“Fundamental to mergers is to agree with other companies,” said Luo Yi, CEO of X’ian Semipower Electronic Technology Co. (X’ian). Chinese executives, generally speaking, don’t communicate with other companies with an open mind about the possibility of a mutually beneficial deal. “Except for Huawei, I don’t see many Chinese fabless companies that can pull that off.”
5. They’re not identifying the right segments.
“To beat TI, China has a long way to go,” said Zhang Jin fang, CEO of Chipone (Shenzhen). The most important thing for us is to find the right segments of the market that we should be in, he added. “To identify that strategic market is hard.” So far, what usually happens is that a whole bunch of China fabless firms spot the same opportunity and go after the same or similar market segments en masse. Then, they all try to beat each other on price.
6. They suck at forecasting.
Chinese fabless companies are terrible at forecasting the market demand for their chips. A Chinese market environment that tends to favor the reselling of chips in Hong Kong, for example, creates a broad impression that there’s a chip shortage. The inevitable result is overproduction and an oversupply of chips, thus fueling price competition and a buyer’s market.
7. The "spirit" to match TI is willing, but the substance is weak.
China fabless companies aspire toward TI’s example, but “TI has something special Chinese companies can’t touch,” said X’ian Semipower’s CEO Luo. “TI has the big bucks it takes to invest in the future.” It’s hard for most Chinese companies caught up in today’s market forecast to think five to 10 years into the future. Even if they were tempted to invest for the long-term, they simply don’t have the capital to spare. They either need a sure thing — which is impossible when you’re envisioning scenarios that have yet to develop — or a whole lot more money than they have right now.
Huawei could be China’s TI someday, Luo predicted. But he’s not betting on it.
First person to comment that isn't trying to sell sunglasses and handbags! I am actually more positive that this will happen than some of these folks on the panel. That said, I see the growth of the China semiconductor industry as being somewhat different to that of TI. Several companies are aligning to key OEMs in China first, developing a solution there and then rolling that out more broadly across the world. Granted, it is still early, but if those companies are committed to listening to the feedback from those companies (i.e. developing stronger strategic and marketing skills), then they will succeed. If you look at the system level, Huawei went from nothing to being a significant $30B force worldwide (with limited engagement in the US market for well covered reasons). There is no reason why this cannot happen at the semiconductor level too.
I too think this will happen as there is a political will behind it. The Chinese Government is pending huge money on R&D, and this will pay off in the mid to long term, I believe. That said, they should aim higher than TI IMHO.
Indeed, the Chinese government offers some financial support, but many startups I talked to here in China aren't getting that big an incentive from the government.
Sure, in the end, the government's support in growing companies (like Huawei and ZTE) could make a difference, but I think the struggle Chinese fabless companies face now is that they need to figure out by themselves how to get over the first hump -- from a run-of-the-mill small startup to be a slightly bigger player with global recognition.
Yes, I believe it will happen organically once the numbers reach a critical mass. There will then be consolidations which will create global players. It's inevitable IMO given the Government's huge investment in R&D.
The development of semi-conductor industry in China has gone a really fast pace. With the concentration of foundry companies, the relevant R&D activity will move in a reasonably fast pace. Who knows when the next TI is born in China. The likelihood is the next semiconductor R&D company born in China is not going to be the same kind as TI is.
The Chinese are very good at copying and replicating inexpesive devices, but can anyone name one "China" exclisive device that had not already been designed and developed else where?
Creating a climate of innovation requires a management thought process willing to take losses for unsuccessful new devices. The Chinese punish failure. Until they change, they will never reach the levels of innovation and product process of a TI.
Just my opinion.
when you try to survive, how can you have the luxury to fail. Regarding the comments "Chinese punish failure". Not sure how much you know Chinese history. In culture, that is not true. Otherwise, China won't have been such a great nation for thousand of years.
I retired from Texas Instruments. During my tenure in the R&D Labs, if you did not fail at all you were just not pushing the design envelope enough. I worked on many failed products and some very successful ones. The Digital Light Processing (DLP) technology, that I worked on, took 12 years of internal R&D funding before they sold the very first chip. No other company, Chinese or not, could afford a long term project like this one. For any company to really succeed, the management must have long term goals in mind. By long term I mean many years, not just a few months.
The same could have been said of Japan in the 1950's; they just copied transistor radios designed in the west. But then came giants like Sony and Toshiba. What may come out of China will look nothing like TI, but I'm sure a giant will come.
No. 8: all chinese experts sucks.
I read through all the items , if that's all these experts could imagine, they are idiots.
No. 9. the true reason, chinese so far lacks trust and common value in general.
when you put 3-5 capable chinese VPs together, they .. wont cooperate, they will fight. that's the biggest difference between TI and most of chinese companies. and that 's what's keeping them under.
like SMICs big internal warfare last year, it ended up with a group of taiwan top management take over. The chinese top dog ie simon yang etc are just morally incapable of staying in such kind of position.
TI's real foundation and secret sauce is .. . sourthern baptist church, that's how to keep people trust one another and won't leave the game if they don' t like their PPI...
Human character can be changed. More and more chinese have an open mind, especially many of them have abroad study or working experience, this will change their way of thinking. And it will change the way which you are thinking..
So.. Don't be too absolute.
yeah right, I said in general.
what impressed me most in recent years is Richard Chang of SMIC, a TI veteran, 1st CEO of SMIC.
the 1st thing (maybe) when he setup smic is setting up a bible group in his home.
so not all chinese are idiots, they ll learn the tricks as koreans.
