Recently, Analog IC designer Linear Technology has achieved a profit margin of more than 75%, which surpasses that of Apple and Microsoft and is called "the most profitable company."
In the semiconductor field, the international average gross profit level is 40%. In the IC design annual meeting last year, Wei Shaojun, chairman of the IC Design branch of the China Semiconductor Industry Association, pointed out that the average gross profit level of the Chinese IC design industry is 12.39% lower than the international average, and the average gross profit of China's top ten design companies is 31.3%.
The follow-up strategy is mainly due to the fact that a large number of IC design companies have to follow the strategy due to lack of product definition capabilities.
In today's era of high-cost integrated circuits, there is not enough space for scale and gross margin, which means that companies' reinvestment capacity is insufficient.
Linear Technology focuses on the industrial, communications infrastructure, and automotive markets where product innovation and performance requirements are high and avoids the consumer electronics segment. This market strategy provides a guarantee for maintaining high profit margins. Another factor is that in the high-performance market segment, most of Linear Technology's products are proprietary and there is no product that can be directly replaced. In addition, in the customer communication segment, Linear Technology arranges the most senior design engineers to communicate with customers to obtain first-hand information on customer design problems. In terms of team building, it pays more attention to the stability and unity of the team and does not deliberately pursue scale.
Linear Technology has made great efforts in the areas of markets, products, customers and teams, which has achieved today's high profits and achieved sustainable development for 30 consecutive years.
Wei Shaojun told the “China Electronics News†reporter that there are several reasons why China’s IC design industry has a low profit margin.
First of all, the degree of product innovation is not enough and the market sales price is not high. A large number of IC design companies have to adopt follow-up strategies due to lack of product definition capabilities. Therefore, the product's innovativeness is not much, and naturally it cannot sell a good price.
Second, due to adopting a follow-up strategy, the time to market is relatively late. Pioneers often squash latercomers by lowering prices, so latecomers have to adopt low-price strategies in order to sell their products. While the forerunners have been downselling this generation of products, they have already prepared a new generation of products. By increasing the sales of a new generation of products, it is still possible to maintain a better price.
Third, disorderly competition also led to a drop in product prices. Since everyone's level is almost the same, follow-up strategies are adopted, so there are often similar products from multiple companies at the same time. In this way, competition is exacerbated, so price competition is used, resulting in a further reduction in product prices.
Finally, although the overall cost of Chinese companies is lower than that of Europe, the United States, and Japan, the use of gross profit is reduced to some extent. However, due to the lack of technical skills of local companies, it is often necessary to use higher manufacturing processes than those in Europe and the United States. This will increase the hard cost of products. Before and after a drop of one liter, its own advantage is often offset.
It is a key and positive approach to improve one’s own ability to open source and increase the sales price of products. The key to achieving this goal is to be strong enough.
Over the past 10 years, China's design companies have relied more on process and EDA tools to achieve the progress of their products. The process nodes used are far ahead of the performance requirements of the developed chips. Some companies that once had a glorious past, due to lack of basic capabilities, leading to a decline in product core competitiveness, corporate profits have also declined.
Wei Shaojun pointed out that there are only two ways to improve the profitability of the IC design industry at the enterprise level: open source and throttling. However, the practice of throttling is a passive response and the space for enterprise development will be greatly limited. The positive approach is to open source and increase the sales price of products. The key to achieving this goal is to be strong enough. This includes product definition capabilities and product development capabilities.
The reporter interviewed Shenzhen Hass Semiconductor Co., one of China's top ten design companies, and learned that Hass's average gross sales margin has reached more than 50%. In the digital IC field, this profit is already a high level in the industry.
He Tingbo, executive vice president of Hass Semiconductor, told the “China Electronics News†reporter that achieving high profits was a quick time for product launch, and the second was better product performance. In addition, Hass will not take follow-up actions. Only by having its own core technologies, the products become one of the best in the market, or have irreplaceability, so that it is possible to maintain high profits.
In terms of open source and throttling, Zhou Shenglei, deputy general manager of Beijing Junzheng Integrated Circuit Co., Ltd., told the China Electronics News reporter that due to the fact that domestic chips are mainly concentrated in low-end and middle-end products, the sales price is not easy to increase and the profit margin can only be increased. The chip costs to find a way. Junzheng mainly starts from two points: First, continuously optimize the circuit design to minimize the area of ​​Die; second, strengthen the ability of independent design and try to use IP cores designed by oneself. With the evolution of technology, the procurement costs of third-party IP cores under the 40/28-nm process will greatly exceed the cost of tapeout. In understanding the needs of users, the reporter learned through interviews that design companies also have some positive practices. Analog IC company Shanghai Ai Electronics proposed the concept of "full marketing". Aiwei Ma, the chief operating officer, told the "China Electronics News" reporter that his R&D staff visited customers even more than the sales staff. In addition to approaching customers, it also advocates "reaching customers' customers", which is very helpful in tapping real customer needs.
