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Recently NIX Computer Supermarket invited a guest whose success story might be inspiring for many people in Russia. Mr. Pua Khein-Seng has worked his long way up from a poor Malaysian farmer to a co-founder of a prosperous company called Phison.
- What is the market volume? Can you share your performance figures?
- We ship 10mil USB 2.0 controllers per month plus 5-7mil modules, which makes 15-20mil products per month. But it’s difficult to see how big the market is. In 2010 we hit $1bil and we keep to this level.
- What are your major activities?
We have two businesses. One is called “chip design” based on 100% in-house technology. After design is ready we go to UMC facilities to produce wafers and then we sell our products to our customers, including major NAND Flash semiconductors.
But we have another business called “IP” (intellectual property) where we license, not sell, our IP. For example, we have our own PHY technology for USB 3.0, which is the best in the world, and we license this technology to some very important semiconductors in this market – they pay us. This is an example of IP business.
- What are the major advantages of your products against competitors?
- First – technology. There are not so many SSDs on the market by the module houses, I think you may note it. Why? Because they do not know how to manage. OK. There are 2 types of companies: semiconductors (Samsung, Toshiba) – they use in-house technology, and module houses – they only do assembly. We design and sell different IC’s for Toshiba – USB Flash Drives, Memory Cards, SSDs. Toshiba is our major customer and shareholder. So, technology is our advantage.
- Do you have competitors?
- Yes. Talking about semiconductors, this is Samsung. But Samsung is too big and we are small. So we co-develop with Toshiba to compete with Samsung. Then SanDisk, although this is our customer. OK, I will explain. There are a lot of controllers – USB (1.1,2.0, 3.0), microSD, SATA (I, II, III) – you can’t make all the products in-house and sometimes, not 100% cases, you have to buy products from other companies like us. But at the same time we are competing on the market. Talking about module houses, our competitors are Transcend and ADATA.
- How many people do you employ for your R&D?
- We have 460 engineers who work in design business structured this way: Chip Design - 15%+ of 460 engineers; Firmware & System Design – this is the largest division with as many as 50%+ engineers; Service Design – among other things, this is responsible for plastics; FAE (Field Application Engineers) – this is in charge of a lot of supporting that our customers need.
- Do you think there can be some further progress in flash memory?
- Today, we have 1х nanometers as the most advanced technique. Q1 2014 is time for 15-16 nm flash memory chips to go into mass production. Today, the so called Floating Gate technology introduced by Toshiba is used. Three years ago, Toshiba announced that the Floating Gate technology will end on 20 nanometers, but as we can see this is also the case with 15-16nm. However this is a limit for the Floating Gate technology. Now Toshiba is starting to work on 3D technology under 3x nm process (4x nm for Samsung). So, 16 nm is a limit for the Floating Gate.
- Are there any heating problems?
- For flash, heating is not a problem – it is endurance that matters greatly as the process gets smaller. So, 3D introduction is actually a way to solve the flash endurance problem.
- Do you deal with software or firmware?
- Basically firmware. Our FAE division deals with PCB design, socket design, service supporting in chips manufacturing, as well as a lot of testing.
- How long is the design cycle?
- It depends. For example, we have a lot of Phison USB 3.0 controllers that differ in function. We have models 2301, 2302, 2303, 2305, 2307. It took 60 (!) months to produce the first chip, the second chip appeared faster, in 12 months, and the next one was ready just in 4 months. The reason behind this is accumulated technology used in the successors. So, it took us 5 years to manufacture the first SSD controller and now we need just one month for this.
- How many tries does it take to get an experimental chip up and running?
- Again, it depends. For example, microSD USB 2.0/3.0 controller – 95% first cut, which after minor changes lets us start mass production. But with SSD it’s more difficult. For example, first cut, second cut, third cut… and only then can we get similar result for SSD.
- What is the problem – the procedure of design itself or algorithms?
- Usually the problem is socket. For example, we provide sample chips for customer and he says, “We need power saving”. So, we have to redesign to implement this power saving. The same is for power supply which is also the case of socket. There are also some compatibility issues – in USB 3.0 interface, for example. So, we have to fix the bugs. Sometimes we can solve the problem with firmware, without spending money on a new mask.
- What companies are major foundries on the market?
- First, TSMC in Taiwan; then Global Foundries owned by a Saudi Arabia family; UMC in Taiwan which is our partner; SMIC owned by the Chinese government; Samsung.
- The other day I read up on the first USB Flash Drive and learnt that a lot of guys claim to be the first to invent the device. Do you have any problems here?
