SAN JOSE, Calif. – Union Semiconductor is one of the rare China fabless chip companies working to develop markets in the U.S. and Europe. Its efforts are motivated in part by a recent downturn among China’s OEMs, especially in the mobile sector.
Like many fabless chip companies in China, Union got its start trying to design a cheaper version of components made by Western semiconductor giants. Union’s story provides a cautionary tale about the lack of design skills that dogs all aspects of China’s electronics industry, including its foundries which Union finds subpar.
The 12-year-old analog chip company expects revenues of about $40 million this year, down from nearly $50 million in 2011. Apple and Samsung made huge in-roads in China’s smartphone market this year, taking share from China handset makers such as Haier, Huawei, TCL and ZTE as well as a number of smaller companies who make unbranded phones.
Macro-economic sluggishness and rising costs in China have added to a tough year. Union lost as many as ten percent of its customers as many small companies closed their doors in 2012, said Gary Y.H. Yang, Union’s chief executive in an interview with EE Times here.
“We had a difficult time late last year and early this year, but we have been coming back since July,” said Yang, a candid and upbeat former microelectronics professor turned entrepreneur. “Our strategy is to invest more in new products.
“When business is good, you don’t have so much energy for new product design--I don’t even have enough time to review designs,” said Yang, who handled everything short of customer service in Union’s early days. “During the down cycle, I can spend more time on new product design,” he said.
“We’re also exploring new customers in security, wireless hotspots and Ethernet,” added Yang. “These customers are all new for us--that’s why we started expanding into North America and Europe almost four years ago."
About half of China’s electronics business is in making systems designed in the U.S. or Europe, Yang estimates. So it made sense for Union to go West in its search for design wins.
“Many people think China’s market is big enough for their company, but if you want to move up the food chain, you need to expand,” Yang advised. A focus solely on China “is not sustainable” at a time of dropping prices and heavy competition, he added.
Nevertheless, winning sockets in U.S. and European designs is no cakewalk. “It’s a tough job because we are a Chinese company and people lack confidence in us,” he said.
China chip companies have one advantage when working with Western distributors, said Russ Almand, director of North American sales for Union, based in Silicon Valley. They can track design wins when manufacturing is turned over to China ODMs who sometimes replace specified parts with similar but cheaper components made in China—changes Western OEMs often miss.
“We have a flashlight in the black hole of China,” Almand said.
In my opinion, China's fabless companies need to take a more global perspective, pursue broad markets and embrace innovation as well as efficiency if they are ever going to get on the road to being truly successful. Union is among the few on this road.
I am sorry to answer that your are completely wrong.
We Chinese only want to earn money as quickly as possible. Seldom company has the patience to wait for several years to improve their products' qulity.
Therefor, many companies from China only sell cheap procuts comparing with U.S.A or Europe or Japan' to the area in which common consumers pay much attention on price.
Union knew very well they cannot compete the high end ones, so they choose the fancy way in terms of features and low price to attract western market. This is all about the same tactic of Makers of Chinese products, much of the time they are not emphasize reliabilities test in their manufacturing process. If they are quality products, their own Chinese should buying from them more and more. Right ?
Union Semi is one of China's most established and successful fabless chip firms. So it's not surprising to see them taking this next step. But what about the dozens/hundreds of smaller fabless chip firms in China? How will they react to the lull in the domestic market?
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