“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.
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.
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.
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.
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.
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.
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.
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