- OK. The “paper” concept of USB Flash Drive by IBM dates back to 1997. In 1999, M-Systems from Israel filed a patent followed by Netac from China and Trek from Singapore. In 2000, Phison was the first to introduce single chip (SoC). M-Systems was our investor, and Netac is our client.
- Does anybody try to sue the opposite party?
- No. It’s impossible. Imagine a patent map – this is your patent, and this is mine. If you sue me, I sue you back. This is war – I fire you back if you fire me - even nuclear war in case of North Korea. So, we have to live in peace. (Laughing). This is a business model.
- I think that the only economy now improving is China.
- I disagree with you. China has a lot of problems. But the USА is improving. European economy is flat. Japan is getting better. But China may be in danger because of huge debts by local governments. All the cities have bank debts.
- Do you think the Communist Party will settle the debts?
- No, I am sure. Let me explain you: people bring money to the bank, the bank loans money to the government and the government before bringing the money back to the bank sells the loan. Losses are huge because of huge corruption. The problem is that all the people’s many in the bank are actually the loans of the government. This is s serious crisis.
- I think a country with state-planned economy can solve this problem.
- Yes – by printing money. But mind you, you just can’t print money because the currency rate will drop. A few months ago many Chinese banks were short of cash and the government had to print money. This is a problem.
- I think the principle is not printing money, but that Chinese people are hard-working.
- Yes, Chinese people work hard. The government gets money basically from taxes that can be invested into the country. As for the tax collecting by the federal government, this is OK, but the local governments are hugely corrupted. According to a report, the debts of local governments are so huge that nobody knows the exact size.
And there is one more thing. Before the crisis, investors started to put money out of the economy. As a result the real estate dropped, the stock market dropped, and the crisis began. Of course, the government will save the bank system from bankruptcy by helping banks. But investors will start putting money out of the economy.
- But China has huge oversea resources, about $5tril.
- Yes, very big resources …So, Chinese economy growth slows down greatly.
- I agree – the annual growth may not be great (12%, for example) over several years in succession, but 7% per year is also good.
- Can the Taiwanese educational system produce qualified engineers?
- Taiwanese educational system in chip design, IC manufacturing and IT is good. Actually we have the best educational system in Asia. But the problem is politics. Today, Taiwan starts to follow the USA pattern by inviting smart students from oversea countries.
- Including Russia?
- Yes, we have a lot of Russian students.
- What language is used in your university?
- I graduated from the National Chiao Tung University located in Hsinchu, a well-known science park. This is the best university for IC design and alma mater for executives in such companies as TSMC, UMC, and Asus.
- What language is required to enter Taiwanese university?
- Of course, Mandarin.
- Education is also in Mandarin?
- No. I will explain. Many Russian students go to Taiwan and they do not speak Mandarin. In some universities professors use English and the books are also in English. The system looks like this – books in English, reports in English, but professors use Mandarin to speak to their students. Because this is a problem for many foreign students, many lecturers start learning English. As for hi-tech, it’s English everywhere – books, homework.
In 2000, when we started Phison, I put all that logics into CompactFlash chips personally. There were 5 of us – me as a CompactFlash expert, 2 specialists in USB, and 2 security products experts. However, because of fast growth I had to go to a position in business, management, and finance. Four my partners still work in engineering.
By the way, the name “Phison” is an abbreviation of “Five Persons” that refers to the number of co-founders, all engineers.
- Was it difficult to hire 460 engineers?
- Of 460 engineers 50 are Malaysians, like me, and the rest are Taiwanese. Last year, Phison’s revenue was $1,1bil, where around $100mln is net profit – very good figure. 22% of this amount is shared among employees. So, in Taiwan we have no difficulty in hiring high-skilled people due to our financial base, leading positions as a hi-tech company, and good market reputation.
- Do you pay the same salaries to Malaysians and Taiwanese?
Yes. We pay salaries on whether you are good or not.
- Do you have some form of regulation or salary assignment?
No. All depends on your performance. I hire engineers from Brazil, from Malaysia, and again, everything depends on performance.
- How much money do you have to pay in taxes?
- Let me give you an example. Suppose your revenue is $130mil, of which 13% goes to the government immediately (In Taiwan, profit making companies pay 17%, but we have tax reduction as a hi-tech company doing a lot of investment). After that we share 22% among our employees who (but not the company which has already paid the tax) pays income tax. Security payments are small, and the focus is on the income tax that may be as high as 40%, like I pay.
- Do you like Moscow?
- I think it must be snowing in November here. It’s my third day in Moscow now and it is not snowing yet. That’s bad.
- Sometimes, but not often, it’s snowing here in June.
- Thank you very much. It was all great.
- Thank you for your high appreciation.
Источник: НИКС - Компьютерный Супермаркет