Startup Vies for Opto Market with Homegrown IP

Travelling the Silicon RoadXIAMEN, China – Startups and entrepreneurs are popping up all over China and this southern coastal city, which is also a center of the optoelectronics industry in China, is no exception.

Chinese optoelectronics has a bit of a head start over its silicon semiconductor device industry; one of Xiamen’s opto device companies was founded more than two decades ago. But then it also plays host to Xiamen UX High-Speed IC Co. Ltd.

UX was founded less than three years ago by a handful of engineers, including Chinese — one of them local — as well as a couple of natives form the United States and Canada. They put in some time at familiar names: Cypress, ON Semi, Epson and Texas Instruments.

It is somewhat familiar story by now in China: UX’s founders felt they had learned all they could learn abroad in business, so they returned to China to start the company because the time seemed ripe, according to company president and Chinese native Xu Ping, who put in six years in Silicon Valley himself before returning to China.

He espoused the same logic many do here: China’s chip market is booming, in part because of domestic demand and in part because of the government’s encouragement to develop a semiconductor manufacturing base. Even if China’s domestic chip production capacity grows exponentially, it will be decades before that capacity comes anywhere close to fulfilling the domestic consumption.

“It does need a lot of technology and people,” Xu remarked of his native country. “Right now, most Chinese companies can only do simple chip designs,” he continued. “We feel like we have more growing room in China. After two-and-a-half years, we feel we can continue to do well.”

Xu estimates that to start UX, which now has a team of 18 people, most of whom are dedicated to R&D, the start up cost in China was about one-fifth to one-tenth of what it would have been in the United States.

The company right now is looking for second-round funding; like many startups here, it is looking to foreign venture capital (VC), namely that in the United States, to find it. While UX enjoys support from the local Xiamen government, and just closed the terms on a low-rate loan, the domestic Chinese VC scene is still nascent, that’s why so many companies like UX seek out foreign VC firms.

As for products, UX right now concentrates on high-end mixed-signal/RF IC chips, transceiver chips for front-tend fiber optic network communications applications, such as transimpedance amplifier, limiting amplifier and laser diode driver chips. Like many startups in China, the company is concentrating on high-end applications, where it has a chance of capturing some market share, rather than the crowded market for high-volume, low-end applications, such as consumer — a particularly crowded domestic market in China right now.

While the company originally set out to develop 10gigabit per second (Gbps) chips, it decided to focus in the short-term on the mainstream market for fiber communications, meaning 155megabit per second (Mbps) chips. It already is in production with IBM/Chartered Semi as its foundry partner with two 155Mbps chips, which it has begun selling, garnering interest outside of China as well, Xu said. The market for 1.5Gbps and 2Gbps is also developing rapidly, he noted.

Xu suggested that his company has an advantage over its competitors, in that while many of them are moving their fiber module manufacturing to China, most of their chips are still being exported out of China. As a domestic fabless company whose foundry partner is in nearby Singapore, and whose chips are packaged by a backend company here in China, UX is poised to grab market share in China, and in the future go head to head with its competitors beyond the country’s borders.

He noted that one of the chips that it has in production right now, a 155Mbps laser driver, can attain speeds up to 311Mbps, and is manufactured with standard low-cost CMOS, rather than BiCMOS or bi-polar technology, more commonly found in optoelectronic apps.

But the company is nevertheless still pursuing advanced technology and its own intellectual property (IP), according to Xu. It has developed and produced chips with 0.13-micron designs, as well as silicon germanium (SiGe) BiCMOS technology, in addition to standard CMOS.

“We’re one of the first companies to use SiGe in a BiCMOS process,” Xu noted. UX has also garnered two patents concerning indium phosphide technology, and has two other patents in the final stages of examination, while it has applied for three additional ones.

He agreed that developing domestic IP is an important issue for China right now. With so many engineers coming back to China, and so many other positive factors in place to foster startups, there is no real reason why China can’t foster its own IP, Xu suggested.

Electronic News Travels to China“I think in China, at least some of these [new] companies should have their own IP,” he said. “I think it’s important to come up with a good product.” Up until recently, China has relied mostly on modifying designs from foreign companies for the domestic market, meaning much of the profit leaves China; this has been one of the significant barriers to IP development in China, he acknowledged.

“First you have to have the people, and then you have to have the technology. If you don’t have these, you won’t get money,” he continued, either in the form of profit or investment capital. “Right now, the engineers are the most important things.”

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.

Xiamen: A Bright Light in China’s Tech Industry

Travelling the Silicon RoadXIAMEN, China – If you’ve bought a set-top box recently or perhaps a new appliance – or if you’ve used a remote control in the past decade – there’s a reasonable chance you were utilizing one or components that came from Xiamen Hualian Electronics Co. Ltd.

Or if you’re a Wall Street analyst or venture capital firm trying to finger the few start-ups among the multitudes in China that will be successful, or if you compete in the optoelectronics device market, you’ve probably at least heard of a few of the companies, old and new, here in this sub-tropical southern coastal city. While Chengdu in the east may have its backend manufacturing, Shanghai the front-end fabs, and Beijing may play host to much of the R&D taking place in China right now, Xiamen is a Chinese center for optical technology.