The environment is to help the thrust IC design company to achieve two combinations, one is the combination of design and technology, and the other is the combination of software and hardware.
Wei Shaojun emphasized to the reporter of “China Electronics News†that the accumulation of experience for IC design companies based on analog circuits is crucial. One is to try to invite experts to join, and the other is to work closely with process manufacturers. Therefore, IC design companies must achieve two combinations. One is the combination of design and process, and the other is the combination of software and hardware.
At the same time, local companies must abandon the "following" development ideas, be bold in innovation and dare to take the lead. This requires companies to accurately grasp the market pulse and user needs. In the local market, we must give full play to the advantages of being well-versed and familiar, and adopt strategies such as personal services and special services, which may lead to some opportunities.
Wei Shaojun pointed out that local companies must cultivate entrepreneurial spirit and become local partners as partners. It is difficult for everyone to unite to achieve integration at all levels and fundamentally avoid vicious competition in the market. However, in the past two years, there has been an integration trend. As long as we stick to it and form some large companies through integration, competition will increase and profit margins will increase.
In the construction of the environment, the government should make a difference. It is the responsibility of the government to rectify the market order and maintain fair competition. To promote the integration of enterprises, the government can have major actions. If a number of integrated funds for IC design companies are established, mergers and acquisitions and equity swaps can effectively promote and accelerate industrial integration. It should be noted that the intervention of government funds should be withdrawn in due course, and the market attributes of the enterprises should not be weakened because of the intervention of state-owned capital.
IC Insights Insights Behind High Profits Linear Technology, the American analog IC manufacturer, achieved an average profit higher than that of Apple and Microsoft. Although Linear Technology's size and reputation are not as good as those of other semiconductor giants, although the profitability of the analog IC field is relatively easy to guarantee, it can achieve high profits of 75%, and in 2001 the Internet bubble, the international financial crisis in 2009 and the current economic downturn It is not easy to continue to develop steadily under the great environmental test. In the 30 years since its establishment, Linear Technology has maintained continuous development. This series of facts shows that Linear Technology has a unique set of skills.
First of all, Linear Technology’s basic skills are more solid. It avoids the field of consumer electronics and focuses on industrial electronic products that require high product innovation and performance. Moreover, most products are proprietary and cannot be replaced. When the product can become an irreplaceable role in the market, companies can grasp the market discourse power and initiative. Solid basic skills made Linear Technology ride in the industry electronics industry for 30 years.
In terms of customer communication, Linear Technology does not face the surface. Arrange the most senior design engineers to communicate with customers to obtain first-hand information on customer design challenges. In this link, the most senior design engineer is the key. Because they are more sensitive to perceived market direction and design focus; at the same time it also highlights the company's intentions for customers. In this way, customers' recognition and trust can be better obtained, and communication results will naturally be more in place, in-depth and efficient. By accurately grasping the voice of customers, we can grasp the pulse of the market and design new products that are recognized by customers and accepted by the market.
In the team building, we do not blindly pursue the scale. The company has a total of 4,400 employees worldwide, but employs less than 40 employees in China. They pay more attention to the quality of the team and do their best to maintain the stability and unity of the team. Employees rely on the survival of the enterprise, and the development of the enterprise depends on the employees. The cohesion and centripetal force of the team are the greatest guarantee for the vitality of the enterprise.
In the unpredictable business world, attention is also very important. Linear Technology always maintains its established direction, focuses on long-term goals, and avoids frequent adjustments. The Linear Technology CEO pointed out in the 2012 Outlook Report that for the past 30 years, Linear Technology has always adhered to the strategy's consistency and will continue to use this method in the future.
In Huawei's corporate culture, there is such a sentence: Benches have to be cold for ten years. What this sentence emphasizes is a kind of concentration. Huawei can withstand the changes in the market and keep catching up to become a world-class company. It is inseparable from this focus.
It can be seen that when the various stages of the company are completed, profits are the result of taking advantage of the situation. If profits are regarded as the primary goal pursued by the company, it is easy to overlook the conditions for forming profits—customers, products, markets, and the company’s own construction. This may lead to less efforts.
At present, China's IC industry's average gross profit is still lower than the international level, this hard work of Linear Technology should be able to give some inspiration.
In the road ahead, the biggest obstacle to progress is not the rugged road, but the sand in your shoes. For the IC industry in China, although the current economic environment is not optimistic, it is even more important to practice hard work.
