Busting the Analog Blockade
Analog ICs had long been the uncontested monopoly of U.S. manufacturers. Now Richtek has broken their stranglehold on the market.
Busting the Analog BlockadeBy Victoria Sun
From CommonWealth Magazine (vol. 383 )
If you look into the distance from the platform at the High Speed Rail Hsinchu Station in Jhubei City , you can see the brand-new yellowish brown buildings of the Tai Yuen Hi-Tech Industrial Park with a never-ending stream of cars running through orderly, tree-lined streets. After the Hsinchu Science Park reached full occupancy, Richtek Technology Corp., MStar Semiconductor Inc. and other IC design houses took up home here, leading Taiwan ’s IC industry in launching the newest wave of disruptive innovation.
Richtek is a symbol of Taiwan ’s gradual rise in analog IC design, outside the digital IC design mainstream. Last year the design house’s revenue topped US$100 million, growing from NT$2.68 billion in 2005 to NT$4.4 billion in 2006. With 417 employees, Richtek is Taiwan ’s 14th largest IC design company.
Luke Hsieh, the company’s silver-haired president and CEO, speaks quickly and clearly. Born in 1957, Hsieh graduated from the electronic engineering department at Chung Yuan Christian University . Upon graduation he went to the United States to work in a high-tech company in Silicon Valley . While working, he also obtained a PhD in electrical engineering from Santa Clara University .
When he returned to Taiwan in 2001 Hsieh joined fabless IC company Analog Integrations Corporation (AIC), whose founder Albert Lee, an expert in analog technology, is also a U.S. returnee.
IC design in Taiwan focuses almost entirely on digital ICs, which process digital signals that switch between the two values one and zero. Analog ICs, however, process continuous-time signals. Therefore, the technological hurdle for industry entry is higher for the power-management ICs in which Richtek specializes. IC designers need to take into account unstable signals and a great deal of variables in the development process. Nonetheless, all electronic products require analog ICs.
“In IC design, profit margins are highest for analog ICs,” says Eddie Chang, senior director of Qualcomm CDMA Technologies Taiwan.
In fact, Taiwan ’s analog IC technology all originated from AIC, since Richtek’s founding group of engineers all came from there. An IC design house chairman with more than 20 years of experience in the industry reveals that AIC was originally the only company to possess analog technology, but since it was unfamiliar with the market, its products did not meet market demands. As a result, the company found it difficult to grow.
Foreign Makers Take Belated Notice
Hsieh worked at AIC for several years without enjoying his job very much. Eventually, he felt he had better return to the U.S. , and was already preparing to pack up when he vented his frustrations in a chat over tea with colleagues. “Vice President, why don’t you do your own thing?” his colleagues suggested.
Consequently, several colleagues who had participated in this fateful tea round, as well as venture capitalist Kenneth Tai, an admirer of Hsieh’s, climbed aboard when Richtek was founded in 1998, on the upper floor of a barbershop in Jhubei City ’s Wenhua Road . Tai went on to become Richtek’s chairman.
When Hsieh secured the first order from Samsung in 2000, he was “so happy that I could die.” When Hsieh went to South Korea for the first time, he met six agents and downed twelve cups of coffee in one morning, since he depended on the agents’ help if he wanted to land an order with Samsung.
Hsieh observes that thanks to the rise of Asian brands, it has already become possible for Richtek to guide certain product specifications and suppliers. Richtek’s products are cheaper than American ones and the company can take advantage of the geographical proximity to its Asian customers to service them. Richtek can also participate and directly communicate with its customers when they define new products.
For a long time, analog ICs were the exclusive terrain of a small number of U.S. manufacturers such as Analog Devices Inc. (ADI) and Intersil Corporation – until Richtek was founded nine years ago. Now, Richtek can be described as Asia ’s powerhouse of analog IC technology.
One procurement officer in a Taiwanese IT company says with vituperation that the foreign companies are all “smug.” Their products are expensive, but no one can do without them. Now, computer vendors Acer Inc., Asustek Computer Inc., and Samsung can choose from among analog ICs made by ADI, National Semiconductor Corp., Intersil and Taiwan ’s Richtek. Whose products should they choose?
“The foreign companies always looked down upon us, but they were wrong. They should have taken us seriously back then,” Hsieh says, with belated satisfaction.
Presently Richtek holds a global market share for power management analog ICs of just 1.6 percent and only a one-percent market share for analog ICs overall. But the company’s growth potential draws attention. U.S. technology giant Intel Corporation invested in Richtek five years ago, recognizing the company’s prowess in power management IC design.
“Richtek has already become a world-class IC design company,” notes Joey Cheng, an analyst at Goldman, Sachs & Co.
‘Stoic’ Work Yields Results
Since employees must continue to accumulate experience and knowledge in analog IC design to keep pace technologically, Hsieh keeps encouraging his staff to study a lot and to be strictly disciplined.
Hsieh explains that an electronic engineering graduate can become a good digital IC design engineer within two years. He only needs to learn how to use IC design software and define specifications in line with the design flow to be able to draw a circuit diagram. But analog ICs are a different story. Since they process continuous-time signals, there are many variables in the process that make it impossible to rely entirely on design software. As a result a great deal of experience is required on the part of the design engineer, usually at least five years.
Hsieh’s emphasis on continuous study is reflected in his trademark first question when chatting with staff. “Which book did you read recently?” Employees who are not much into reading have come to peer in all directions when waiting in front of the elevator to see whether the coast is clear, for fear of running into their studious boss.
Every quarter Hsieh buys books for the company’s senior supervisors, even requiring them to write 500-character book reports. Hsieh personally presides over the company’s quarterly study group and raises questions. For quite a number of supervisors, these meetings have become a stressful event. In a bid to encourage staff to buy books, Richtek gives a NT$500 book grant to each employee each year. Moreover, each employee must attend a fixed number of training courses inside or outside the company each year. If employees do not meet the mandated hours of training, their supervisors will be fined.
Hsieh runs his company with an iron fist. He argues, “Not only are we not more clever than others, we’re even more stupid.” Therefore, he feels that the key for success is “to make every single matter work.”
At Richtek punctuality is the rule – meetings never start a minute late. For many employees being on time has become second nature, even outside the company. The story goes that once during a company trip all employees arrived at the agreed meeting place ahead of time, even before the tour guide showed up, greatly embarrassing him.
Richtek’s achievements will naturally show if everyone “stoically” makes every single matter work, day by day.
Translated from the Chinese by Susanne Ganz
Chinese Version: 終結美國大廠獨霸局面