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Intel spies opportunities for China growth

Posted: 17 Oct 2005 ?? ?Print Version ?Bookmark and Share

Keywords:intel? investment? wee theng tan? ic? design?

Tan: Awareness of the importance of developing and registering local IP has seen tremendous improvement.

Intel china celebrated its 20th anniversary in June with a move that was certain to fuel paranoia in Silicon Valley about China's growing importance as a global competitor: It set up a $200 million Intel Capital China Technology Fund to invest in Chinese innovation in computers, electronics and semiconductors. The goal for Intel China is to develop talent, products, processes and services, and to support China's pursuit of opportunities worldwide.

The VC investments supplement more than $1.3 billion that Intel Corp. has already plowed into research and development, microprocessor assembly and testing and an extensive education program aimed at building a digital-era ecosystem in what is rapidly becoming its largest and fastest-growing market.

To find out how the world's largest semiconductor maker is faring in China, EE Times sat down recently with Intel China president Wee Theng Tan in Beijing.

EE Times: What is the size of Intel China currently?
Wee Theng Tan: We're nearly 5,000 people right now in China. A significant number of these are in assembly, testing and other such jobs in Pudon, Shanghai and Chengdu, Sichuan Province. Here in Beijing, we've got in excess of about 300 people, and then we have another site in Shanghai that handles some of our software development capabilities and efforts. That facility houses 800 people.

How large is your R&D capability?
There are approximately 100 engineers involved in R&D. The facility here in Beijing is actually the only one for research that we have in Asia. Here, we're talking about research that looks at projects three to five years ahead. Our facility in Shanghai, to some extent, also has development capabilities and some form of applied research.

What's the potential market opportunity for Intel in China?
I tend to look at it in three major areas: One is the PC industry, followed by the wireless or cellphone market and, finally, the telecom market. China is the second largest PC consumer in the world today.

China is already the world's largest cellphone market by far with more than 265 million cellphones installed, and it's growing at a significant rate. This puts China in another important position for Intel because a lot of the company's silicon products in the communications industry go to the cellphone market.

The third area of growth, telecom, is obviously a much bigger area overall. But if you use one major yardstick!say, optical-fiber cables that have been laid!China today is about the third largest in the world and it continues to grow, probably faster than most of the more-developed countries.

How would you characterize the challenges for Intel in China?
There are some complexities in China in terms of how we start up a business, for example. The market becomes more complex as you grow. In fact, sometimes, when a market becomes more developed, it is more bipolar in nature. You need to have new strategies to address different markets. You need to have newer user programs, if you will, to cater to different usage models and this complexity continues to evolve as you grow.

Does China pose special challenges in that it is not the same type of free and open economy?
As opposed to what China has been in the past, when there were viewed to be restrictions in terms of business, I think from a consumer perspective that we have moved products quite rapidly. We've overcome the challenges in terms of user acceptance and we are narrowing the gap of product acceptance in China.

To give you an example, about five or seven years ago, when we announced a new Intel product, it took about a year and a half before it matured in China. Today, when we announce a product in the mainland, there is ready user acceptance.

Will IBM's sale of its PC business to China's Lenovo impact Intel China's position in this market segment?
From Intel China's perspective, both IBM and Lenovo are very important customers and that will continue to be the case while they work on this transition. We would expect business as usual to go forward. Obviously, we are supportive of whatever activities are required on Intel's part to be an important supplier to IBM and Lenovo.

Given the highly publicized rapprochement between China and India, do you spy new opportunities for Intel China in terms of market cooperation?
I can't comment on the political nature of these developments, but it would not be surprising to assume that Chinese experts and the Chinese government have looked at the strength of the Indian market in terms of how [India's] software industry has evolved. There may be a desire to emulate India in this regard and perhaps learn from the Indian environment.

Likewise, it would not be surprising if the Indians have looked at the Chinese IT market and seen how it's evolved over the years and how successful it's been. [Perhaps India felt it] could really learn from the Chinese government and how they've perpetuated the industry in those terms as well. So, I think the sharing is going to be good for both sides.

