TI China Engineers Straddle Two Different Cultures (part 1)

Travelling the Silicon RoadSHANGHAI – Editor’s Note: At the behest of Texas Instruments Corp.’s Jeff Smith, deputy director of Asia Semiconductor Communications, as well as worldwide manager for analog media/analyst relations, four TI China engineers sat down with Electronic News Senior Editor Jeff Chappell to talk for an afternoon, but not about TI or its latest products. Rather, they discussed the experience of being an engineer and working for a U.S.-based, global company doing business in China.

The four engineers — three of them Chinese — are a microcosm of what you find in a large foreign tech company doing business here. One, Tan Hui, has only been out of graduate school six years, and has worked for TI in China since graduation. He is currently a member of the technical staff and an application manager in the industrial and home appliance semiconductor group here.

Another, Michael Wang, grew up in a city not far from Shanghai, and is currently a system engineering manager in the portable power management semiconductor group here. While he has worked for TI for several years, he came back to China a year ago after spending two years at TI headquarters in Dallas.

Eric Braddom is director of DLP products for TI’s Asia semiconductor group. A U.S native, he has spent the last two years in Beijing with TI; prior to that he was with the company and also stationed in Dallas.

The fourth member of the group was 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 here in Shanghai. He came back to China two and a half years ago after living some 14 years in the United States; prior that he was based in Houston, Texas.

During the afternoon, the four provided insights that can only come from living and working in China, and in some cases only having been a native who has lived abroad and come back. The following are excerpts from the conversation.

Chappell: First off, tell me what is it like working for a large American chip company here in Shanghai?

Tan: I have no experience working with a domestic company, but one big difference I’ve noticed, since I started with the company in technical support … I think working for a large international company enhances our ability with teamwork. If you want to be successful, you have to have technical expertise, but it’s not the only thing. You need a team, a system to support you. TI has done a good job along these lines. I’ve talked with friends I went to school with who work for domestic companies, and they say it’s not like that. Domestic engineers concentrate on their own work. It’s a big difference.

Braddom: It’s definitely a challenge working with and managing Chinese employees also. They have many strengths and are very strong technically, but cooperation is often a weakness. In the U.S. we’re taught early, we’re forced to do things as a team. That is a management challenge. Chinese students just haven’t had that [teamwork] experience.

Wang: China produces more engineering graduates than the United States or Germany, but the pool accessible to a large international company like TI is relatively very small. They are often not qualified because of one, language, and two, teamwork. Language is a big thing, I think. Just look at the way I work in TI — we have almost daily contact with the mother team back in the United States, and knowing English is essential.

Chappell: What’s the converse? What’s it like for the large American company to come here?

Braddom: One thing about the Chinese workforce, is it produces a real good chance to have diversity. China is a very diverse country, and it’s really nice to have engineers that can converse with customers in their own local dialects. Furthermore, in China I get a lot of strong resumes from women. I’d say about half of our staff are women; in the U.S. it would be a much lower number. There are many opportunities to achieve diversity in China, from a management perspective. I’m not sure it’s valued by everyone, but it’s a good opportunity for us.

Yu: One big problem, however, for Western companies doing business here is motivation of local, native employees. There is often a historical and cultural gap between them and management, who tend to be expatriates, or from Hong Kong and Taiwan. Often employees come to work here or at other large international companies to get exposure, but after a couple of years they get fed up and leave. They don’t have the same feeling the U.S. and European employees have with regard to how they feel about the company.

Braddom: I’ve found that some Chinese employees though do respond to Western style management — it’s an opportunity to achieve that closeness on the staff.

Yu: I think the problem is that companies fall into the same cycle; there are so many managers that are not local — they miss the opportunity to groom local employees for management and leadership positions.

