Harry Page. (Darren Brown, OBJ)

Navigating the market is only one of the challenges for a company that lost its founder

Harry Page assumed the mantle of president at Semiconductor Insights a couple of weeks ago, eight months after the death of 15-year boss Doug Smeaton in a diving accident.

Last week the OBJ spent a few minutes with the Kingston-born and Ottawa-educated Mr. Page and asked him about the state of the local semiconductor industry, life at the 20-year-old firm since it was acquired by CMP Technologies in July, and the challenges of continuing a company after the sudden loss of its leader.

OBJ: Where does Semiconductor Insights fit in the sector in Ottawa, and where is the growth going to come from for the industry?

PAGE: We're a professional services firm that really doesn't develop and distribute devices ourselves. We work with our clients on helping them understand both the technological and intellectual property challenges of their portfolios. So we wouldn't consider ourselves being part of the semiconductor supply chain.

If you look at where the growth is coming from . . . it's being driven by memory products – by DRAM (dynamic random access memory) products, flash memory products, things like that. And that's really been driven by these huge advances in consumer devices. Just take a look at the advances in cell phones, MP3 players and iPhones – that's driving these huge volumes of memory. I saw a report just recently that said that DRAM shipments in 2007 are up close to 50 per cent from last year, and flash memory over 40 per cent. So, from an overall industry volume perspective, the hot growth is coming from memory-type products. That's a market that's dominated by a few, very, very large players, most of them in Asia, some American suppliers. That's a huge, capital-intensive market, (with) people owning their own manufacturing supply chain.

OBJ: So how can Ottawa semiconductor firms take advantage of that?

PAGE: Well, they don't necessarily have to compete with them. If you look at the appliances in which those devices are going, there's an awful lot of other peripheral devices that go around and that's where Ottawa probably has a chance to compete. In the area of wireless and media chips, there's a number of companies in Ottawa who are looking at that. And this is where you see your startups identifying an opportunity, and actually developing an application-focused device. You look at how all these portable devices are becoming so media rich – streaming video, being able to watch television off the phone – all these kinds of things. Certainly for startups, there's always opportunity . . . Look at Tundra: they have a good niche in the rapid interface space. Their devices are complementary to those high-volume devices produced by the guerrillas in the memory and the processing space.

OBJ: Are offshore competitors rivals, or are they partners?

PAGE: What happens often is companies in Ottawa are able to, in many cases, develop what's called "IP cores," cores of technology that they can actually license out to some of these large fabs in Asia, and they can get their circuitry designed into a lot of other products. As far as the IBMs and the people who make memory and processors, Ottawa companies wouldn't be competing, they would be designing to inter-operate with them, and both of them focus on the same customer base.

OBJ: Is patent protection in Asia still an issue for you?

PAGE: Intellectual property protection is a huge issue. Companies that invest heavily in R&D really should have a right to protect their investment and have a reasonable return on that . . . We are actually seeing an interesting phenomenon happening now, companies that are in China who are also doing some advanced work are now getting concerned about protecting their IP in North American and Europe. So, the pendulum has kind of swung full circle.

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OBJ: Is the future more in licensing IP or in development and manufacturing?

PAGE: There's a growing group of companies who are acquiring patent portfolios and looking to extract the value that they represent. Here in Ottawa, I think Wi-LAN has been a good example of a company that has transformed itself into a licensing company.

MOSAID has sharpened their focus, and that is their sole line of business now. They had a test line of business, and they had a circuit-design line of business, and they've sold off both of those.

So (that's) definitely a growing space. There are people who develop IP, and do a lot of investment. And they develop the IP on the intent of licensing it to larger manufacturers. This is that whole concept that's called "IP cores." And there are a number of companies in Ottawa who develop proprietary circuitry, and have some novel circuitry as well, and license it out for other people to use and embed as a segment in a larger device.

But on the other end of the spectrum, you have the large manufacturers, the people like the Intels of the world, or the Samsungs or the Fujitsus, who are large manufacturers of incredible volumes of devices. They continue to be as aggressive in the patenting front as anyone is, because they obviously have considerable R&D investments.

So I think there's a space for all of them. It's much easier for a company to start in Ottawa and develop some IP cores, and get them out to the marketplace through a licensing program. The probability of someone creating a new fab in Canada – it's almost cost prohibitive, I think.

OBJ: How much of a challenge has it been since Mr. Smeaton's sudden death?

PAGE: As you can imagine, a tragedy like that when it occurs is pretty devastating for the group. Doug had been here 15 years. Not only was he CEO of the company, he was a close family friend to many . . . You can overlay that with the fact that the company was starting the process of an exit when Doug's accident occurred. We were able to continue going down that path and successfully complete that exit this summer. . . . That's really a testament to the quality of the whole team here.

OBJ: Was the rest of the management team aware of all the things going on with the exit strategy, or were aspects of it known only to Mr. Smeaton?

PAGE: No, they were quite aware . . . Doug had a very participatory style of management. Certainly, he kept the team very well apprised of what was going on . . . We had had a four-year relationship with CMP prior to them acquiring us. I was on the marketing front. Certainly the team was quite involved, and that has allowed them to continue on through the process.

OBJ: Speaking of the exit, what changes have occurred since CMP Technologies took over?

PAGE: So far, there hasn't been a lot of changes. Obviously, when you get acquired by a large company, you have to go through a little bit of a feeling-out period. And there's some changes in policy, changes in structure, as far as reporting and things . . . We're still in the early days figuring out along with them what are the most fruitful paths for us to go down.

The changes we're going to see are . . . new lines of business, new ways of doing business for SI, (and) just building upon the incredible brand reputation that we have. Most acquisitions are fraught with overlaps in management structures and overlaps in products technology, or sales and channel management. And we actually had none of that in the acquisition by CMP.

This, for me, is just one of those acquisitions that can truly be one of those synergistic acquisitions where one plus one equals three.

OBJ: Is growth on the horizon?

PAGE: CMP is an incredibly large company. They're owned by even a larger company called United Business Media, a publicly-traded company out of the U.K. that's a multibillion-dollar media company.

But CMP themselves have incredible reach. They have global reach. They have access to channels and contacts that really weren't available to SI in the past. Our potential for growth really is phenomenal. We just have to be very, very smart, very precise and surgical about picking which ones we want to pursue in the immediate term.

OBJ: There must be some challenges facing your company and the Ottawa semiconductor industry in general over the next 12 months.

PAGE: One of the big things that's really facing us is . . . the Canadian dollar. Canadian companies have become comfortable relying on the foreign exchange rate for a significant part of their margin . . . it is certainly having an impact on everyone's bottom line. (Also), foreign competition is always an issue. We're seeing some new competitors coming into our space with different cost structures than ours . . . from China, for example. We have to always be sharpening our pencils for ways to compete against them. Sometimes it's just changing the nature of the game, competing with them by providing other services that they can't create.