Recently, Dr. Henning M.Hauenstein, CEO of Datang NXP Semiconductors (DNS), was interviewed by the media, introducing the current situation and vision of DNS and his thoughts after joining THE company. Here are the details:
Dr. Henning M.Hauenstein, CHIEF Executive Officer of DNS
Q1: Dr. Henning, would you please share some information about DNS? In particular, why did you decide to join the company?
Henning: Ok. In fact, DNS was established in March 2014 as a joint venture between Datang Telecom Technology Co., Ltd. and NXP Semiconductor in China. I joined the company in 2017. NXP is the No. 1 automotive semiconductor supplier in China, one of the world's largest and fastest-growing auto markets, according to an April 2013 report from Strategy Analytics. The joint investment by two powerful shareholders is expected to accelerate the growth of the Chinese auto market by taking advantage of China's huge potential market and the strengths of the joint venture. That's the basic starting point.
To this end, we need to focus on the research, development and sales of very advanced SPECIAL-purpose vehicle ics in high-performance mixed-signal technology to develop products suitable for the Chinese market.
There are a lot of very innovative, very advanced powertrains and electrified products in the Automotive market in China, so we see electrification in transportation as a key area that we want to address locally and one that we want to grow. Not only for China, but also for markets outside Of China.
For the past five years, we have been working on a differentiated battery management technology, which is a unique technology started by the joint venture and is a very advanced technology. This technology is not only targeted at the automotive market, but also provides energy storage solutions for the industrial market. In order to meet the requirements of automotive safety standards, we have subdivided the r&d process that fully meets the requirements of automotive products. There are very few Chinese companies like us that can meet the requirements of Chinese, European, American, Korean and Japanese automobile manufacturers. We are based on meeting the requirements of the global automotive business. We are the first automotive semiconductor company in China to launch the ISO 26262 functional safety certification program. As is known to all, cars have high requirements for driving safety, so they also put high requirements on semiconductor suppliers like us.
We focus on internal local innovation and recruit global industry talent to build our own R&D team to develop automotive semiconductors in China. We differentiate ourselves from many of our semiconductor competitors in China because we conduct fully proprietary chip design in analog, digital and mixed-signal processes, while many of our competitors offer only technical support services and product application expertise development. Of course, we also provide excellent local technical support and develop specific applications related to our proprietary chip designs. In our company, the core competitiveness of products, applications and market needs are all concentrated in the R&D center located in Shanghai.
Q2: Thank you, Dr. Henning. As you just introduced innovation, THERE are significant differences between D&S and its competitors. Could you tell us about the company's development goals in the next five years?
Henning: Simply put, our vision and development goal is to be the leading automotive semiconductor supplier in China. We really want to be the leading automotive semiconductor supplier for both the Chinese market and the global market. We do have an international presence, which is now about half. We want to develop our products in China, and the company's primary vision is to become the leading automotive semiconductor supplier in China.
Our current goal and focus area is to become a high-tech battery management IC provider for industrial and automotive applications within the next five years. We all know that the battery is very important in new energy vehicles. If it fails in the car, it may have a great impact on the safe driving of the car. Therefore, we believe that a safe battery management system can ensure reliable driving and improve driving performance by providing more power. So, this is our focus area right now, putting all of our energy, all of our r&d resources into developing specific ics that will help battery and battery pack manufacturers and Oems, all tier 1 and tier 2 suppliers, even vehicle Oems, to design and manufacture their battery systems. In addition to its automotive applications, it can also be used in the industrial market to provide energy storage solutions, so we have a lot of applications to develop. This will be a key area for our products and we believe we can be successful.
On the other hand is the huge growth potential of China's auto market. Until today, China's largest car market, because China's large population, the Chinese government to the local new energy automobile market intense stimulation, ambitious development confidence, pollution and protect the environment and the city from traditional gasoline internal combustion engine determination, China will continue to be in the coming years one of the largest and fastest growing market in electric cars. We are confident in China's auto and semiconductor markets, although the current auto sales have slowed down and have not yet recovered.