In the semiconductor field, the international average gross profit level is 40%. In the IC design annual meeting last year, Wei Shaojun, chairman of the IC Design branch of the China Semiconductor Industry Association, pointed out that the average gross profit level of the Chinese IC design industry is 12.39% lower than the international average, and the average gross profit of China's top ten design companies is 31.3%.
The follow-up strategy is mainly due to the fact that a large number of IC design companies have to follow the strategy due to lack of product definition capabilities.
In today's era of high-cost integrated circuits, there is not enough space for scale and gross margin, which means that companies' reinvestment capacity is insufficient.
Linear Technology focuses on the industrial, communications infrastructure, and automotive markets where product innovation and performance requirements are high and avoids the consumer electronics segment. This market strategy provides a guarantee for maintaining high profit margins. Another factor is that in the high-performance market segment, most of Linear Technology's products are proprietary and there is no product that can be directly replaced. In addition, in the customer communication segment, Linear Technology arranges the most senior design engineers to communicate with customers to obtain first-hand information on customer design problems. In terms of team building, it pays more attention to the stability and unity of the team and does not deliberately pursue scale.
Linear Technology has made great efforts in the areas of markets, products, customers and teams, which has achieved today's high profits and achieved sustainable development for 30 consecutive years.
Wei Shaojun told the “China Electronics News†reporter that there are several reasons why China’s IC design industry has a low profit margin.
First of all, the degree of product innovation is not enough and the market sales price is not high. A large number of IC design companies have to adopt follow-up strategies due to lack of product definition capabilities. Therefore, the product's innovativeness is not much, and naturally it cannot sell a good price.
Second, due to adopting a follow-up strategy, the time to market is relatively late. Pioneers often squash latercomers by lowering prices, so latecomers have to adopt low-price strategies in order to sell their products. While the forerunners have been downselling this generation of products, they have already prepared a new generation of products. By increasing the sales of a new generation of products, it is still possible to maintain a better price.
Third, disorderly competition also led to a drop in product prices. Since everyone's level is almost the same, follow-up strategies are adopted, so there are often similar products from multiple companies at the same time. In this way, competition is exacerbated, so price competition is used, resulting in a further reduction in product prices.
Finally, although the overall cost of Chinese companies is lower than that of Europe, the United States, and Japan, the use of gross profit is reduced to some extent. However, due to the lack of technical skills of local companies, it is often necessary to use higher manufacturing processes than those in Europe and the United States. This will increase the hard cost of products. Before and after a drop of one liter, its own advantage is often offset.
It is a key and positive approach to improve one’s own ability to open source and increase the sales price of products. The key to achieving this goal is to be strong enough.
Over the past 10 years, China's design companies have relied more on process and EDA tools to achieve the progress of their products. The process nodes used are far ahead of the performance requirements of the developed chips. Some companies that once had a glorious past, due to lack of basic capabilities, leading to a decline in product core competitiveness, corporate profits have also declined.
Wei Shaojun pointed out that there are only two ways to improve the profitability of the IC design industry at the enterprise level: open source and throttling. However, the practice of throttling is a passive response and the space for enterprise development will be greatly limited. The positive approach is to open source and increase the sales price of products. The key to achieving this goal is to be strong enough. This includes product definition capabilities and product development capabilities.
The reporter interviewed Shenzhen Hass Semiconductor Co., one of China's top ten design companies, and learned that Hass's average gross sales margin has reached more than 50%. In the digital IC field, this profit is already a high level in the industry.
He Tingbo, executive vice president of Hass Semiconductor, told the “China Electronics News†reporter that achieving high profits was a quick time for product launch, and the second was better product performance. In addition, Hass will not take follow-up actions. Only by having its own core technologies, the products become one of the best in the market, or have irreplaceability, so that it is possible to maintain high profits.
In terms of open source and throttling, Zhou Shenglei, deputy general manager of Beijing Junzheng Integrated Circuit Co., Ltd., told the China Electronics News reporter that due to the fact that domestic chips are mainly concentrated in low-end and middle-end products, the sales price is not easy to increase and the profit margin can only be increased. The chip costs to find a way. Junzheng mainly starts from two points: First, continuously optimize the circuit design to minimize the area of ​​Die; second, strengthen the ability of independent design and try to use IP cores designed by oneself. With the evolution of technology, the procurement costs of third-party IP cores under the 40/28-nm process will greatly exceed the cost of tapeout. In understanding the needs of users, the reporter learned through interviews that design companies also have some positive practices. Analog IC company Shanghai Ai Electronics proposed the concept of "full marketing". Aiwei Ma, the chief operating officer, told the "China Electronics News" reporter that his R&D staff visited customers even more than the sales staff. In addition to approaching customers, it also advocates "reaching customers' customers", which is very helpful in tapping real customer needs.