@Echo, you are still missing the point, it's not about character, it's about true love, between VPs , between you and your boss.
It's like a real family, the ignorance of many chinese such as you is one of the reason of this situation.
Good Part of it is atleast China is attempting or trying to understand what it takes us to become TI or Qualcomm. Sure, some day they have a chance to get there. As they pointed internal co-operation is the key element rather than in fighting and openness in communication with their stake holders.
Huawei is not the next TI. It's the next Cisco. Today.
I have been told in both Taiwan and China there is a feeling that everyone wants to be the boss and this gets in the way of the M&A needed to build large companies with broad portfolios that have a deep bench of crack divisional leaders working under on CEO.
It is true that culture and IP barrier handicap have been important factors, but that can be changed with money. What they need is to develop a few chips for a couple of killer applications; rake in tons of money, then they will be on their way. There are a couple of good examples in Taiwan.
if you look at chinese IPOs , most of them have 1 founder only, (baidu, huawei, sohu...)
at the same time TI got 4 founders, Intel 3, google 2...
very clear , most chinese don't know /can't find a real partner.
The reason is Nature. Most of the why most ? almost all of the technology born in the western countries and all the other especially eastern countries follow this. My personal idea is this is because of the food grown in that part of the earth and the consumption by the people in their respective places plus the cosmic radiation to that part of the earth.May be after a few more centuries the scenario may change.
I think they have more fundamental problems such as trust and free communication infrastructure.
My understanding is that design teams are isolated and information does not flow freely, due to a state that is very restrictive.
I think the innovation culture has not yet mature in China so it takes some long time for Chinese to catch up the west. The education fundamentally is different. The whole 5000 years of education system is not creating good entrepreneur but officers that obey the king while science is not treasured by the country for very long time so generations by generations Chinese are not cultivated in an open space of creativity and innovation. Without good innovation culture it is very high to go for hi-tech! Well, although the Chinese now are more exposed to the western lifestyle and more Chinese are educated the western way, it still takes some time for the whole culture to change!
what country you think China was copying in the its thousands of years of history? Look at what China has achieved in the history, you call that a culture lack of creativity and innovation. Without creativity and innovation, you can build a country with GDP more than the rest of the world combined? Chinese should be responsible for all the problem existing right now, but attribute that to the great culture built by the great ancestors, that is nonsense.
Often the nature of society dictates this. Although it is now supposedly open and no longer a Communist country, the fundamental nature of mistrust is built into a communist society where suspecting every other person to be an agent is second nature.
For example, when we were selling SLC (Subscriber Loop Carrier) products to several countries, we had a uniquely different problem with China. All other countries would tell us the supply chain, who bought it, where it was deployed and provided contacts. We could dial into that machine and get its health related parameters. The information was used generally to improve the next generation design.
Only in the case of China, it went into a black hole. A Govt agency bought it wholesale - No clue of where and whether it was deployed and no information on how it was doing. No contacts, nor related info. This is was a uniquely perplexing situation (to us from this end, as a product house). I am sure TI if they supplied chips to China, would experience the same. Therefore, to expect China to compete is not practical since there is no "two-way communication".
Just the other day I was having a conversation with another person while drinking tea, and thinking to myself how good the tea tasted. But what if the tea had tasted bad? Yes you can have good conversation with bad tea, but good tea can certainly add a lot. If I had a choice between having excellent food (three meals a day), and excellent internet service, what would I pick? Well, I limped along on a 56k modem until just a couple years ago, so I might just pick the food! So being the best country at making tea is actually a pretty good feather for one's cap. And I suspect that a country that can produce good quality tea will also be able to, when the time arises, make good semiconductor products. Doing something well lends itself to many enterprises.
What ingredients does it take to make a good semiconductor company? I think freedom is one ingredient. So part of TI's success may trace itself back all the way to the Alamo. And there is also the notion of "quest". Being able to freely follow some strain of thought where it leads. In TI's case, it has lead to a proliferation of semiconductor products. In HP's case, it went from test and measurement in a garage to optoelectronic and semiconductor products and printers and pcs. In surfer jargon, these companies "caught a wave" and rode it.
But making good tea is also a pretty important role to play in our world. Just ask th English!
There is an idea!
Seriously, many Chinese fabless companies, sooner or later, need to find companies to buy, technology to transfer and engineering talents to hire from abroad, if they are serious about going truly global.
How is the challenge facing Chinese fabless companies different from what similar companies in the West have already gone through?
The Chinese outfits are starting from scratch in an essentially new market. Each is struggling to differentiate itself, get a track record, and score design wins. Those who do so successfully are likely to find investment available. Those who don't will wither and die or be acquired.
If you were an investor looking to invest in one or more of these outfits, who would you pick, and why? At the moment, the answer would probably be "none of them", because investment is made in anticipation of future profit, and there isn't enough information to handicap the field and and make plausible guesses as to who might actually make money.
TI didn't become what it is overnight. It's the result of decades of diversification and growth. As the Chinese market matures, consolidation wil occur and something like TI might be possible, but it won't and *can't* happen quickly.
Yep. And you know what, Bell Labs (Alcatel/Lucent) has a BIG presence in China -- building the infrastructure. It's based in Shanghai and doing a host of interesting things. More on that later. Stay tuned.
An eight reason can be lack of IP protection. Even a reputation for lack of IP protection makes it very difficult for Chinese companies to trust each other and form meaningful partnerships. Western SoC companies nurture a third-party IP vendor (TPIPV) ecosystem based on trust. TPIPVs can dramatically reduce time to market and investment required.