Rick Clemmer executive director, president and chief executive officer, NXP

When private equity company KKR, along with Silver Lake Partners and AlpInvest Partners, bought an 80.1% stake in Philips Semiconductors' business for €8.3billion back in 2006, the industry raised a collective eyebrow. Some more cynical observers expected a rapid disassembling of the company – stripping it for parts, in effect – to turn a quick profit. But other factors quickly had an impact; the global economy started to turn downwards and NXP – as the company had then been renamed – was seen as one of a few semiconductor companies in danger of going under. Far from turning a quick profit, the investors were faced with a rescue operation. Part of the problem was the amount of debt placed on NXP's balance sheet as a means of financing the deal. Servicing that debt while trying to survive in a shrinking economy required some fancy footwork. An early casualty was ceo Frans van Houten, replaced by long time semiconductor finance executive Rick Clemmer. Clemmer – a senior advisor to KKR – was already a member of NXP's board. By effectively parachuting him in to replace van Houten, NXP and its investors were giving a strong message to the world – we need to sort the finances out. And Clemmer has applied himself to the task in the last two years, the latest move being the sale of NXP's sound systems business to Knowles Electronics for $855million. "There has been a lot of change financially," Clemmer admitted, "and we are still carrying $3.6bn of debt." But he didn't feel this was too high. "NXP is on an annual run rate of about $1.2bn, so our debt ratio is about three times our revenue, which isn't unreasonable. But I would like it to be less than two." To a certain extent, NXP inherited many of its problems. As Philips Semiconductors, the company had interests in a wide range of technologies, it had a large number of staff and maintained many fabs around the world. At a time when the industry collectively was looking to slim down, Philips Semiconductors was maintaining an old style outlook. Clemmer has been trying to sharpen the company's focus since taking over the hot seat. "The key," he believes, "is to focus on those areas where NXP can be a true leader; those areas where we have the technology." One of those areas is high performance mixed signal. Talking at electronica in November, Clemmer said: "While the last quarter has been flat sequentially for NXP, sales of high performance mixed signal devices grew by 38% and, in the first three quarters of 2010, sales in this area grew by 57%." The old Philips was noted for its standard products, but Clemmer highlighted the fact that only 30% of sales are now generated by standard products. "High performance mixed signal is not a commodity area," he asserted. So how does Clemmer define 'true leader'? "It's a market where NXP can be 1.5 to two times the size of the nearest competitor. If we want to be a market leader, we'll participate. But we are not interested in being number three in market sector." Nevertheless, there are always exceptions. "General purpose logic is one," Clemmer admitted. "It's a good market, but we won't try to become number one there and get in a price war with Texas Instruments." The automotive market remains important, said Clemmer. "Whether it's automotive door locks, in vehicle networks or radio/infotainment, NXP is the leading supplier and we're trying to focus on those areas." Lighting is another target market. "Here, we are x1.5 on design wins," he noted. NXP has identified compact fluorescent lighting (cfl) as holding potential for growth. "Everyone is focused on led drivers," he said, "but NXP has chosen to follow the cfl route because it will be around for a while and people will need dimmable cfls." The microcontroller market is important for two reasons, he continued. "In the 32bit ARM based microcontroller market, we're more than 1.5 times ahead of the nearest competitor. But it's not just leadership; it's also about the ability to drive sales of the semiconductors that go around the mcu." Philips was renowned for its range of R&D activities. How does Clemmer see this effort developing? "We had a couple of thousand people in the central research division. That's now down to about 650. While some have moved into business units, we are still developing advanced technology and working closely with imec. And we have an advanced systems lab in Eindhoven and we employ five or six professors, who influence some of our research work." But, like many of its competitors, NXP is focusing more on 'D' than 'R'. "While we have the fundamental technology to support and drive high performance mixed signal, we will continue to see a move to applications. Even while we've cut staff, we've added more people in applications roles and are working with other companies." Target areas here include energy conservation and healthcare, where NXP is, said Clemmer, developing a relationship with Philips. NXP is an adherent of the 'fab light' approach. "We've gone from 13 to 6 fabs," he pointed out, "which brings a lot of cost reduction. But we still have proprietary process technology, which means we can develop, for example, high voltage rf products." He also believes that relationships with foundries such as TSMC will ensure its Nijmegen fab remains competitive. "We're making 65bn units a year," he concluded. "We need to do this at the lowest cost and, if you have proprietary technology, you can combine advances in process technology with design capability and applications expertise to create differentiated solutions." Rick Clemmer became executive director, president and chief executive officer of NXP in January 2009. Prior to that, he was a member of NXP's supervisory board and a senior advisor to private equity investor KKR. Prior to joining NXP, he drove the turnaround and re emergence of Agere Systems. He has also served as chairman of gps technology provider u-Nav Microelectronics and as chief financial officer for Quantum Corporation. Prior to that, he was senior vice president and chief financial officer for Texas Instruments' semiconductor group.