Does Intel have any transnational research or development programs between China and India?
Intel's R&D efforts are worldwide efforts. They're not just focused on one particular country or one particular region. There is different regional expertise, though. For example, there are skill sets here in China that we use in terms of R&D efforts or R&D development in some of our product areas. Likewise in India-and Russia, for that matter. But much of this has been used in an integrated fashion in pushing testing knowledge and development forward.

What's your assessment of the intellectual-property situation in China?
IP is very important to a company like Intel. The manifestation of IP protection and how it evolves in China is extremely critical to our moving forward. Earlier, I think this issue of inadequate IP protection was raised about China. Since then, there's been an evolution of activities. A lot of programs have been put in place by the government in general; regulations and laws have been drafted on IP. I think all of these efforts put China on the right path.

I think there are still some challenges going forward, however, in terms of complete compliance in some of these areas relative to how the statutes are being enforced. The challenge is to ensure that there is completeness in the enforcement and as this moves on, I will be very interested to see how it is going to evolve in the most positive light, given all the progress that's already been made.

Does this mean that the IP situation is getting better in China?
I think that from an IP perspective and my own experience, awareness of the importance of developing and registering local IP has seen tremendous improvement. There's also been a greater emphasis by senior government members, who are paying much closer attention to the issue than they once did. It warrants a lot more attention than it got in the past.

Does Intel play a role in educating legal and industry organizations here on intellectual-property protection?
Yes, most definitely, I think it's something that's beneficial to all. What we've been involved in over the past years has been engaging and talking about it and simultaneously enabling the process by holding lectures. We have also met with two strategic members in government, in the legal office on IP. We've also had a team of Chinese advisers involved in domestic courts in IP visit the United States and we are working together with different enterprises. We have been giving lectures on what we believe are important areas of IP that need to be addressed.

China recently dropped the value-added tax on foreign chipmakers and replaced it with an R&D rebate credit for local semiconductor makers. Is that likely to stir further design and development activity in China's chipmaking industry?
Whether or not that effort is an incentive for the local industry or beyond the local industry, we've yet to see. Again, I can't comment on behalf of the Chinese government or [present the official] Chinese perspective, but I think the data they are relying on shows that China imports the vast majority of its semiconductor components. Given that fact, they want to encourage the development capabilities of indigenous chipmakers.

With more than 250,000 engineers entering the market every year, China has become a magnet for foreign companies looking to set up R&D operations. Is the engineering labor market becoming more competitive?
Being a technology company, we are comfortable with the fact that we are an attractive company to work for!one that's known for developing products for China and for the worldwide market. It is important that we look at the engineering base of talent in China to find the right talent to work on projects we want to evolve. There's always a finite number of universities, a finite number of students in each particular location. But China is a big country. Much of the talent has got a heavy math and science base and, therefore, fairly natural engineering skills.

So, you have access to all the talent you need to grow your business in China, including management skills?
I think we will continue to work with getting more talent, going forward. We have to continually train engineers and grow new capabilities here in order for them to take on goals like project management and technical management. We will continue to recruit engineers with management skills-that makes sense for us in terms of appropriating product focus and our R&D activities. So, we will continue to work on that.

What kind of educational programs have you developed for China?
Intel has made investments in education programs to prepare talent for the country's future competitiveness. For example, Intel worldwide will invest something like $100 million every year in education innovation programs. We are also deploying the Intel International Science and Engineering Fair, and every year, we attract about 15 million youths in China to participate. Also, we train teachers in China through Intel Teach to the Future programs. We're targeting at the end of this year to train about 500,000 teachers in China and, ultimately, to achieve the 1 million goal in three years.

Are Chinese-born engineers who were trained in the United States returning to China what some have termed "sea turtles"?
Yes. This continues to be one of the talent pools that we obviously look at, where we see a right fit for us in terms of returnees coming back!especially those interested in evolving and continuing to grow their own areas of development.

- Richard Wallace
EE Times

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