It’s not the only city in China to place an emphasis on optical device manufacturing, and other cities have their share of domestic opto players. But Xiamen embraces the technology wholeheartedly here, as has the central government. In fact Xiamen, located in the Fujian province, has even adopted the moniker of “Light Valley.”

Actively seeking high-growth industries, Xiamen has actively recruited companies like Hualian, said Fan Yu Bo, the company’s president and CEO. The city provides a lot of support, in the form of yuan and specific policies for companies in the optoelectronics industry, among others.

“At the same time, Xiamen is a nice place for hiring … so a lot of high-tech companies would like to reside here,” Fan said. In addition to a nice climate, the city has two other key ingredients, according to Fan: infrastructure and human resources.

Thanks to local and central government support, optical chip technology is one area of high-tech that China actually has a head start on, relative to the rest of its domestic semiconductor industry – although its development is still behind that of other parts of the world. It began developing its optoelectronic manufacturing capability two decades ago, and is already one of the world’s largest producers of light-emitting devices.

Now it is trying to head the rest of the world off at the pass, so to speak, much like Taiwan did with its semiconductor foundries, becoming a center for global silicon chip manufacturing in the previous decade. On the one hand, China’s dedication to its optoelectronics industry is thus economic; on the other hand it is driven by environmental and social necessity: the country is a power-hungry place.

In 2003 the total amount of China’s electricity generation capacity was about 1.91 trillion kilowatt hours, about 12 percent short of actual demand, according to figures from China’s National Solid-State Lighting Engineering Program Office. It estimates the shortfall currently between domestic production and demand from its 1.3 billion citizens and various industries to be as high as 28 percent to 43 percent. By 2020, China’s electricity consumption, based on current demands and current economic growth predictions, could range anywhere from 8 trillion kilowatt hours to 9.5 trillion kilowatt hours.

But the government estimates that it could reduce its electricity demands by as much as 30 percent if the bulk of lighting applications in the country switch to solid state light emitting device technology. It also reckons that the switch could measurably reduce its airborne pollution emissions, given that 80 percent of its electricity comes from coal and oil.

It’s these ideas that drove the creation of the Solid-State Lighting Engineering Program in 2003, a coalition of central government ministries, research and development organizations and local governments.

Xiamen Hosts Old and New

Today China has more than 10 optoelectronic chipmakers, and some 200 light-emitting diode (LED) packaging companies.

Xiamen, specifically, is home to one of the veterans of China’s optoelectronics industry, as well as some of the newest players.

It is host to Xiamen San’an Electronics Co. Ltd., for example, created in late 2000. A partially state-owned concern – its Chinese parent company is involved in steel, iron and electricity production; its other investor is a state-owned capital investment firm – Xiamen San’an is now one of the largest manufacturers of LEDs in China, and it has an optoelectronics R&D program established here as well; the R&D center one of the central government’s goals for establishing the company in the first place.

Xiamen is also home to the aforementioned Hualian Electronics, a company first established in 1984. Today it has two main product lines: optoelectronic semiconductor devices, such as infrared modules for remote control systems, opto-couplers, LEDs and sensors; and optoelectronic-based control and remote control devices, such as infrared remote control emitters and receivers for appliances like air conditioners, refrigerators, microwave ovens and TV set-top boxes.

Unlike many players in China’s semiconductor industry, much of Hualian’s revenue comes from exports, around 40 percent, according to CEO Fan. Many of its international customers include brands recognizable to Western consumers: Panasonic, Yamaha, Emerson and Electrolux among them.

But like many high-tech companies in China today that were around before the turn of the last century, Hualian is a mixture of state-owned and private owned as well. Half of it is owned by a state capital company; the rest of Hualian is owned by a parent company that is itself publicly owned and traded.

Fan naturally sees China’s Solid-State Lighting Engineering Program as a good opportunity for Hualian; the company is currently investing some $16 million (150 million yuan) more into R&D on low-power LED devices.

Over the years, a company like Hualian has seen a lot of changes, from the time it was founded when China was just beginning to open up, to today when it is aggressively pursuing economic growth and a conversion to a free-market driven economy. Both central and local governments naturally tend to lend more support to companies that prove successful in the market place, said Fan, and this, along with China’s economic growth, has lead to chances for the company’s growth.

Electronic News Travels to ChinaAbout the time it began exporting products in the 1990s, it began to realize the importance of developing its own intellectual property, as did the Chinese government. In the past, the government didn’t stress the importance of companies like Hualian developing their own IP, but that changed when China began to actively seek international trade, Fan acknowledged.

Today, for companies like Hualian to compete globally, not only does it have to create its own IP going forward, but respect those of the companies it competes with on the global stage, Fan said. That’s why in recent years, the company has put a lot of funding into R&D programs, and begun applying for patents.

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.