The environment is to help the thrust IC design company to achieve two combinations, one is the combination of design and technology, and the other is the combination of software and hardware.
Wei Shaojun emphasized to the reporter of “China Electronics News†that the accumulation of experience for IC design companies based on analog circuits is crucial. One is to try to invite experts to join, and the other is to work closely with process manufacturers. Therefore, IC design companies must achieve two combinations. One is the combination of design and process, and the other is the combination of software and hardware.
At the same time, local companies must abandon the "following" development ideas, be bold in innovation and dare to take the lead. This requires companies to accurately grasp the market pulse and user needs. In the local market, we must give full play to the advantages of being well-versed and familiar, and adopt strategies such as personal services and special services, which may lead to some opportunities.
Wei Shaojun pointed out that local companies must cultivate entrepreneurial spirit and become local partners as partners. It is difficult for everyone to unite to achieve integration at all levels and fundamentally avoid vicious competition in the market. However, in the past two years, there has been an integration trend. As long as we stick to it and form some large companies through integration, competition will increase and profit margins will increase.
In the construction of the environment, the government should make a difference. It is the responsibility of the government to rectify the market order and maintain fair competition. To promote the integration of enterprises, the government can have major actions. If a number of integrated funds for IC design companies are established, mergers and acquisitions and equity swaps can effectively promote and accelerate industrial integration. It should be noted that the intervention of government funds should be withdrawn in due course, and the market attributes of the enterprises should not be weakened because of the intervention of state-owned capital.
IC Insights Insights Behind High Profits Linear Technology, the American analog IC manufacturer, achieved an average profit higher than that of Apple and Microsoft. Although Linear Technology's size and reputation are not as good as those of other semiconductor giants, although the profitability of the analog IC field is relatively easy to guarantee, it can achieve high profits of 75%, and in 2001 the Internet bubble, the international financial crisis in 2009 and the current economic downturn It is not easy to continue to develop steadily under the great environmental test. In the 30 years since its establishment, Linear Technology has maintained continuous development. This series of facts shows that Linear Technology has a unique set of skills.
First of all, Linear Technology’s basic skills are more solid. It avoids the field of consumer electronics and focuses on industrial electronic products that require high product innovation and performance. Moreover, most products are proprietary and cannot be replaced. When the product can become an irreplaceable role in the market, companies can grasp the market discourse power and initiative. Solid basic skills made Linear Technology ride in the industry electronics industry for 30 years.
In terms of customer communication, Linear Technology does not face the surface. Arrange the most senior design engineers to communicate with customers to obtain first-hand information on customer design challenges. In this link, the most senior design engineer is the key. Because they are more sensitive to perceived market direction and design focus; at the same time it also highlights the company's intentions for customers. In this way, customers' recognition and trust can be better obtained, and communication results will naturally be more in place, in-depth and efficient. By accurately grasping the voice of customers, we can grasp the pulse of the market and design new products that are recognized by customers and accepted by the market.
In the team building, we do not blindly pursue the scale. The company has a total of 4,400 employees worldwide, but employs less than 40 employees in China. They pay more attention to the quality of the team and do their best to maintain the stability and unity of the team. Employees rely on the survival of the enterprise, and the development of the enterprise depends on the employees. The cohesion and centripetal force of the team are the greatest guarantee for the vitality of the enterprise.
In the unpredictable business world, attention is also very important. Linear Technology always maintains its established direction, focuses on long-term goals, and avoids frequent adjustments. The Linear Technology CEO pointed out in the 2012 Outlook Report that for the past 30 years, Linear Technology has always adhered to the strategy's consistency and will continue to use this method in the future.
In Huawei's corporate culture, there is such a sentence: Benches have to be cold for ten years. What this sentence emphasizes is a kind of concentration. Huawei can withstand the changes in the market and keep catching up to become a world-class company. It is inseparable from this focus.
It can be seen that when the various stages of the company are completed, profits are the result of taking advantage of the situation. If profits are regarded as the primary goal pursued by the company, it is easy to overlook the conditions for forming profits—customers, products, markets, and the company’s own construction. This may lead to less efforts.
At present, China's IC industry's average gross profit is still lower than the international level, this hard work of Linear Technology should be able to give some inspiration.
In the road ahead, the biggest obstacle to progress is not the rugged road, but the sand in your shoes. For the IC industry in China, although the current economic environment is not optimistic, it is even more important to practice hard work.
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