Poaching Taiwanese Talent from the Inside
Hungry for new talent, China's leading telecom equipment maker has set up shop on Taiwan and is poaching some of the island's brightest IC designers. How has it managed this feat, and what does it portend?
Poaching Taiwanese Talent from the InsideBy Elaine Huang
From CommonWealth Magazine (vol. 523 )
Worldwide top talent is in high demand, and the hunt is on. While many ambitious Taiwanese flock to China on their own initiative to boost their careers and their pay, Chinese companies are also actively headhunting on Taiwan. Their talent-poaching zeroes in on the engineers at Taiwan's integrated circuit design houses, the brains behind a NT$1.6 trillion industry.
After taking the Shenzhen exit on China's Meiguan Highway, a left turn takes you to the world's largest electronics contract manufacturer – Taiwan's Hon Hai Technology Group (Foxconn). If you turn the opposite direction, you find yourself at the gates of Huawei, China's leading information and communications technology provider.
In China, Huawei is popularly known as a "wolf enterprise" because of its fiercely competitive spirit and its wolf-pack strategy of using collective strength to defeat formidable rivals. Under the leadership of company founder Ren Zhengfei, Huawei used a wolfish encirclement strategy to become the world's second largest information and communications technology provider, behind longtime industry champion Ericsson of Sweden.
The Huawei headquarters look like a university campus. The company boasts 45,000 employees at an average age of less than 30 years. If Foxconn can be characterized as employing a mainly blue-collar labor force, Huawei can pride itself on attracting China's most talented white-collar workers.
China's Top Talent Flocks to Huawei
The Huawei headquarters have incubated a mysterious IC design house - HiSilicon Technologies, which ranks among China's largest and has become a magnet for Taiwanese IC designers.
In April, when Huawei held its global analyst summit in Shenzhen, Huawei executive vice president and HiSilicon chairman Eric Xu bluntly refused to answer questions about HiSilicon from journalists, telling them: "HiSilicon – don't report so much on that."
One hundred percent of the integrated circuits designed by HiSilicon go to parent company Huawei – they are truly the heart of Huawei products. This rapidly expanding Chinese brand maker is copying the strategy of South Korean electronics giant Samsung. By integrating the supply chain vertically and horizontally, Huawei hopes to retain control over key components.
From behind these core components lurks the shadow of Taiwanese technicians. HiSilicon's R&D power has already been relocated across the Taiwan Strait from Shenzhen to Taiwan.
The Tai Yuen High-Tech Industrial Park is just a 15-minute drive away from the Hsinchu Science Park.
The park, built on the premises of a decommissioned Tai Yuen Textile factory, currently houses some 200 high-tech companies, about half of which are IC design houses. This IC design cluster includes Mstar Semiconductor and Ralink Technology, which have both been bought up by first-tier IC design house MediaTek Inc., as well as Richtek Technology, Ilitek Technology, Sitronix Technology, Sonix Technology, and a number of smaller IC design houses.
It is around noon and employees from companies in the park gather at a large cafeteria that resembles a department store food court.
A park manager reveals, "In the past we've had park management committee meetings where all the different companies even joked, let's all not poach staff from each other."
HiSilicon has already stealthily moved into this IC cluster under a different name and is quietly doing technological R&D.
In a five-story office building near the park entrance a company called Xunwei Technologies has rented several offices and hired more than 100 employees.
"HiSilicon has kept its front-end IC design in Shenzhen and has taken its back-end to Tai Yuen, so that it can seamlessly connect with Taiwan Semiconductor Manufacturing Company (TSMC) in nearby Hsinchu. TSMC does contract manufacturing for HiSilicon, producing its chips," reveals a software company consultant who frequently visits HiSilicon. Since back-end operations are what influence yield rate, "this strategy of using Taiwanese to interface with Taiwanese is really clever," the consultant observes.
According to Taiwanese government regulations, Chinese investment may not account for more than 10 percent of Taiwan's highly competitive IC design industry.
