Reed Electronics Group created Movers and Shakers five years ago to recognize leadership and innovation. In the previous annual issues (www.reed-electronics.com/moversandshakers) and in this sixth edition, we've noted the achievements of influential executives and companies. This year, the emphasis on customers and the global nature of the industry is much strengthened.

While doing so, we've also taken pains to acknowledge that missteps and failures are par for the course. Electronics is a brutal industry, and leading lights sometimes get forcibly moved and shaken by factors that are beyond their control—from macroeconomic conditions to tectonic shifts in the technology landscape.

With that in mind, we decided to revisit some of the CEO conversations from past editions of Movers and Shakers in hopes of spotting trends that continue to reverberate. We also asked a handful of present-day CEOs to give their views on not only the past five years but also the key opportunities and challenges facing the industry today.

The first Movers and Shakers arrived in mid-2000, just as the dot-com bubble was about to pop. Much of the conversation among CEOs in that issue focused on the difficulty of retaining talented people in a so-called "get big fast" market fueled by irrationally abundant venture capital. Not one CEO sounded so much as a note of caution about the hyper-investment then taking place. On the contrary, they clearly expected the high times to continue indefinitely. One CEO, Dwight Decker of Conexant Systems, even stated his company was fortunate to be 100% focused on communications because "that's just about the best place in the world."

Suffice to say, Decker's opinion may have changed in the subsequent months, as the harrowing downturn ravaged the industry in general and communications in particular. Yet the pain ultimately proved beneficial, according to CEOs speaking today with the benefit of hindsight. "There's nothing like a significant downturn to bring people who have cost expertise—sometimes called CFOs—back into the decision space," says Aart de Geus, CEO and chairman of EDA vendor Synopsys.

Despite the crash, the dot-com "land rush" did accomplish quite a bit, according to Bob Bailey, president and CEO of communications-focused silicon vendor PMC-Sierra Inc. That initial wave of investment generated a communications infrastructure that enables powerful applications that we take for granted today, such as broadband and wireless connectivity.

"Now what's happening is a second wave of investment," Bailey says. "New applications are surfacing and being innovated that need even more bandwidth and more intelligent networks." Better yet, he does not expect irrational exuberance to wreak havoc this time around. "The good news is that this second wave of investment is grounded in sustainable financial business cases," he says.

Others are less convinced the industry learned from the excesses of the past. In the 2002 Movers and Shakers,

John Daane, chairman, president, and CEO of programmable-logic vendor Altera, called on his peers to share more forecasting information in order to better balance supply and demand.

He doesn't see much progress on that front. "I believe that if we were to suddenly see strength in more of the end markets, the semiconductor industry would run out of capacity. That would cause double ordering. That would cause companies to try to take inventory positions. That would cause a tremendous pickup in revenues in the short term. But it would inevitably lead to a slowdown."

That happened in 2004 when a strong first half led to a weak second half as companies worked off bulked-up inventories, according to Daane. "Even in what was a mild upturn, you saw the same pattern of imbalance," he says. "I think very little has been done to improve communications and logistics."

Over the last five years, electronics companies have also been grappling with the increasingly global nature of the industry. Global issues garnered little mention in the 2000 and 2001 editions of Movers and Shakers, but all that has changed. "We'll do about $4 billion in China this year," Flextronics CEO Michael Marks stated in 2002. "We have 20,000 employees there, and anybody who thinks these guys aren't taking over the world is just asleep at the switch."

Today, global factors permeate every aspect of business. "Understanding your customers on a global scale is very important," says Lothar Maier, CEO of analog-IC maker Linear Technology. "And being able to provide service and application support on a global basis is important." Today, 72% of Linear's shipments go to destinations outside North America, Maier says.

Altera's Daane reports that 25% of his company's revenue comes from Asia, but urges careful analysis of those numbers because contract manufacturing of products designed in the West absorbs many of those shipments. "In reality, there's still a tremendous amount of design activity in the U.S.," Daane says.

Despite such assurances, North American engineers have complained loudly that the companies they've faithfully served are now abandoning them in favor of lower cost Chinese and Indian counterparts.

Most of PMC Sierra's designers reside in North America, Bailey says, but the company has an engineering center in Shanghai and has just opened another in Bangalore. Such moves are just plain good business, Bailey argues. "That is a prudent thing to do, not just because of cost but also because of scalability," he says. "The number of engineers graduating out of universities in China and India dramatically outpaces that of the Western countries. So we have to tap into that labor pool. And those engineers are closer to the customers who are going to provide the majority of the growth going forward."

Whereas chief executives in 2000 worried about dot-coms poaching their employees, CEOs in 2005 are troubled because the United States is not producing enough engineers. "The United States is completely underestimating the importance and the value of education, specifically in science and math," de Geus says. "And what makes this a very scary problem is that if you said tomorrow, 'We're going to fix it.' The day after tomorrow, the problem won't have gone away."

Whatever one thinks of these highly charged issues, globalization is creating enormous opportunities for companies that can harness engineering talent where they find it. "In about 20 years, the number of consumers will roughly double," de Geus states. However, he continues, the disposable income of these new middle-class consumers from so-called BRICs (Brazil, Russia, India and China) will, at least initially, be much lower than that of consumers in more mature economies. Therefore "cost has become the single biggest driver in the mind of most electronics executives," he says.

Yet at the same time, design is getting more complex and expensive. "The biggest challenge I see for the semiconductor industry right now is the rising cost of design associated with moving forward to new process generations," says Altera's Daane.

"You have deflationary influences, you have huge volume opportunities, and you have escalating R&D cost requirements," says PMC-Sierra's Bailey. "Balancing all those out to where one can have a sustainable business model is a challenge for most high-tech companies."

But to the victors go the spoils. "I won't say that there's what I would call a killer application," says Linear Technology's Maier. "What really excites us is that there are many opportunities. We're really only limited by our own skill and imagination to go after them."

Despite the stiff challenges presented by the confluence of cost, complexity and globalization, optimism abounds. "Every market will have its own brilliant ideas," de Geus says. "And by virtue of this being a knowledge-based economy, brilliant ideas travel pretty much at the speed of the Internet. The major killer app is the unleashing of innovation."

Matthew Miller is executive editor, online, for EDN.