Braddom: Teamwork is not taught in schools here, but there is a strong focus on family and relationships. Even on my team, some of the employees use the [familiar Chinese titles] of older sister or younger brother. Then there is the concept of face. It’s kind of like a bank account. I’ve seen it both demonstrated and used in business here, and it can be quite effective. It really does exist and it’s important to understand. Companies here are just now learning the concepts behind intellectual property laws and merger laws. They recognize that it is important if China is going to do business globally. But it’s more important to have the relationships in place when dealing with Chinese people in business, not just the signed legal documents. You have to know the concept of guan xi.

Yu: That’s very true. After 14 years in the U.S., it is something I had to adjust to again. In the U.S., if you dealt with a colleague and had met each other’s business needs, you were done. But here in China, it’s much more than that. Sometimes, even though you both realize that it’s not a personal relationship, you have to make it feel like a personal relationship.

Braddom: It’s really nothing more different than realizing that people have personal and professional objectives, and can use your help to achieve them. It’s not just going out do dinner together or having drinks together, it’s actually helping one another.

Wang: In my mind, though, I would like to emphasize that compared to other Asian countries, China and the U.S. are not all that dissimilar. Taiwan and China are much more open to Western culture.

Yu: That’s very true. We’re much more open to Western ways of doing business and Western ways of thinking.

Tan: You have to remember, when an Eastern businessman looks at a business deal or opportunity, he sees that there are always reasons for and against it. That’s why the relationship beyond the deal is so important.

Electronic News Travels to ChinaYu: People do emphasize relationships a lot. Let’s say you are trying to gain 10 different customers, in the end, it’s the ones that really benefit from what you have to offer that become successful. And that’s when, in turn, the relationship becomes stronger. But fundamentally, you do have to bring value to the table. It’s not just guan xi.

Wang: I think this idea that relationships are so important originates from dealing with the government. I don’t always see it at my level.

Braddom: For my part, I’ve have seen it used it myself.

Return to Traveling the Silicon Road tomorrow for the second part of this article.

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.

Applied Applies Guan Xi

Travelling the Silicon RoadSHANGHAI — Applied Materials Inc.’s business in China illustrates just how beneficial the right relationships can be here, the so-called “guan xi.”

It’s a concept not always easy for the West to grasp; at the same time it has become a rather mythical aspect about doing business in China.

A U.S. company that is the biggest process tool vendor in the world, Applied has had operations on the ground here since 1984. Today, the company employs about 400 people at five sites around the country, with about 300 at its Chinese headquarters here in Shanghai, specifically the Zhangjian Hi-Tech Park. Applied is literally right down the street from its largest customer here, Semiconductor Manufacturing International Co. (SMIC).

The company is also in the process of establishing a Chinese holding company, having filed for that status with the Chinese government last June. Holding company status would let Applied act like a local Chinese company; pending approval the company plans to establish what it calls a Global Development Capability (GDC) center in Xi’an — one of the many newly developing high-tech centers in China — that will provide engineering and software support.

Its facility in Shanghai, which consists of two former factory buildings converted to office space, also houses a training center. It also contains a bonded parts warehouse, which certainly gives the company an edge dealing with China’s complex tax structure for foreign companies – a tax structure so complex that even some Chinese officials admit to not understanding all of it.

“It’s always a problem,” acknowledged Kevin Sun, a marketing manager for Applied Materials China, discussing the headache of getting parts through customs in a timely manner. Because of tax issues, storing spare parts at customer sites isn’t an option, but with the company’s warehouse having a bonded status, the company can store parts there in Shanghai, and only pay tax on parts that actually leave the warehouse bound for a customer site when they are needed.

“That’s one advantage our competitors are learning,” Sun said of the bonded warehouse. The warehouse is not a common thing to find among foreign process tool vendors doing business in China. For instance, typically it is only chip companies that get any sort of tax exempt status inside China.

To get special status, it helps to know the right people — to have established guan xi.

“They see our commitment [to China], so they give us some special deals,” Jeff Lin, manager of corporate affairs and communications for Applied Materials China, said of Applied’s relationship with the Chinese government. “For example, they gave us the bonded warehouse.”