In addition, we have two very strong parent companies that we can use to improve our chances of success. Datang Telecom Group is a state-owned enterprise with core competencies in consumer INTEGRATED circuit design, software application and terminal design and deep government connections in China. As mentioned earlier, NXP remains the number one automotive semiconductor supplier in the industry with reliable automotive semiconductor technology, advanced manufacturing processes and extensive expertise. NXP, of course, has high hopes for the joint venture's products, and its presence will help reduce the high barriers to entry that new companies typically face in the automotive industry.
Therefore, in effect, the joint venture is a win-win cooperation between two highly regarded industry leaders, and we can help them expand their presence in the global automotive semiconductor market with a strong base in China. By establishing a joint venture with Datang in China, NXP can form a partnership with Datang to tap its technology and application expertise locally, while Datang can do some financial subsidies or legislation with the local government. Through the joint venture, NXP can expand its product portfolio and accelerate its business growth. For Datang, the joint venture could help them enter the automotive semiconductor market with high barriers to entry. Overall, this is clearly a win-win situation.
Q3: So I understand the huge potential of the Chinese market. On the other hand, since you have more than 20 years of experience in the semiconductor industry, can you share with us the various challenges you see in the market?
Henning: WHEN NXP and Datang approached me looking for leaders with international skills to take NXP to a global level, I was very excited to join such a potential joint venture.
Prior to joining D&P, I worked in top international semiconductor companies in Europe and the United States. D&p is the first joint venture I have worked for and the first time I have worked directly in China.
As we all know, China's GDP is growing year by year, the market demand is huge, the population is large, the business environment is complex and changeable, the demand for cars is huge, and countless opportunities are born every day. I am absolutely thrilled to be joining DNS and working in such a fast-moving environment.
Second, China is aggressively developing its automotive semiconductor industry, but it still lags behind the world's top companies. Although the Chinese government has given strong support to the development of China's local semiconductor industry in recent years, its technology accumulation is still weak, including a lack of talent and experienced engineers for highly complex product development, international market demand insight, global business development, product strategy and so on. So the parent company of the joint venture really wants to find professionals who are familiar with this. Going back to my previous work experience, I have worked for over 20 years for several leading semiconductor companies in Europe and America, including Bosch, IR and Infineon. I have been responsible for global marketing, new business development, strategic management, product development, organizational building, quality manufacturing and continuous improvement. Therefore, my background in global management and in-depth understanding of the global automotive semiconductor business and strategy will be of great benefit to NXP.
Personally, it was the "opportunity of a lifetime" to partner with datang and NXP, two industry-leading companies, to establish and lead China's first automotive semiconductor company. The experience of working in China to address the global automotive semiconductor market is a perfect fit with my personal career goals and ideas.
Not only that, I am very excited about joining a high-tech company that I can try to lead from establishing an emerging automotive semiconductor manufacturer to its growth into a leading automotive semiconductor supplier in China.
In addition, our products can solve global environmental problems and energy challenges by providing environmentally friendly solutions. Our products support environmentally friendly transportation and energy storage systems and contribute to a cleaner, greener world, which is another big motivation for me to go all out.
A key success factor in the company's vision is the blending of Eastern and Western cultures. To create a successful international working and business environment, we need to create a company that understands each other and can take full advantage of their complementary strengths.
The main challenges are addressing communication barriers and complying with local regulations while meeting the requirements of international operations. As a high-tech company, retaining our r&d talent is a key factor for success. This is another challenge we address at D&P, namely to create an attractive work environment with outstanding career development opportunities and personal development in a high-tech company with an international focus.
Q4: Dr. Henning, you have a very strong talent team. So how do you find the right people? What is your retention strategy? How do you retain these talents and grow through D&P?
Henning: Yes, you're right. This is a common problem for companies that continue to grow. In my opinion, you need to make your employees really love the company, and you need to make sure your employees are sure of the vision of the company. We need everyone in the company, including engineers and functional people, to believe in the success of the company and to work as a team to move the company forward.
