July 2007 Exclusive Feature:
Being there: The key to serving fabs in Asia

By Phil LoPiccolo, Editor-in-Chief, Solid State Technology

Given the enormous and rapidly growing consumer market in Asia, it comes as no surprise that chipmakers are expanding operations into these regions to satisfy the local demand for semiconductor devices at the lowest possible price points. But what does this move mean for equipment suppliers, namely American and Western European tool vendors trying to serve fabs in Asia? “Basically, there’s no alternative: If you want to participate, you have to be there,” according to Jean-Marc Pandraud, EVP and COO of Entegris, who offered his perspective as a mid-tier equipment supplier to chipmakers and OEMs in an exclusive interview with SST.

Moreover, suppliers cannot just “be there” from a sales and distribution standpoint, Pandraud advises; they must also be there from an engineering development standpoint to support their products quickly with sufficient technical expertise. “Whatever technology you are developing, you need to have application specialists close to the customers to support them at their doorstep and speak their language,” he says. “And in terms of speaking their language, it’s not just a question of translation; it’s about understanding the culture and knowing how to interact with customers in high demand of your services.” Alternately, trying to support development at a distance, with North American or European engineers, for example, would clearly be prohibitive in terms of both time and expense, he adds.

One option for “Western” suppliers seeking to establish product development activities in Taiwan, China, Singapore, Korea, and even India is to consider outsourcing or other partnerships with companies in those nations. “Given the speed at which Asia is expanding manufacturing operations today, it’s quite difficult to start from scratch and be able to serve big customers in a timely manner,” Pandraud says.

“However, a major limit to partnerships in some Asian countries is intellectual property protection, especially if you’re a US-based company that wants to bring innovation into the equation,” Pandraud cautions. So to avoid those issues, it’s preferable to try to acquire companies in these regions. “Personally, I think this is the way to go,” he says.

A key ingredient a company must possess to succeed in making the transition to Asia is a management team that is broad enough in terms of cultural diversity and ethnicity, Pandraud believes. “For our company, it is important to make sure that the first 30 or 40 people on the executive committee come from all parts of the world, so we can leverage their knowledge of their respective cultures and have all viewpoints fairly represented,” he says. “I would encourage any American or Western European company to do that as well.”

It’s also important to develop people in each region so they can become future managers and executives, Pandraud notes. There is certainly no lack of skill in many Asian countries. “When you look at the quality of the engineering you can find in China and India, for instance, in terms of the number of graduate students, it’s absolutely amazing,” he says. “So there are plenty of opportunities to work with a pool of very talented people.”

Regarding development plans for India, Pandraud says that his company currently has limited investment in the country, but hopes to establish a subsidiary there by the end of the year. “There are incentives now for semiconductor companies to set up manufacturing in India, so even though there is limited silicon being made there now, that’s no reason not to be there,” he argues. “Having our own people in India to train and develop and immerse into the world of semiconductor business is the way to go. You need to put a stake in the ground.”

In the rest of Asia, the time to expand operations is now, since that’s the region with the largest potential for growth, Pandraud says, especially for mid-tier suppliers such as Entegris, given that the larger suppliers are already well established there. Currently, some 32% of Entegris’s revenues are from Asia (excluding another 22% from Japan), and of that only about 3% is from China, and less than that is from India, he says. So migrating to these regions is one way for an American company to grow, he says. “When you are a public company today, if you have limited growth prospect, you are not attracting a lot of attention to your company. So growth in Asia is absolutely essential.”

Of course one of the biggest challenges of accomplishing a migration to Asia is to make the move while ramping up and ramping down to serve changing demand levels in what remains a very cyclical industry, Pandraud cautions. “It’s a dual charge,” he says. “You have to execute the transfers while conducting your “normal” business.


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