Top Execs Beat Feet to China: OEM activity very high in industry's silver lining

Electronic News, Dec 17, 2001 by Gale Morrison

The industry's top executives are keeping themselves very busy courting the mainland China electronic OEM market, especially since the Communist nation's entrance to the World Trade Organization (WTO) in November.

LSI Logic Corp. recently held a "Digital Home 2001" forum in Shenzhen, China, where the ASIC stalwart showed off its ICs for DVD, DVD-Recordable and DVR devices.

LSI entered these segments with its acquisition of C-Cube and has since been very active in China's market. According to company spokeswoman Ann Chen, among the attendees were 250 Chinese executives and design engineers from 48 OEMs and 24 journalists, and the meeting was "very successful." She said that a government official from China's Ministry of Information Industry also attended and spoke at the forum.

China Central TV interviewed Mark Wadlington, LSI's VP and general manager of Asia/Pacific, and the interview was later aired during prime time all over China, she said.

"Wadlington also met with the CEOs of some leading Chinese OEMs in their native consumer electronic industry on his trip. We have since won design-ins with several of the leading OEMs on LSI Logic's DVD, DVD Recordable and DVR solutions," Chen said.

Conexant Systems' Eric Huang was in China last week, where he spends half his time. Huang is VP of engineering within Conexant's Personal Computing division and also the chair and general manager for Conexant's Chinese entity, known as Communication Technologies Development (CCTD) Co. Ltd., in Shanghai. The other half of Huang's time is spent at corporate headquarters in Newport Beach, Calif.

U.S. semiconductor senior executives, all the way up to the CEO -- and in Motorola's case in November, the entire corporate board -- are hopping on planes and showing the Chinese they are ready to do business.

"I personally already go to China [to see customers] two times a month," said D.K. Cheng, CEO of High Bandwidth Access Inc. (HBA), a start-up that's breaking into the FIFO market with a United Microelectronics Corp.-produced, standard cell-designed part to compete with IDT Inc. and Cypress Semiconductor Corp. (See story, page 12.)

China's communications infrastructure market is, compared to the contraction North America is watching, gargantuan.

"Basically, everyone is going to China pretty often. Agere is going there once or twice a month. I heard IDT and Cypress go to China every other month," Chengsaid. "With WTO acceptance, it's much more easy for us and for European companies to sell products directly into China."

Cheng said China has exactly four major telecommunications equipment vendors, and the government makes its buying decisions in huge swaths, usually on one standard.

Analysts say the true allure of China is that the country has so many consumers for electronics that have already been engineered. Motorol--a which has a partnership with Huawei Technologies, sometimes called the Cisco of China--and Lucent, for instance,just need to execute and deliver on products they've already engineered and can deliver from their mature fabs and assembly lines. Compare that to the U.S., Japanese and European markets, where every sell is for the latest, greatest, fastest, still-in-the-pipeline technology since consumers are already well-equipped and are currently watching their budgets extremely tightly, too.

China, already the world's largest cell phone and pager market, can be pure return-on-investment.

The Chinese government, said HBA's Cheng, lays out huge deployment goals and sees that they are filled, but it treads carefully with vendors so that one does not get a lock on their market and then hold a monopoly.

"They don't want to have one vendor become a monopoly," he said. The country is 95 percent equipped to the GSM cell phone standard, but the government just awarded Qualcomm a contract for its CDMA 2000. And executives, Cheng said, shouldn't get too starry-eyed over China's potential because the government is trying to control the economy and perhaps avoid the volatility that smaller nations such as Indonesia, Malaysia and Korea have seen.

"Right now the Chinese government is trying to control the economy because it's grown too fast the last few years. They have put on the brakes," he said.