Global Chipmakers Gather in China
Dr David Wong
Executive Vice President,
Office of President,
Applied Materials, Inc. USA
Applied Materials, Inc, a leading supplier of products and services to the global semiconductor industry, has established a strong presence in the Asia-Pacific region. The company, which has had an office in Japan for more than 20 years, is now taking a serious look at the China market, which imports 80% of the semiconductor products from overseas.Dr David Wang, executive vice president of Applied Materials, talked to NEA about his views on China's semiconductor market, the company's plans in China and the rest of the Asia-Pacific region, as well as the importance of customer support.
NEA: Applied Materials, Inc achieved US$9.6 billion revenue in fiscal 2000 (as at the end of October 2000). The company has had a strong presence in Japan, where it has had a sales and support office since 1979 and a Technology Center (in Narita) since 1984. How strong a presence does the company have elsewhere in the Asia-Pacific region?
Wang: As well as in Japan, we have overseas subsidiaries in Korea, Taiwan, Singapore and China. We also have individual technology centers in Korea and Taiwan, in which the focus is on R&D, joint operations with customers, and training for customer support. We established a service center in Beijing in 1984, which we have used for training our local staff of 150 engineers. China will be the next big market for our company.
NEA: How do you see the China market today?
Wang: The semiconductor industry in China is now very active. There are several semiconductor chip manufacturers throughout the country, namely: Shougang-NEC Electronics in Beijing; Hua Hong-NEC Electronics, Advanced Semiconductor Manufacturing Co (ASMC), Beling Semiconductor, Grace Semiconductor and Semiconductor Manufacturing International Corp (SMIC) in Shanghai; Motorola in Tianjin; and Central Semiconductor Manufacturing Co (CSMC) in Wuxi. In Shanghai, SMIC and Grace Semiconductor are operated using Taiwanese capital.
We have enjoyed longstanding relationships with the Chinese government and with all of these local companies. Applied Materials has invested for many years in China. In 2000 we received orders worth US$100 million from these semiconductor companies.
NEA: Previously the US government placed restrictions on the types of hi-tech equipment that could be exported to China. I heard that a US chip company complained about such restrictions, which prohibited them from exporting submicron process equipment to China.
Wang: Now, both the US and Chinese governments have given approval to introduce advanced fine line process equipment into China. Applied Materials has installed advanced equipment into the semiconductor firms in China. Recently there have been very good opportunities for investing in the Chinese chip industry. We have had long-term relationships with both the Chinese government and the local corporations.
Only 20% of the semiconductor chip products that these companies produce is shipped to the Chinese domestic market; the remaining 80% is exported worldwide. Many of our customers, however, are moving to China from Japan, Taiwan, the USA and Europe. The 20% provision rate is therefore expected to increase gradually. In addition, these companies plan to spend money over the next three years. Our orders from these companies will have reached US$500 million by 2003.
When China joins the WTO, the boundaries between China and other countries will dissolve. We can easily provide support to China and the Asia-Pacific region through the Internet and e-mail. China has actively established good telecommunications and wireless communications; there are 70 million telecom subscribers and 20 million Internet users at present. These figures will increase in the following years. To deal with such a big market, we plan to hire 500 staff over the next two or three years, and to build a training center in China similar to the Narita Technology Center in Japan. Chinese engineers are currently coming to Japan to train in the new process technologies.
NEA: What percentage of the company's total revenue comes from the Asia-Pacific region?
Wang: Revenue from the Asia-Pacific region, excluding Japan, is still small at present, but we aim at boosting the percentage of total revenue from the region to over 50% within the next decade. All of our Asian offices will be able to support semiconductor firms worldwide. Motorola in Tianjin is supported by Motorola in Phoenix. Many semiconductor firms are moving into the China market from all over the world, so our support is global. NEC has Shougang-NEC in Beijing and Hua Hong-NEC in Shanghai, and the NEC account team in Applied Materials supports these companies. Each of our customers is an "account;" a team for an account has a sales manager, a process engineer and field engineers for customer support. A specific account has a responsibility of US$1 billion for global support.
NEA: How do you support your customers?
Wang: We take a global approach to our support efforts, because our customers are global. A customer's success is our priority. If our customers move to other countries, we also move there.
We stress creating successful partnerships with our customers. We respect customers and they also trust us. Our partnerships with our customers are long-term. If a customer starts to build a 300mm wafer facility, we also hire people to jointly develop the new facility.
Joint efforts provide two advantages to our customers. One is a return asset. To earn profits as soon as possible, a rapid ramping-up is essential. As a partnership, we have to work at training our customers to operate the installed equipment, and at supporting process management, yield management and in-situ methodology.
The other advantage is a short time-to-market. If a customer develops a new cell phone chip to be shipped within the next 6 months, we will work together with the customer to help with their process integration. A copper damascene process, for example, has complicated steps, such as barrier metal deposition, seed copper layer deposition, electroplating, polishing, low-k material deposition, and diagnostics. If a customer were to attempt to establish such major process integration alone, it could take them as long as three years.
Working in a partnership, however, the customer has helped with the equipment installation and spare parts management. Ten years ago, a customer would initially have wanted to talk about a discount on the price of equipment. Now, however, the first thing they want to discuss is how we can work together.
I want to be a strategic partner in our customer's value chain, to support them increase their return asset and reduce time-to-market. We aim to increase our customer's profitability through partnership, providing a global support infrastructure and total worldwide service solutions.
(March 2001 Issue, Nikkei Electronics Asia) |
