Offshoring – or Entrepreneurship?
It turns out that the wave of immigrant engineers, particularly to Silicon Valley, has created a talent pool with strong ties back to countries including India, China, and Taiwan. As those engineers' careers advance, it only makes sense that some would start companies, making use of the connections to their home countries.
In the case of Analogix Semiconductor Inc., an offshore base has translated into a design win with the Huawei Technologies Co. Ltd. The Chinese firm will use Analogix's 5- and 10-Gbit/s serializer-deserializers (SerDes) in the backplanes of future routers and switches to be sold through a joint venture with 3Com Corp. (Nasdaq: COMS) (see Analogix Claims SerDes Advance and 3Com Taps Huawei in Enterprise Battle).
Analogix's founders claim they landed that business by having a substantial engineering team in Beijing, giving them a strong foothold for stirring up business.
"Having a facility there, we have a relationship with the main systems vendors," says Ted Rado, Analogix vice president of marketing. That will allow us to gain sales there, which will help us with credibility here."
Of course, it's also saved costs.
"We've gotten products to production with just $10 million. I don't think you can find many semiconductor companies that can do that for less than three times that cost," Rado says. (The company's sole round of funding came late in 2002.)
Analogix does all its designing in California, but two thirds of the company's 45 employees are engineers based in China. They're doing the later stages of chip design, which involves the exact placement of circuits into the chip and verification that the whole thing works properly.
According to Rado, the two founders of the company are from China. They got their bachelors degrees in the U.S.
"It happens when founders know some people in another country. In that respect, it is more like trans-national founding team," writes Julien Nguyen, partner with Applied Materials Ventures, in an email.
Along those lines, BayPackets Inc., a voice-over-IP (VOIP) applications software vendor, keeps a 75-person development center in India along with its 50-person headquarters in Fremont, Calif. "We've actually had an India operation from the beginning," says Amol Joshi, vice president of marketing. "The two founders are from India, and they were able to tap a pretty good group of people."
Cases such as Analogix and BayPackets are happening more frequently but haven't become prevalent, Nguyen says. After all, the usual questions about offshoring still stand.
"The cost is lower, but this is offset by intellectual property and management overhead concerns for the VCs, so offshoring in the early stage is not an advantage for a startup," Nguyen writes. "If a VC invests, he will want to either move the founding team to the U.S., or make sure a U.S. team is hired to take over the main technology development (the crown jewels)."
Yet another scenario was pointed out by Tony Li, the former Chief Scientist of Procket (see Li Quits Procket), who met with Light Reading editors last week in Silicon Valley. (Note: An interview with Li will be published soon.) "Procket had a very small, opportunistic outsourcing program," said Li, when asked about the offshoring trend at his former company. "We had a couple of engineers that wanted to move back to India, but they also wanted to keep their jobs, so it was more of just a relocation."
The bottom line? Jobs will continue to move around. But in some cases, it's just folks going back home .
— Craig Matsumoto, Senior Editor, Light Reading