MediaTek Chairman Tsai Ming-kai:
Technology Leadership Is the Only Way
In this exclusive interview, the chairman of MediaTek Inc. shares the strategy that turned his middle-of-the-pack fabless chip company into a global smartphone powerhouse.
Technology Leadership Is the Only WayBy Sara Wu, Benjamin Chiang, Hsiao-Wen Wang
From CommonWealth Magazine (vol. 533 )
Q: Over the last three years, what has MediaTek done right to move up the value chain?
A: We took the lead in feature phones in 2009, at the peak. We wanted to keep expanding our operations and make better and more system-on-a-chip (SoC) features to go after high-end brand customers. We didn't anticipate such a rapid rise in smart phones, so we were caught thinking a bit too short term.
Amazon CEO Jeff Bezos once said, "When [our competitors are] in the shower in the morning, they're thinking about how they're going to get ahead... we're thinking about how we are going to invent something on behalf of a customer." If you ask me why that quote means so much to me, it's because we were too competition- and product-oriented at the time. We were somewhat sluggish to respond to the market, and not customer-oriented enough.
By being overly focused on feature phones we lost a bit of the entrepreneurial spirit we had. So we pulled back and reallocated our resources away from feature phones and toward smart phones.
We realized that the most important part of a smart phone is the processor inside and its multimedia processing capacity – MediaTek's established strength. So we refocused to handle products and marketing the right way.
When faced with market challenges, we reflected over the company's six core values, and we found that we were lacking "customer orientation." Upon review, we placed customer orientation among our values, making it clear to everyone in the company from top to bottom that we faced such challenges in 2010-11 and had to get back to being customer-oriented.
On the product end, ever since we made the decision to use the Android platform in 2010, we have kept making adjustments, making clearer distinctions within the product array.
Our smart phone chipset market share has climbed over the past two years. In addition to product planning and execution, we have an excellent client and marketing channel foundation from the feature phone era, from which sales growth naturally emerged.
Q: How do you incorporate "customer orientation" in practice?
A: The process involves translating customer needs into products. Android provides an excellent opportunity for us to focus on hand-held smart devices.
Customers Demand High Performance-Price Ratio
MediaTek has always stayed close to and cultivated emerging markets to get a better understanding of consumers' demand for high performance-price ratio. Accordingly, we can quickly assess market demands, be out front in product development, and accelerate time to launch.
In another area, we seek to be "ecosystem-friendly." In addition to offering total solutions, we look to strengthen cooperative ties to the industry chain. Beyond focus on hardware, we must understand the demands on the service side so that both systems and software design and development better carry various services and applications to satisfy customers' needs for diversified products.
Q: Has MediaTek reached a new phase where being first to market is more important than first to scale?
A: In our earlier period we went after emerging markets first. But now that everything is more globalized and the gaps between developing and developed countries are getting smaller all the time, the paradigm shift from the PC era to mobile computing has accelerated changes across the industry. In response, MediaTek must become a leader not only in technology, but also in the market, within the scope of the products we choose.
Over a half century in the semiconductor industry the market has continually undergone consolidation, and technology is also constantly progressing. In addition, now that we have reached annual turnover of over NT$100 billion, it is even more vital to reach the market sooner so as to retain our leading position.
At the moment we ask ourselves over the product planning process, "If no one else has made a product like this, do we want to be the first?"
Committed to Technology Leadership
Last year we got more aggressive and were the first to introduce a true eight-core processor to the market, and the first to release quad-core tablet chips with large and small cores, featuring a lot of software optimization and a lot of technological innovation.
In the past we waited for other people to prove these things before following along, whereas now we aim to be a technology leader.
Q: MediaTek is the world's first company to introduce an eight-core chip. What does this mean to you and your competitors?
A: To us it proves once again that technology leadership is the only way.
Q: What is the significance of technology leadership? Does it mean engineers or management not taking a back seat to Europe and America?
A: We have that kind of talent, and we're confident in our engineers.
