12 July 2010
Lothar Maier, chief executive, Linear Technology
Linear Technology's chief executive tells Graham Pitcher how the company has refocused itself successfully.
When a company makes a conscious decision to move away from the seemingly lucrative consumer electronics market, eyebrows can be raised. But that's what Linear Technology did in 2005.
"It caused a little bit of controversy," said Lothar Maier, Linear's ceo, "because people felt Linear was walking away from a huge market opportunity."
Linear was established in 1981 and its focus on analogue technology hasn't changed in that time. "But our market focus certainly has," Maier noted. "Ten years ago, we were focused on communications; it was a sizeable part of the business and one which fell dramatically following the dot com crash. While we grew the business back, we did this on the basis of 'bread and butter' products," Maier continued.
Those 'bread and butter' products were being used in consumer electronics products ranging from mobile phones to MP3 players. "We realised consumer products were moving from being high end to becoming commodities and decided to move away from that market."
The result was painful, Maier admitted. "We shed millions of dollars worth of business and needed to replace that with business from other markets." The transition was complete in 2008 and Maier claims Linear is now growing faster than its competitors.
"The repositioning is finished and we have ended up in markets which are suited to our skill sets and it looks like these will be some of the fastest growing markets for the future," he continued. Now, business is solid and sales in the first quarter of 2010 were an all time record, Maier claimed. "And we anticipate continuing to grow strongly."
Being in fast moving markets is one thing; developing products that designers need is another. How does Maier address this? "The challenge is being able to make and deliver products. For the longer term, its identifying products that customers will find compelling."
There's a degree of crystal ball gazing involved here. "If you look at the time it takes for analogue products to be design, designed in and sold, it's probably four years. So our challenge is to understand what customers will need in five years," Maier explained.
So what does Maier believe will be the 'hot' technologies? "Wherever there's an interface, you will find analogue components. And, as digital grows, analogue grows alongside it – probably faster on a percentage basis. Mechanical is being replaced with electronics and it's happening all around us."
With Linear now focusing more closely on markets such as industrial, automotive, communications and military/aerospace, will it begin to specialise? "No," Maier responded emphatically. "Specialisation won't happen easily in the analogue market. For one thing, there are no standards and, in many cases, this reluctance to develop standards is because companies are looking for ways to differentiate themselves. And customers want us to come up with products that are different."
He used the automotive industry as an example. "Every car manufacturer wants to create a car that does things more efficiently than its competitors. If products become standardised, that advantage will go away and customers don't want that."
Rather than specialising on, say data conversion or amplifiers, Maier sees the future in solutions. "Our customers have fewer and fewer internal skills, so they are looking to us to design the analogue portion of their products. There's a lot of interaction between analogue products so having a portfolio is important. When we're providing applications engineering support, we don't just sell one chip; we have the opportunity to sell Linear chips for the whole design."
That, of course, means Linear needs to be resourced appropriately. "We have a couple of hundred really good analogue engineers," Maier boasted. "It's not just about how many you have, it's also about their quality and creativity."
That creativity has resulted in a range of products called micro modules. "These are complete analogue solutions," Maier explained. "They are internally complex, with many pieces of silicon, capacitors and resistors. But it looks just like an ic to the customer."
Maier says that, by offering complete solutions, customers can create more complex products without the need for a lot of internal expertise.
Linear also maintains its own production facilities. Being an analogue company means its products are less dependent on feature size and, as a result, Linear isn't a slave to Moore's Law. "We make all of our wafers," Maier said, "and there's good reason for this. It isn't because it's cheaper, it's because we need flexibility and you don't get that from a foundry. We have lots of different process choices available and that allows our people to do things they couldn't do elsewhere."
Linear has a rigid process by which it decides which projects get funded and that means that not all ideas become products. But there are some 'slow burners' and some 'happy accidents'. "Analogue products may not be successful for 5 to 10 years," Maier pointed out. "Then an application appears and the product becomes a success years after its introduction."
He gave an example. "After the dot com bust, a lot of products were appearing which needed a white led backlight. We had a general purpose product that turned out to be ideal for driving white leds. Although the product wasn't designed to that application, it turned out to be well suited."
One thing Maier is sure of is the productivity of his designers. "There's no shortage of ideas for new products," he asserted. "Our challenge is deciding which ideas to fund."
Lothar Maier was named chief executive officer of Linear Technology in January 2005, having served as chief operating officer for more than five years. Before joining Linear Technology, Maier held various management positions at Cypress Semiconductor, most recently as executive vice president of worldwide operations. He holds a BS degree in Chemical Engineering from the University of California at Berkeley.