometer, 45-nanometer, and 65-nanometer technologies, as well as the development of 12-inch technologies.

The largest geographic customer base of SMIC in 2010 was formed by North American customers, who amounted for approximately 55 percent of the company’s revenues, while Greater China brought in 39 percent, compared to the 2009 level of 35 percent. Mainland China brought in 28 percent of overall revenues.

More than 11 percent of total sales, or 174.9 million, was spent on research and development.

The company’s outlook for 2010 is a positive one, and it is based on the potential of growth in the semiconductor market, as well as the 2010 performance of SMIC, when the company managed to cover its losses and turn in a positive balance.