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Chinese RFIC Manufacturer Claims Home Field Advantage

October 5, 2012
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Successful Silicon Valley executives, Vincent Tai and Shuran Wei, founded RDA Microelectronics in 2004 as a fabless IC design company with a focus on RF, analog and mixed-signal wireless SoC semiconductors. Establishing their operations in Shanghai, the company has grown significantly since its inception to become a leading supplier of FM radio receivers, DVB-S tuners, power amplifiers and Bluetooth system-on-chip to Chinese manufacturers. The Company's product portfolio, which includes power amplifiers, receivers, transceivers, front-end modules and more, have been incorporated into mobile handsets, set-top boxes, MP3 players and other wireless and consumer electronic devices sold throughout China, Southeast Asia, India, the Middle East, Africa, Russia, Latin America and Europe.

Microwave Journal China sat down with co-founder, Chairman of the RDA Board of Directors and CEO, Mr. Vincent Tai, to talk about his company’s success and plans for the future. Mr. Tai has considerable executive management experience dating back to his co-founding of Hong Kong based distribution company, Excel Associates in 1986, serving as General Manager and President of UMAX Technologies (1990-2001), a manufacturer of computer and peripherals and his co-founding of Silicon Valley based USI Inc., a developer of  linear power amplifiers. In addition to an MBA from the University of Chicago, Mr. Tai has an engineering background with science degrees (BS and MS) in electrical engineering from Georgia Institute of Technology.

MWJ:Congratulations on your company’s success and thank you for taking the time to meet with us. You studied engineering at Georgia Tech and spent considerable time in Silicon Valley. How did these experiences help you in starting RDA Microelectronics?

VT:Georgia Tech offered a strong engineering community that I was able to tap into, learn from and establish my own network of business connections that extended all over the United States.  At Georgia Tech and elsewhere, I was able to connect with very smart and talented people who would introduce me to other bright people and opportunities. Silicon Valley has a similar nature to it where smart people and opportunities exist very close to each other. Naturally in that environment people and businesses have a better chance to thrive. I connected with a lot of people there that are now involved with RDA in Shanghai, either directly or indirectly. Many of our senior management worked with each other at various companies in the US before joining RDA.

MWJ: So is the networking and association with a community of talented people something you and your co-founders were looking to leverage when you chose to set-up operations in Shanghai?

VT:  Yes, very much. We have an excellent pool of talent right here with many local talented engineers to recruit from (the company currently has about 320 employees total). I am local. I have a core R&D team here, and I have field application engineers here, which is a huge advantage over multinationals. Multinational phone companies retain a model that requires100 engineers to develop a new phone every six to twelve months. Local phone maker can develop a new phone every three months. As a supplier to the local phone maker, we need to react with quick response and short upgrade cycle. Foreign companies are not only slow to upgrade their products but also are slow to respond to customer complaints. I can send someone to my customer’s site right away and do quick diagnostics. Compare that to a multinational relying on its core R&D team that is in the United States. It takes more than a few e-mails back and forth to solve problems. With up to a twelve hour time zone difference that can add up to days.

MWJ: So finding and retaining engineering talent is important to your success?

VT: Our future success depends, to a significant extent, on our ability to attract, train and retain qualified personnel, particularly technical personnel with expertise in the RF and mixed-signal semiconductor industry. Since our industry is characterized by high demand and intense competition for talent, we need to be able to attract or retain qualified technical staff or other highly-skilled employees that we will need to achieve our strategic objectives. As we are still a relatively young company, our ability to train and integrate new employees into our operations to meet the growing demands of our business is one of our challenges. So this high density of engineers is good for our recruiting needs but it also represents a threat if we are unable to attract, train, and retain qualified personnel in which case our business may be materially and adversely affected. Silicon Valley has the same characteristic of high turn-over or churn among engineers from company to company, which on one hand leads to the spread of ideas and is the basis for regional expertise and growth, but on the other hand is still a challenge for management. We are very proud of our ability to retain employees, we have around 3% attrition rate for the last three years compare to a typical 15-20% rate for the high tech industry in China.

MWJ: What markets are unique to China and may offer a competitive advantage to Chinese-based design houses over a multi-national integrated device manufacturer?