Xunwei, however, is Huawei's general distributor for Taiwan, established via a Singaporean company. The company's administrative center and sales arm are located in an office building on Dunhua South Road in Taipei. Based in the offices in the Tai Yuen High-Tech Park are the IC design operations, effectively an arm of HiSilicon.
A query of the online job bank www.104.com.tw shows that Xunwei's "IC design department" near Hsinchu lists a host of job openings for R&D engineers. The company recruits talent and conducts R&D in Taiwan, and then transfers its technology back to China.
American wireless communications giants Qualcomm and Broadcom also run R&D centers in the Hsinchu area. Now HiSilicon is following in their footsteps using Taiwan's homegrown talent.
In fact, HiSilicon counts a number of Taiwanese among its senior executives. Around 2004, HiSilicon lured the Taiwanese R&D engineer Chao Chuan-lung away from Broadcom to a position at the level of operational general manager at its headquarters in Shenzhen, strengthening technology for its ICs used in communications.
Previously, when MediaTek acquired Mstar, more than 20 Mstar employees working in handset chip design collectively jumped ship to Xunwei in Tai Yuen.
Jumping Ship En Masse
"When more than 20 people leave, they are unlikely to go to a small company. Within the company setup of MediaTek, which also did handset ICs, those coming from outside did not have much space for development, so instead they went to a well-known Chinese company, where they had a big stage to perform on, without even having to move to China to work," relates one IC design house executive who knows the inside story.
And Mstar employees are not the only ones to leave for HiSilicon. A vice president at Faraday Technology, which belongs to wafer foundry United Microelectronics Corporation (UMC) and is another golden goose in the IC design industry, also accepted a job at HiSilicon and took several engineers with him.
"It's not just HiSilicon. In the Tai Yuen park there are a lot of companies backed by Chinese investors, big ones and small ones. Without a doubt, the employees of medium-sized IC design houses like ours are often lured away," acknowledges K.C. Chang, vice president of technical development at Richtek.
Taiwanese companies face a hemorrhage of highly skilled personnel.
Yeh I-hau, chairman of IC design house Elan Microelectronics Corp., reveals that companies in the Hsinchu Science Park often receive phone calls from Chinese headhunters who are looking for engineering talent. "They randomly call a number in the company and directly ask whoever picks up, 'Are you an engineer?'" If one engineer is lured away, he can easily take a dozen colleagues or an entire team with him.
Money Not the Only Lure
But the main enticement of Chinese companies is not necessarily money. Indeed, salaries at their Taiwanese subsidiaries are within the industry range. A Taiwanese engineer who works at Xunwei in the Tai Yuen park says he earns only a standard salary comparable to other Taiwanese IC design houses, although the company belongs to the Huawei business empire.
In contrast to Huawei in Shenzhen, employees in Taiwan do not get bonuses or stock options. Although remuneration at Xunwei is higher than at the average IC design house, its salaries are still below those of first-tier Taiwanese IC design houses such as MediaTek.
So if it is not the money, what is HiSilicon's attraction for Taiwanese engineers?
"Talent wants to rise, so Taiwanese companies need to get stronger. If they do, Taiwanese engineers won't leave," explains Yeh. If an individual company's business is on the decline, it will no longer provide good benefits or a good working environment, so it is only natural for its employees to defect to competitors.
This reflects a structural problem of the industry as a whole.
The boss of one Taiwanese IC design house self-critically admits that Taiwan's IC design industry only has itself to blame. While the government considers the chip designers a competitive core industry, the mass defection of engineers from Mstar to HiSilicon should serve as a wake-up call. "Taiwan's IC design industry lacks innovation. They only do redundant kinds of business," he says.
"Going after a higher salary is one thing, but for veteran engineers and talent at the supervisor level, a sense of achievement is very important. You won't get that by always doing the same thing and always thinking about how to lower costs," the company leader warns.
Over the past years, Taiwanese companies have engaged in sustaining innovation and cost control with an eye on keeping up revenue and profits. Faced with Chinese companies, which throw money at Taiwanese engineers to recruit them for their R&D teams, Taiwanese companies should probably take a good look at themselves and think hard how they could create an innovative environment that attracts top talent.
Translated from the Chinese by Susanne Ganz