They suck at forecasting
4. They’re not open minded.
“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.
-- Additional reporting by Miya Kong
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