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rick.merritt
In my opinion, China's fabless companies need to take a more global perspective, ...
collin
China fabless firm looks West as mobile slumps
Rick Merritt
11/26/2012 3:10 PM EST
Starting with a single product
Maxim’s Jack Gifford lured Yang out of his academic post in Shanghai to become a market researcher for the analog company, exploring its potential in China. “We identified some opportunities, but mostly we saw mismatch,” said Yang.
Maxim wanted to make high margin products for industrial markets, but China’s focus was and still is mainly on consumer products. “For their own system designs, China’s engineers choose components that are good enough, so TI and National are more successful in China than Linear Tech and Maxim who want high margins,” Yang said.
After spending almost four years with Maxim, Yang quit to found Union with his own money and $200,000 in seed capital from a venture capitalist. “It was a crazy time of the Internet boom, my VCs had just cashed out, made a lot of money and were eager to make more--they didn’t even know the details of semiconductors,” said Yang.
A team of six people initially focused on just one product. “It was almost the same spec as a part from TI and Maxim, only at a lower price, but it was very difficult for us,” Yang said.
Yang quickly found out he had to please two customers, the hard-negotiating China buyer who just cared about price and the China engineer who was more concerned about performance and features.
“We found the engineer was not happy with one aspect of the TI and Maxim spec, the output voltage level, so we upgraded our design to increase the output voltage swing 50 percent,” Yang said.
The budding CEO convinced a lead engineer at China’s top maker of power meters it was a good part. The engineer recommended the part to his buyer who asked Yang how much it cost.
“I said, ‘you tell me the price,’” recalled Yang. “He said, ‘TI sells it for a dollar, so I’ll give you 80 cents,’ and I said OK because our cost was ten cents--everyone was happy."
The high profile design led to others, and the company survived on the single product for three years. By 2003, Union snagged $2 million in a second VC round to expand its portfolio into related interface parts. It now has a catalog of well over 100 parts in four broad areas and is self-sustaining.
Maxim’s Jack Gifford lured Yang out of his academic post in Shanghai to become a market researcher for the analog company, exploring its potential in China. “We identified some opportunities, but mostly we saw mismatch,” said Yang.
Maxim wanted to make high margin products for industrial markets, but China’s focus was and still is mainly on consumer products. “For their own system designs, China’s engineers choose components that are good enough, so TI and National are more successful in China than Linear Tech and Maxim who want high margins,” Yang said.
After spending almost four years with Maxim, Yang quit to found Union with his own money and $200,000 in seed capital from a venture capitalist. “It was a crazy time of the Internet boom, my VCs had just cashed out, made a lot of money and were eager to make more--they didn’t even know the details of semiconductors,” said Yang.
A team of six people initially focused on just one product. “It was almost the same spec as a part from TI and Maxim, only at a lower price, but it was very difficult for us,” Yang said.
Yang quickly found out he had to please two customers, the hard-negotiating China buyer who just cared about price and the China engineer who was more concerned about performance and features.
“We found the engineer was not happy with one aspect of the TI and Maxim spec, the output voltage level, so we upgraded our design to increase the output voltage swing 50 percent,” Yang said.
The budding CEO convinced a lead engineer at China’s top maker of power meters it was a good part. The engineer recommended the part to his buyer who asked Yang how much it cost.
“I said, ‘you tell me the price,’” recalled Yang. “He said, ‘TI sells it for a dollar, so I’ll give you 80 cents,’ and I said OK because our cost was ten cents--everyone was happy."
The high profile design led to others, and the company survived on the single product for three years. By 2003, Union snagged $2 million in a second VC round to expand its portfolio into related interface parts. It now has a catalog of well over 100 parts in four broad areas and is self-sustaining.
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rick.merritt
11/26/2012 8:01 PM EST
Felt some bumps in China's mobile market? Have your own opinions about China's foundries, analog startups, and/or shortage of seasoned designers? I'd love to hear from you.
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dylan.mcgrath
11/27/2012 12:19 PM EST
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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Chee Choy
11/27/2012 7:33 PM EST
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 ?
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collin
11/28/2012 9:06 AM EST
Sir,
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.
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rick.merritt
11/28/2012 2:22 PM EST
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.
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