Layoffs in the Israeli high-tech industry are not a rare occurrence. When a startup fails (and many do; according to the well-known statistics), dozens of employees are thrown on the market. When two companies merge, one of the byproducts of the merger is usually a personnel cut at the merged company. When a foreign company decides that its Israeli R&D center is no longer connected to its overall global strategy, the center is closed, and all its employees have to look elsewhere to make a living. This is what happened at the beginning of the month, when Dutch company NXP Semiconductor decided to close its Israeli R&D center in Herzliya, and almost 200 of its employees were laid off.
200 people is a lot. It is even a great many, and NXP's action is unusual in the Israeli high-tech industry. On his recent trip to Israel, which he visits frequently, NXP VP Sales and Marketing EMEA Steve Wainwright therefore stepped forward to explain what happened.
Before telling you how Wainwright explained NXP's decision to "Globes," the role of the Israeli R&D center for the Dutch company should be explained, and how it came to own the center. The NXP center was originally Motorola Semiconductor, before it was acquired by US chip company Freescale Semiconductor a decade ago. Freescale itself was acquired in 2006 by private equity funds in a huge $17.6 billion deal. Freescale held a US IPO in 2011, but the cyclical nature of the semiconductors market was not favorable for the company and its business, and it was sold again, this time to NXP for $11.8 billion in cash and NXP shares.
"NXP Israel specialized in cellular network infrastructure, and when we examined the future of this market, we realized that it had reached maturity, in contrast to a still growing market," Wainwright declared. "Over the past two decades, this business grew quite healthily, but in the past five years, its growth virtually halted, and the business opportunities in this market shrank.
"Therefore, when we examined all our R&D centers around the world - and we have six of them outside of Israel - and under the assumption that we invest 15% of our revenue in R&D - it was important for us to streamline our R&D investments. Unfortunately, this meant that Israel was selected, based solely on the market served by the center. That's unfortunate, because we have knowledgeable and high-quality people in Israel."
According to Wainwright, "This was a decision we made long before the merger was finalized. We looked at what was happening with our customers, such as Nokia and the merged Alcatel-Lucent company, and we realized that we had to adapt ourselves to these dynamics. Among other things, this adjustment consisted of closing the Israeli R&D center, which focused on cellular infrastructure. This is a mature market that is not growing, and its return on investment (ROI) is no longer attractive for us." Wainwright emphasizes that as soon as it had been decided to close the Israeli center, management made every effort to help its employees find other work. "We help laid-off NXP employees find new jobs," he states, and explains, "We strive to do this in groups, not individuals, in other words to find work for an entire group, not for an individual." He claims that there is a great deal of interest in local industry in NXP Israel employees, and that there are more than a few opportunities waiting for them outside.
Wainwright also made it clear that NXP would continue investing in Israel, among other things by continuing the development of the Athena SCS Israeli R&D center, which NXP acquired in early 2015. Athena SCS has 15 employees in Israel, and specializes in information security for the Internet of Things (IoT). Wainwright asserts that he sees many opportunities in Israel in all matters pertaining to IoT solutions. "We'll invest a lot in this market," he says, because "as a global company faced with a small market, thinking about Israel is not confined to a development center. Many high-tech companies in Israel base their developments on components manufactured by giant global companies like NXP and others. We're learning from cooperation with Israeli companies, because many of our customers and partners here are global market leaders or developers of breakthrough technologies. We're therefore taking their needs into account in the framework of development of our products for the world as a whole."
Published by Globes [online], Israel business news - www.globes-online.com - on February 2, 2016
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