VT:Opportunities to supply ICs to Chinese domestic branded and “white box” (no-name, generic brand) mobile handset manufacturers have grown significantly over the past few years. Initially, the majority of Chinese mobile handset manufacturers targeted domestic consumption and as the domestic market has developed, branded and white label manufacturers have grown market share relative to the multinational box manufacturers. At the same time, significant demand has grown for exports, primarily in emerging markets, which has led to further expansion of total mobile handset shipment volumes by Chinese manufacturers. Exports include both branded and white box manufacturers in China seeking international business on a private-label basis with mobile operators and leading local brands in these export markets.. Currently most of these mobile handsets are based on 2G (including 2.5G and 2.75G) technologies, yet the increasing availability and adoption of 3G services will lead to greater demand for handsets based on 3G technologies. This adoption represents even more opportunities for chip manufacturers.

MWJ: What advantages do Chinese-based chip manufacturers have over multinationals?

VT: The “cycle time” for Chinese handset manufacturers is extremely short. While it takes six months to design a new mobile handset outside China, Chinese cellphone makers are spinning out new models every three months and yet Chinese handset vendors provide chip suppliers will little information about market demand. As a result, chip suppliers need to be in touch with the market, so they can be ready when market demand spikes. Our success comes from our proximity to these customers and the supply chain allowing us to react quicker to the ups and downs in the China market.

We believe that the evolution of China-based mobile handset manufacturers mirrors past trends in other consumer electronics markets such as the DVD, MP3, set-top box and television markets. The availability of low-cost manufacturing capacity, independent handset design houses to which manufacturers can outsource design functions, and turnkey semiconductor solutions has reduced the initial upfront development effort and cost, thereby significantly reducing entry barriers. Development barrier have fallen, development cycles have shortened from one or two years to an average of one or two months, and distribution costs have also declined substantially. All these factors favor companies that can deliver designs faster and cheaper. When the entire ecosystem of foundries, design houses along with packaging and system OEMs resides here, the local team has some natural advantages with regard to speed.

MWJ:What are some of the challenges to Wireless Semiconductor Vendors in China?

VT:We believe the rise of the Chinese manufacturer is a globally disruptive industry trend and as a result the wireless semiconductor companies need to compete on fundamentally different set of parameters to address the demands of manufacturers in this target market. Mobile handset manufacturers in China have different requirements than those based elsewhere, such as: different product cost/performance trade-offs due to generally lower levels of affordability and lower priced products in emerging markets; higher levels of customer support for handset manufacturers due to lower levels of internal design skills of many Chinese mobile handset manufacturers; flexible logistic and distribution arrangements due to the different wholesale and retail-level distribution structures of their end markets; and accelerated product cycles due to different competitive dynamics and time-to-market pressures. Additionally, as these manufacturers have become more sophisticated about handset design, they are increasingly purchasing radio-frequency and mixed-signal semiconductors based on the specific merits of a vendor’s solution rather than relying on the generic reference design framework provided by their baseband integrated circuit vendors.

The growing sophistication of the mobile handset manufacturer and the lack of their own internal RF design skills means that our designers have to deliver parts that drop right into their platform and do not require RF engineering solutions outside our part. Therefore the responsibility for the RF engineering is with the chip designer.

MWJ: So what technologies are your RF solutions based on?

VT: We design and sell both CMOS and gallium arsenide products. For CMOS based product we have wireless SOC such as connectivity chips, RF transceiver  and base band chips and quite a few other chips. For gallium arsenide based semiconductor devices, we have power amplifiers, and we also have SOC based switches. Currently, most of the key PA supplier are shipping GaAs based PA, there are several CMOS based PA company marketing their CMOS based PA. Although, we think eventually, CMOS will become very competitive, we believe in the next couple years, GaAs based PA, especially the Multi Mode Multi Band 3G PA, will still dominate the market.

Our future success depends in part upon our proprietary technology. We partner with leading foundries, WIN Semiconductors, IBM, TSMC and SMIC. We have developed our core competency through a combination of technical know how, system and application level knowledge and expertise in mixed-signal integrated circuits which convert real-world analog signals, such as sound and radio waves, into digital signals that electronic products can process. Through internal development and licensing, we have assembled an extensive library of radio-frequency, mixed-signal, and digital signal processing building blocks, which enables us to develop our comprehensive system-level intellectual property.

MWJ: So what are your plans moving forward?

VT: We intend to build upon our competitive position serving China's mobile handset market and leverage our radio-frequency design expertise to become a leading provider of semiconductor products in the global cellular, broadcast, and connectivity market. While we plan to continue to focus on mobile handsets, we will also continue to address specialty markets outside of mobile handsets where highly integrated single chip solutions can replace discrete components. To achieve these goals we will continue to develop highly integrated products and expand our product offerings with high-margin products:, maintain and expand our customer base, reduce our production costs while investing in our staff of highly productive engineers and technologies that help us compete.

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