SHANGHAI, China – Multinational semiconductor companies are no longer able to compete with China’s fabless chips vendors in the consumer electronics IC business, according to Vincent Tai, CEO of RDA Microelectronics Inc. “It’s game over” for them, Tai asserted in a recent interview with EE Times here.
RDA Microelectronics, founded here in 2004 and listed on the Nasdaq exchange since November 2010, is a leading Chinese fabless IC vendor supplying RF and mixed-signal chips for cellular and broadcast communications used by China handset manufacturers.
RDA is a major supplier to the Chinese mobile handset market. Tai, quoting IHS iSuppli estimates, claimed RDA already has the leading market share in power amplifiers, Bluetooth, FM tuners and DVB-S tuners for the domestic white label market.
Still, RDA has a long way to go to compete with the likes of Broadcom in the global semiconductor market. Still, according to Tai, being a leader in the Chinese market is a good place to be.
RDA’s enviable position foreshadows a growing trend here for companies like RDA to dominate global electronics markets, Tai noted. As evidence, he cited the fact that multinationals such as Analog Devices and Texas Instruments backed out of China’s baseband chip business. While technically not Chinese companies, MediaTek and MStar, two Taiwanese giants, grabbed that market by leveraging their Chinese ties.
Indeed, Tai boldly predicts that the days for multinational chip companies are numbered, especially in the Chinese mobile handset and set-top box markets. “It’s because the supply chain in China can’t allow you to have a 50 percent gross margin,” he explained.
When the entire ecosystem of foundries, design houses along with packaging and system OEMs resides here, “You need to be a local to play the game,” said Tai.
The RDA chief described four rules for surviving in the Chinese market:
Rule #1: The “cycle time” for Chinese handset manufacturers is extremely short. While it takes six months (or a year in the case of Nokia) to design a new mobile handset outside China, Chinese cellphone makers are spinning out new models every three months.
Rule #2: Chinese handset vendors provide chip suppliers will little information about market demand. Therefore, chip suppliers need to be “in touch with the market,” said Tai, so they can be ready when market demand spikes. Speed is the key. “You need to be able to live with the ups and downs on the China market,” he said.
All I know about China is we sold an HF based wet etch system there to a government fab in 2005. The contract engineer rang us up to complain during the install that the fab had no PPE (Personal Protection Equipment) whatsoever for the engineers working on this HF chemistry based tool.
I'm looking forwards to NOT working in any factory like that at any time in the next 20 years...
Contact us now to buy and sell used equipment
and enjoy the benefits of cost-saving.
The points look reasonable, probably because if we applied the analysis in the US or other developed country, we'd expect similar results. Although the author, in order to criticize the one-child policy, appeared to favor many-child policy - that obviously doesn't work for other reasons.
Many of the departed are trying to return to the US. Corruption and politics at ever level of society is a very real problem. You can't live a normal life in India/China with every Tom, Dick and Hari asking for a bribe or treating you for one.
Sorry, whatever our faults here, bribery and corruption is hidden and doesn't affect us on a personal level.
The issue is how did the Japan Inc transform into high quality?
It is because the government policy to force them to follow. Which I don't see the Chinese government is taking that action? It took Japan ten years after the government launched the "quality program" in 1965.
Another thing is Japan spent tons of money to do the deep researches and China mainly relies on the foreign technology transfers... That is the key differences, once the foreign companies are gone, so are the quality...
I doubt the accuracy of that statement.. China makes nickle and dime on their products and only spends very little on the R&Ds.. US fabless design houses will spend around 15% of the revenues in the R&Ds because the net gross margin over 30%. The Taiwanese fabless design houses can only spend 5-7% of the revenues on the R&Ds. But China counter parts can only spend less than 3% of the total revenues on the R&Ds or even lower because the low net margins.. I know it the first hand because our fabless design house in Taiwan is competing with the China ones.
Some good points navelpluis. My 4 years working experience in Holland shows there are many Dutch guys who are really arrogant.They are great engineers but they know nothing of what happening outside Holland and has no vision for future.What happens at NXP is a good example.
Join our online Radio Show on Friday 11th July starting at 2:00pm Eastern, when EETimes editor of all things fun and interesting, Max Maxfield, and embedded systems expert, Jack Ganssle, will debate as to just what is, and is not, and embedded system.