We are continuing to refine organizational management. In recent years we have aggressively assembled a marketing team with world-class marketing personnel, while strengthening our Board of Directors and introducing independent board members.
Our Board of Directors has new members now. Its predecessor was the Strategy Advisory Board, and it meets for one day every quarter to discuss long-term development policy and strategy.
We got such people as Kenneth Kin, Peng-Heng Chang and Cheng-Yaw Sun to come on board and assist us with marketing, personnel, international operations and executive personnel development. This will be a big help in raising our abilities in corporate governance, setting a long-term course, and determining overall operational management strategy.
Q: You have said that "low price" does not mean "low tech." What do you mean by that?
A: If a low-price strategy is also low-tech, that's what makes it unsustainable. MediaTek's total solutions are highly valuable, and our design and development incorporate substantial advanced technology. Further, we utilize innovative commercial models to lower the production and manufacturing threshold for customers, so as to widely popularize products with excellent specs and performance. With this, consumers discovered that brand-name products on the market are priced too high in comparison.
"Low price" Can Equal High Quality
With this in mind, when we work long-term with local brands in emerging markets, despite not having international recognition, the products they offer are well known locally and enjoy great popularity. Naturally, this drives the market share of higher-priced brands down, and they resort to a strategy of accusing market latecomers of being low-priced because they're low-tech.
We do not target the existing low-price market, but rather have used a new model to forge new markets and consumers. Sony's first pocket-sized LCD radio and TSMC's professional wafer manufacturing services are examples of creating new markets, which is the essence of "new market disruptive innovation."
Q: Smart phones have fully matured. How are you preparing for the future?
A: Wearable devices and the Internet of Things are future trends we are prepared for. From our perspective regarding SoC, smart phones are a major component of the product array at this time.
Demand for Wearable Devices to Reach 100 Million
We have the capacity for cross-platform integration. On the foundation of such wireless information devices as smart phones and tablets along with home entertainment media systems (e.g. digital TV), plus existing wireless connectivity technology, we are optimally positioned to help customers achieve a "multiple screens and a cloud" environment.
The information technology industry's competitive cycle undergoes a paradigm shift once every decade that puts an extra digit on items shipped. Workstation computers were one million units, mini computers were 10 million units, personal computers are now at 300 million units, and smart phones are up to one billion. Once we get to the wearable devices and Internet of Things era we will be talking in terms of tens of billions.
Q: How do you want people to see MediaTek five years from now?
A: Our management philosophy seeks to incorporate the best people and pursue an industry leadership position. Our acquisition of MStar Semiconductor was made in line with these guiding principles for long-term development.
Q: But this is the first time Taiwan has made it into the top three of global IC design.
A: Seen from a wider perspective, short-term ranking is temporary, whilst a company's long-term deployment and execution prowess, along with continual learning and maintaining an open mind, are a lot more important.
That Taiwan has a world-class technology company like TSMC gives us even greater motivation to pursue a leadership position.
Constant Learning: the Only Approach to Change
Q: How have you managed to have so much courage all along to go from a small media unit of around two dozen people to where you are now 16 years later?
A: Since our founding, the company has had many opportunities come along as changes have transpired in the industry. As a technology company our operational team strongly believes in the contributions of new technological progress to society and the market opportunities underlying them.
This is the kind of thing that gets us excited, which is the sort of passion and ideals a technology industry leader should have. Naturally, technology R&D must be approached as a long-term investment that presents various obstacles to be overcome.
Everything goes beyond the surface and the short term, so one must consider everything at its essence, which is where the company motto of "conviction inspired by deep thinking" comes from. It is also the philosophy that keeps us going.
The development of new technology and new products, and the setting of new organizational functions are fraught with numerous unknown challenges. In recent years people in our internal meetings have often heard me say the phrase, "You don't know what you don't know," which is precisely why you have to just keep learning.
The industry environment changes so quickly. Who could have imagined a few years ago that Nokia's handheld phone division would be sold off? Constantly adjusting to the environment and doing what needs to be done – that's what really matters.
Translated from the Chinese by David Toman