Europe had grown accustomed to having three chip companies in the world top 10 rankings: Franco-Italian STMicroelectronics; Netherlands-based Philips Semiconductors, which became NXP; and Infineon Technologies AG, which years before had been the semiconductor arm of Germany's Siemens, had made the cut for years.

But 2008 saw the start and 2009 the continuation of a major realignment and retrenchment among the continent's leading semiconductor players.

To drive the point home, Europe suffered more than any other region when chip sales imploded earlier this year. For the first nine months of 2009, European semiconductor companies' sales were down nearly one-third from the tally for the first three quarters of 2008.

Of course, leading semiconductor companies today have to be global. But home markets still count for something, and at the beginning of the year there was some concern that NXP could disappear under the burden of debt landed on it by Kohlberg Kravis Roberts & Co., the private equity group that led the leveraged buyout of NXP from Philips Electronics.

CEO Rick Clemmer has worked throughout the year to reschedule and reduce NXP's debt, sell off unwanted operations, move the TV semiconductor business out and take a 60 percent stake in Trident Microsystems. The efforts to slim down NXP and train its focus on high-performance mixed-signal are being made to improve its operating position, but they have raised questions about the chip maker's future and its management's longer-term objectives.

As for the future of Qimonda, the DRAM operation owned by Infineon Technologies, there is none. An administrator has been in place all year trying to sell Qimonda as a going concern, but in reality the year has been one of selling off various assets around the world. Europe is out of the DRAM business.

That leaves STMicroelectronics as the unrivaled standard-bearer for European semiconductors. But even ST is smaller than it once was, mainly as a result of steps undertaken in 2008. Mobile phone silicon was moved out into ST-Ericsson, a joint venture established in February 2009. In 2008, ST and Intel pooled certain flash memory operations to form Numonyx BV (Rolle, Switzerland).

Europe may have retrenched, but optimism remains. It comes mainly in the form of intellectual property plays from ARM and Imagination Technologies, and via the continent's newfound enthusiasm for entrepreneurship and fabless chip companies.

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