The short range low power wireless chip maker CSR is one of the successful example in fabless semiconductor business. CSR has seen tremendous growth in Bluetooth wireless ICs and is now targeting wearable and IoT market. In a video interview with me, Mr. Joep van Beurden, Chief Executive Officer, CSR shared his experience in fabless business and also about Bluetooth Smart. Below are the excerpts from the interview.
What are the risk factors involved in developing silicon products both IP and ICs?
Joep van Beurden: Some risk factors are very generic, for instance when you design a product you typically tend to be very innovative and boost the boundaries to get something new. Since it is new it may take longer than what you plan, we might have planned for the product to take two years, it would actually take three years, by then competitor might have already launched similar product.
Another generic risk factor is even if you're on time your customer is not successful then you suffer. The flipside is also true, if you sell your product to a successful end-user, which may result in good growth.
The risk factor for fabless is, fabless companies have no assets, you have just peoples and engineers designing the chip and then you are outsourcing the production to foundries such as TSMC, UMC, globalfoundries. You are heavily relying on people and your people are free to go, as a fabless company, if you can't retain or attract the right people you're going to have a problem.
On the product model of silicon IP versus silicon chip:
Joep van Beurden: There are successful models of companies that focus on IP. Actually most fabless companies are built like that. CSR was a consultancy and IP company before it became a fabless company. It is a step-by-step transition and it is a powerful transition. In India for example there are lot of successful IP companies.
What is common between US and UK and what is also un-common between these two regions?
Joep van Beurden: There are remarkably similar, culturally similar, very similar in the way young people are educated, also for the semiconductor industry US is much bigger, Silicon Valley has special advantage as semiconductor cluster, but you can see that in Europe and UK as well. you see our companies in Cambridge, Cambridge cluster is a smaller version or the younger brother of Silicon Valley.
If you look at India, I would say all the fundamental attributes like big universities, educated young people, entrepreneurial spirit and a lot of these IP companies, all precursors and conditions for a fabless ecosystems are here. If the country focuses, in 10-15 years there will be strong fabless ecosystem.
What is the role of the government?
Joep van Beurden: My personal opinion is first and foremost for the government is to create the conditions for success, that means infrastructure, simple things like roads, trains, affordable housing. Then off-course industry specific things like favourable tax regime. For instance in UK, there is something called patent box, when you granted with a patent you get the tax relief as the incentive for the company. That is a big relief for the companies to spend more money on R and D.
Is Bluetooth is still a workhorse of CSR?
Joep van Beurden: Company is diversifying massively from the original focus which was just Bluetooth. Now we have Bluetooth, Wi-Fi GPS, audio and video technologies. Bluetooth was earlier planned for cellphones. now Bluetooth is undergoing resurgence. This resurgence is all around Internet of things. Bluetooth is expected to do extremely well compared to ZigBee. The reason is very simple. The Bluetooth is now established in its second flavour called Bluetooth smart. Bluetooth Smart is a standard peer-to-peer communication at very low power. In that low-power domain, it competes with Zigbee, Ant and other low-power standards. ( He physically explained how a wearable device, smart phone and other medical devices use Bluetooth smartphone for low-power infrequent communication).
On Bluetooth competing with other low power wireless:
Joep van Beurden: Bluetooth smart is not taking away the space of any other low-power standards. It will have its own area of application.
On the trend of too many standards:
Joep van Beurden: He says it might be confusing for the user but it is a good trend. Many of these technologies have their own application and they don't compete with each other.
On CSR's revenue growth plan:
Joep van Beurden: There are two parts of our business one is a core business and other is legacy. the legacy business is the business we do not invest and that is typically low margin business and mostly selling Bluetooth chips into phones. Our legacy businesses shrinking and our core businesses rising. Our core business is high margin and in the automotive infotainment, Bluetooth smart, voice and music, and streaming audio, all this is doing well quite a lot.
Internet of things is quite small but have a very high expectation there.
Investment in India:
Joep van Beurden: we have two offices, one in Bangalore and other in Noida. We have moved into a bigger office in Bangalore, there are plenty of good talent here, we look forward to grow more here.