Rule #3: Chip makers must survive on lower gross margins. Many local
chip companies can live with a 35 percent gross margin in order to achieve a
20 percent operating margin, said Tai. But for most multinational chip
companies to achieve the same 20 percent operating margin, they need a
50 to 55 percent gross margin. “That’s no match with the locals.”
#4: System vendors in China are less technical. Hence, they require
more hand-holding. The success of Taiwan’s MediaTek here can be
attributed to the turnkey solutions it offers Chinese system companies.
said multinational companies retain a model that requires100 engineers
to develop a new system every six months. “We are seeing Chinese system
guys pump out a new product every three months with just five to 10
people.” Tai said, “That’s very disruptive.”
are not only slow to upgrade their products but also are slow to respond
to customer complaints. “I can send someone to my customer’s site right
away and do quick diagnostics,” he said. “A multinational’s core
R&D team is still in the United States, and it takes more than a few
e-mails back and forth to solve problems.”
Many in the West
focus on the cost advantages of Chinese companies. Instead, they should
be focusing on the agility of Chinese chip vendors and system companies
in their domestic market. As Tai noted, “I am local. I have a core
R&D team here, and I have field application engineers here. I have a
huge advantage” over multinationals.
RDA increased its annual
revenue in 2011 by 51.1 percent to a record $288.9 million, compared to
$191.2 million in the previous year. The company’s gross margin was 34.5
percent compared to 29.8 percent in 2010. In the first quarter in
2012, RDA’s revenues totaled $72 million, with a gross margin of at 35.9
percent and a 20 percent operating margin. The company has $143 million
in cash and no debt. It currently employs 320 workers.
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.
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