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Dec. 6, 2004 – MEMS software provider Coventor is launching its first design-training center in China. Based at Peking University, it will be among four hands-on labs established throughout the nation for students who — like their government — see a future in MEMS.
Coventor sees a future in them as well. In 2003, the Chinese government selected Cary, N.C.-based Coventor and its suite of design tools as the software provider for its MEMS program, an initiative to build the nation’s microsystems capabilities through universities and companies. The deal is among several recent agreements between the Chinese government and United States-based software and tools businesses for strengthening China’s small tech expertise.
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While a customer base of students and faculty members may seem small, the potential is big. Today’s students will be tomorrow’s technicians and executives, points out Benjamin Blackwell, Coventor’s director of Asia-Pacific sales. They will be among the decision makers choosing software and tool suppliers for corporate research and development labs and manufacturing facilities, leading to potentially large and lucrative markets.
“There’s room to grow,” Blackwell said. “It’s great for us because we’re getting in early.”
Many Western countries are trying to get a foothold into China at the early stages of what could become an economic boom. Software and toolmakers have discovered that China’s higher education system offers one route toward that goal.
“This is going to be a high potential market for us,” said Lung Chu, vice president of Asia-Pacific Operations at Magma Design Automation Inc. in Santa Clara, Calif. A software provider for the integrated circuit industry, Magma signed an agreement with the Chinese Academy of Sciences in early 2004 to establish a nanotechnology IC design lab. Magma’s goal is to become one of China’s leading IC software providers in industry as well.
“There’s a large market potential in IC manufacturing, IC design,” Chu said. Magma’s software can be used to design chips well below the 100-nanometer range, according to Chu. The need for smaller and more powerful chips is forcing the semiconductor industry to design increasingly minute chips.
At the same time, the lower costs of Chinese labor and manufacturing make companies look to the East. “With the outsourcing trend, people are going into India and China,” Chu said. “The users of our product will increase over time.”
Like Magma, microscope specialist Veeco Instruments Inc. is partnering with China’s science academy. In 2002, Veeco and the academy announced they would create a nanotechnology center in Beijing. Woodbury, N.Y.-based Veeco supplied tools such as its atomic force and scanning tunneling microscopes as well as day-to-day management of the facility. The academy, backed in part through a multimillion-dollar government nanotech initiative, provided scientists and engineers.
China’s desire to build itself into a high-tech economy offers opportunities for companies like Veeco, which can provide tools not only for nanotechnology research and development, but for manufacturing as well. Students and faculty trained on Veeco equipment then want similar Veeco products in their workplace, said Don Kania, Veeco’s president and chief operating officer.
“We look at this as a stage thing,” Kania said. “There’s the lab-to-fab approach,” Kania said, where lab equipment like an AFM is wedded to manufacturing products like robots. “And there is lab-to-lab. We have a high emphasis on both groups.”
The strategy has proven a success. Veeco reported that in 2001 the Asia-Pacific region accounted for 10 percent of its revenues. That jumped to 17 percent in 2002 and 24 percent in 2003. It projected revenues of more than 30 percent for 2004, based on sales through the second quarter. The Asia-Pacific region includes China, Korea and Taiwan.
In 2003, Veeco opened an office in Shanghai to serve China’s semiconductor and research markets. “Sales have been growing strong,” Kania said. “It’s been a good business for us.”
Kania credits Veeco’s success in China to the already established relationship between the nation and microscope maker Digital Instruments. Veeco acquired Digital Instruments in 1998. Magma benefited from contacts Chu had established through the Chinese American Semiconductor Professional Association.
Coventor went through a rigorous and competitive process to convince the Chinese to select its CoventorWare software suite over other vendors. The stakes were high: The selection has helped determine the standards for China’s emerging microsystems industry.
“There were fierce negotiations,” Blackwell said. “Our big win is showing them they want to partner with a company that is stable. We helped create a vision in their minds that when they make an investment like this, they’re making an investment with a company that will be around.”
The academic market makes up most of Coventor’s sales in China, Blackwell said. But Coventor, which works through the distributor IMAG Industries, intends to build a commercial customer base from its education and training efforts.
Growth won’t come without pains, Chu and Kania warned. Companies like Veeco work hard to ensure they remain in compliance with U.S. trade regulations, Kania said. It’s an overhead cost that needs to be considered before venturing into China. Chu cited the potential theft of intellectual property and the still-large gap between China’s capabilities and its aspirations as potential roadblocks.
“The China market is emerging,” Chu said. “There are big opportunities, but there are challenges ahead.”