As Lin said, doing business in practical-minded China right now is all about timing, being in the right place, and knowing the right people. That commitment he referred to has involved both R&D and scholarship funds; the company sets aside $1 million a year for each. It also has set up a similar program specifically in Xi’an, where it plans to base its domestic holding company, calling it the Innovation Fund.

While it isn’t uncommon for large companies to do similar things in the United States and Europe, here in China, it amounts to considerably more than just good public relations. It comes back around to the importance of establishing and maintaining relationships in China, Lin concedes.

And it is paying off now. “When [Applied] came here, the business was small,” he said. But now, that business is growing. While he said that company doesn’t break out numbers specifically for China, he suggested that Applied’s revenue derived from China is becoming a significant chunk of overall revenue.

But a look at Applied’s order numbers provides some idea of China’s importance to Applied. In its July quarterly earnings reports, the company said that Southeast Asia and China accounted for 12 percent of orders totaling $1.47 billion. Japan lead the way for the company’s orders with 23 percent, followed by South Korea 19 percent, North America 19 percent, Taiwan 15 percent and Europe 12 percent.

U.S. Export Laws Hit Tool Vendors the Worst

This is not to say that it is all smooth sailing for Applied in China. It still has its fair share of headaches to deal with. One of the biggest is not a Chinese government issue but an American one: export rules on process tools for advanced technologies.

While the application of the Wassenaar Arrangement regulations limiting the export of semiconductor process technology from the U.S. to China have eased recently, it is still problematic for U.S. process tool vendors.

The United States is one of the 33 member countries that signed off on the Wassenaar Arrangement, an international body formed in 1996 to address the export and control of conventional military arms and dual-use goods and technologies, such as semiconductor technology. The Wassenaar group decides on export controls and then each member country is responsible for enacting them.

Chinese Export

With China trying to bring its domestic chip industry up to the level found in the rest of the developed world – a process that will take at least a decade or more, officials acknowledge – it represents a large potential market for semiconductor process tool and materials and vendors. There isn’t a huge domestic industry for producing homegrown process tools in China, and the companies that do exist are typically making tools for 0.5-micron processes — 0.35-microns at best.

The aforementioned SMIC, China’s largest chipmaker and the No. 4 foundry in the world, has the first 300mm fab here in China, in Beijing, producing certain designs with 90nm design rules. In fact, it developed its 90nm process with the help of a U.S. customer, Texas Instruments.

U.S. export rules dictate what kind of 90nm-capable process equipment Applied can sell in China, which is in turn dictated by the potential end customers of the chips fabricated on said equipment — there can be no potential military applications for said chips. No 65nm-capable process tools can be exported out the United States into China currently.

TI incidentally, likes to keep its leading-edge technology in house; for the wafers that SMIC fabricates for them, the foundry is creating the final four layers of the chips.

But much military technology is bought off the shelf these days; other high performance military applications, particularly those involved in aerospace apps, involve chip technology other than that based on silicon, such as gallium arsenide or indium phosphide.

And for chipmakers that sell chips that can be used in military applications, for those big chipmakers doing business in China already, it’s typically a small part of their overall revenue that’s affected. TI, for example, which has operations here in Shanghai, while bound by U.S. export rules, wouldn’t see much difference in its sales here if such export laws were lifted, explained Jeff Smith, deputy director for Asia semiconductor communications.

Those types of high-end applications aren’t really what is selling in the Chinese market anyway.

And for fabless and fab-light companies that depend on foundry work, manufacturing in China isn’t so cheap that it has become a necessity to use Chinese foundries — it’s much more important to find a foundry with good technology, and there is plenty of that across the Straits of Taiwan.

Electronic News Travels to ChinaSo the export rules hit process tool vendors the worst. There’s little impetus for chipmakers to fight the current export laws, although industry groups from all walks of the supply chain have lobbied against them, not just those representing equipment.

And as Sun pointed out, Europe and Japan have no such export laws regarding process equipment.

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.