I need to talk about engineers in high-tech companies, who are absolutely the backbone of the company. We strive to train our engineers to know their personal goals and the steps they need to take to achieve corporate and personal success. In addition, NXP supports us in training our engineers in advanced automotive semiconductor technologies and processes. Therefore, for our engineers, they have a clear understanding of the company's goals, are confident in the direction of the company, and they know that they can grow from the training and practical work. These can be the basic motivation for our engineers to stay and grow in the company.
Moreover, our attraction is not only the sharing of these international experiences, but also the clear ladder of personal career development within the company. We have the technical career ladder and the management career ladder. So that people can grow inside the company and they know exactly what they can achieve with hard work or a lot of effort.
In addition, we offer a long-term incentive strategy to retain all employees, which is a good reward for retention. This may not be the company's strategy at the moment, but we have set up a similar program for key engineers to retain their jobs for the long term. As they stay longer, they can earn more rewards. I think it's a win-win for both the company and the employees.
In fact, we want everyone in the company to grow with the company and work together as a team to move the company forward. I think that's the way to keep our key talent.
Q5: We pay a lot of attention to the operation of the company, including the supply chain. You mentioned how to find the right talent to succeed at DNS. In terms of external departments and external suppliers, how do you actually work with them to establish stable partnerships, and in particular how do you identify supplier partners that you want to work with?
Henning: That's a great question. As I mentioned earlier, we are a fabless semiconductor company. Fabless means we don't have our own semiconductor plants, and we currently rely on NXP's manufacturing plants and outsourcing packaging operations. This eliminates the need for additional capital to build large semiconductor plants like other large international suppliers. As a result, our company is very lightweight, which is the best choice for us because we don't need much capital to make our own products, we don't need to build a huge operation team, and we can only win by focusing on product development. You can delegate manufacturing to someone who knows how to do it or is very good at it.
Our semiconductor experience comes from NXP, we use NXP factories to produce our chips, but NXP can't do it all themselves, they also have outsourcing suppliers.
At the moment, for us, we operate more or less the NXP way, which is the right supply chain that can deliver a good product.
However, we can choose the supplier with the lowest cost. And we can still explore other opportunities. From my perspective, I'm going to start doing more work on the back end, where we can get some benefits.
As I said, we are not only targeting the automotive market, but also the industrial or consumer market. So we also try to find the best price. In addition, we need suppliers with the necessary capabilities.
In summary, all our suppliers should fully meet our and customers' requirements in terms of quality and performance. Especially when problems arise, we need quick response and feedback from our suppliers in order to solve problems for our customers. This is the key to our cooperation with suppliers.
Q6: What is the ratio of local suppliers to international suppliers in D&P?
Henning: It really depends on the product. It's hard for me to give you a ratio figure right now. I think there are more and more suppliers in China because China is really trying to develop for the semiconductor industry and the quality is getting better and better. From this perspective, we will give China more capacity to build more local Supply chains in China and rely more on China. But I can't give you a rate right now.
Q7: When I talk to executives in other industries, these ceos talk about the idea of critical key suppliers, so Henning, you may agree that a company may have many or even thousands of suppliers, but you may have a critical top ten, or even top twenty suppliers. So, how many suppliers do you think are critical or strategically important to your business for D&G?
Henning: We're not a big company like NXP. We don't have thousands of suppliers.
In my personal opinion, I don't want to have too many different suppliers because it takes too much resources to manage the supply chain. And it does take a lot of effort to manage the reliability of the supply chain, so I'd rather focus on a few really good suppliers and build business relationships, work well together and support our business (e.g., product development, distribution). Therefore, I would say that having fewer than 10 suppliers is really beneficial and critical to our business development.
Q8: In addition to operational excellence in the supply chain, Dr. Henning, what are the key messages that stand out for you to convey to interested customers, suppliers, and even investors?
Henning: That's a good question. I want to summarize the key message: We are a growing semiconductor company that wants to address the automotive market with quality products and to be a strong business partner with our suppliers and customers' business partners.