SHANGHAI – Editor’s Note: Electronic News Senior Editor Jeff Chappell continues to discuss how working for a U.S.-based international chip company means more than straddling geography and time differences with China-based Texas Instruments engineers Tan Hui, a member of the technical staff and an application manger in the industrial and home appliance semiconductor group; Michael Wang, system engineering manager in the portable power management semiconductor group; Eric Braddom, director of DLP products for TI’s Asia semiconductor group; and Yu Zhen Yu, a senior member of the tech staff and director of the industrial and home appliance group and China application and development center in TI’s semiconductor group. What follows are excerpts of that conversation.
Chappell: How does China’s nascent design and IP business affect a company like TI coming into China to do business?
Braddom: What’s different in China from an IC design perspective is that they are much more welcoming to a complete system solution. Their advantage here is in low-cost manufacturing, so bringing in a whole system solution works here. This is very different in many other places. The converse is also true, here. Because design is not so strong, you may not be able to sell an individual chip here.
Yu: But you have to be careful who you sell that system to. Companies here haven’t learned, as those in the West already have, that you have to concentrate on your core competency. People here haven’t learned that lesson yet. People don’t realize how difficult it is to bring a new product to market from scratch. If you do all the work designing and creating that system, and then the customer’s product isn’t successful, you don’t get any return on your investment.
Wang: There are a lot of small companies here, and they don’t always know what they’re doing – we don’t know who will win. It really is like Taiwan was four or five years ago; the market really hasn’t stabilized yet. Just to give you an example: A year ago there were 400 makers of MP3 players in China, and now there are 200. I’m pretty sure in six months, it will be 100. As a systems provider, how do we deal with this? It’s a very fragmented market here, and everybody wants to do what’s hot.
Yu: Yes, look at automotive electronics. There are more than a thousand automotive electronics company in China, because a few years ago the government decreed that China has to get into auto electronics. We just have to watch and see who emerges, and then do business with the winners.
Chappell: So for you two, Mr. Wang and Mr. Yu, what were the biggest changes that occurred in China while you were in the United States?
Yu: Well for one thing, like I said before, there is guan xi. In business in the U.S., when I know both sides bring value, I know we will have a strong relationship, even without a prior history together. Here, it is different. After having been in the U.S. 14 years, I have a tendency to be too straightforward and blunt. It took me about two and a half years to really understand the internal relationship dynamics with customers.
Wang: I’m not engaged with a lot of local customers here, so I can’t address that. But Shanghai has changed so much, I didn’t recognize it. There are so many skyscrapers here now. A skyscraper is defined as any buildings that extend above an 18th floor; by that definition I read somewhere that there are more here than in New York. It’s really changed. I’m from a town a couple of hours from here by train, Hongzhou. You can put me in the middle of my hometown and tell me it’s a different city, and I wouldn’t know otherwise. It’s so different from when I was growing up, I don’t like going back there now, in a way. Also, having lived and worked in the United States, I found that I didn’t have much in common anymore with friends that I knew when I went to college here.
Yu: I lived in Beijing for 11 years prior to 1989 when I went to live in the United States. … I’m really shocked at how big a change has taken place in the city there. I’m glad that it’s growing, but I one thing I feel strongly about – the environment, the weather and the air, has all deteriorated so much, there is so much dust and smoke and smog. I was just there for a tradeshow, and I had all sorts of problems, I had to take nasal decongestants, and carry a bottle of water with me wherever I went. It was awful. And this season, autumn, is traditionally supposed to be its best season.
Braddom: There is a city in central China – I’m not going to say its name – but it is a very beautiful, historical city. But the air quality there is so bad, the people there say that the dogs start barking when they see blue sky, it’s so rare.
Wang: It’s the big cost for the speed of China’s economic growth.
Yu: It is a very high price.
Chappell: China has come a long way in the past five years in moving toward a market-based economy, and generally opening up. The central government just announced its next five year plan; where do you see China in five years?
Yu: There are certainly a lot of big issues the country is facing right now. At the same time, you can tell the government is trying to fix these things, the gap in economic development between eastern and western China, between urban and rural, and the gap in the standards of living. It’s actually bigger than Westerners tend to believe. Five years from now I hope they will be able to make some progress.
Braddom: In terms of business and the market, you can’t afford not be here. Just look at the size and the growth of the domestic market. There are 300 million people in China right now with cell phones – that’s more than every man, woman and child in the United States. China is already the second largest big screen TV market. Business is exciting here. Yes, there are economic gaps, and there will be fluctuations in growth; things could go awry. But from a business perspective, can you afford not be here?
Yu: In dealing with [Chinese] customers on a day by day basis, and seeing them finish a design and bring it to market … one of the good things I see is that a lot of companies in China are growing up. … They are starting to be able to design products on their own. And in other industries, things are changing. In many markets, foreign companies that have traditionally had a solid lock on a domestic market, a lot of traditional manufacturers are being supplanted by local Chinese companies. It is happening fast.
Braddom: TI China’s managing director, Gerald Kuo, has kind of a famous quote about doing business in China, that I think sums it up nicely: There are three rules to doing business in China: 1) Anything is possible. 2) Everything is difficult. And 3) If someone says it’s no problem, that means it’s a big problem. It’s a great climate for starting a business, I think. But personally, I still have problems mailing a letter or getting money out of a bank.
Yu: Yes, many travelers to China, who are here only for a short time, only see the skyscrapers and fancy airports, and they don’t see all the problems here. What they see is, “Ooh, China is developing rapidly, it’s a threat.”
Braddom: There is another famous quote by a Western ambassador to China, about how it appears very Westernized on the surface, but when you peel back the sheets for a closer look, the truth emerges. There is a big city façade here, that’s true. It’s when you get into the details, this is when you realize things are very different.
Chappell: Are there any other observations about China that you’d care to offer? Anything that Westerners planning to come to China to do live or do business should know?
Braddom: One of the things we did during TI’s cultural training class before coming to China was spending half a day as if we were in a Chinese classroom, as elementary school students. We were treated just like regular students; there was no speaking English. It was very tough; I don’t think I could have hacked it as a student. Heck, I’m not sure I could now. The school system is very different here, and I think it’s important to understand that. A lot of the cultural behavior of engineering students coming out of school here originates within that system. It’s a big part of life here, the education system. The teamwork issue that we face is only one aspect of that.
Yu: There was a study done in the past by U.S. and Chinese educators comparing the U.S. and Chinese schools systems. After studying each other’s educational systems, the Chinese concluded that the U.S. educational system was in complete failure; students didn’t pay attention and there was seemingly no discipline. The U.S. educators, meanwhile, thought that the Chinese had a good system. That was 30 or 40 years ago, I think. Look at what the U.S. education system has generated since then, more Nobel prize winners than any other country.
In the Chinese education system, there is a tremendous importance placed on individual high scores and class rankings. It is such that Chinese students tend not to listen to what other students are saying, because only what the teacher says and thinks is important to them; it is the teacher that has the impact on scores and rankings. I believe that in the future if the government does the right things, they can fix the problems that face China. But the school system, that is an issue they don’t know how to fix. There are just so many people here, how do you educate them all?
This article is Part Two of a Q&A session run by Electronic News Senior Editor Jeff Chappell as he traveled the Silicon Road through Shanghai. Click here for part one of his roundtable discussion with Texas Instruments engineers in China.
Editor’s Note: As explained at length elsewhere on this site, this is a news story written by me that originally appeared on the now-defunct Electronic News’ website, which is long gone. It’s former sister pub Electronic Design News (EDN) currently holds the copyright to all Electronic News copy (to the best of my knowledge). You can still see a copy of this story at EDN.