yun liu

IC DESIGN IN CHINA AND ARK PIONEER MICROYun LiuApril 13, 2002Harvard China Review’s 5th Annual Conference: 

IC DESIGN IN CHINA AND ARK PIONEER MICRO Yun Liu April 13, 2002 Harvard China Review’s 5th Annual Conference

AGENDA: 

AGENDA A fledging but fast-growing industry Substantial market opportunities Ark Pioneer Micro

SIX MAJOR SHIFTS DRIVING THE INDUSTRY GROWTH: 

SIX MAJOR SHIFTS DRIVING THE INDUSTRY GROWTH School labs to key industry Government owned to private owned Government funding to policy shifting Pure Chinese companies to multinational JVs Melody chips to SoC IC chip design to industry standard proposal

SCHOOL LABS TO KEY INDUSTRY: 

SCHOOL LABS TO KEY INDUSTRY Before 1998 100 or so IC design organization ... ... mainly in universities and academic research institutions ... ... and invested by the government After 1998 IC design is recognized as a key industry More than 200 IC design organizations established by December, 2001 About 100 of them are newly registered companies

GOVERNMENT OWNED TO PRIVATE OWNED: 

GOVERNMENT OWNED TO PRIVATE OWNED Before 1998 Almost all IC designed organizations owned by the government “908” projects 19 IC design centers set up to support IC manufacturing facilities After 1998 The government is no longer the sole shareholder of many IC design companies “909” projects The government changed its investment strategy and encouraged electronic product manufacturers to play a part in investing in IC design companies The newly registered 100 or so IC design companies are owned or partially owned by private parties

GOVERNMENT FUNDING TO POLICY SHIFTING: 

GOVERNMENT FUNDING TO POLICY SHIFTING 1999 1993 1995 1997 1994 1996 1998 2000 1992 “908” 19 IC design centers created with funding and operation instruction from the government “909” Electronic manufacturers encouraged to invest jointly with the government and to take management responsibility The government stake shrunk to 50-60% Year The government changed role (Dec, 2000) Tax deduction scheme Industry park or incubation center R&D funding

PURE CHINESE COMPANIES TO MULTI-NATIONAL JVS: 

PURE CHINESE COMPANIES TO MULTI-NATIONAL JVS Before 2000 Foreign IC chip design companies mainly promote their products in China After 2000 Most influential chip design giants and EDA providers started to invest in both funding and technologies Motorola and MCORE proposal Intel invested in 3G/4G startups in China Via funded GSM/GPRS project COMMIT invested jointly by TI, Nokia, LG, and other 14 Chinese and foreign companies Cadence and Synopsys R&D plan

MELODY CHIPS TO SOC: 

MELODY CHIPS TO SOC 1996 1998 2000 2002 1994 Year 2001 1999 1997 1996 Communication memory chips Super chip for digital TV 64bit CPU cores GSM/GPRS analog/ digital BB processor Melody chips 8bit, 16bit, and 32bit CPU cores

IC CHIP DESIGN TO SET UP INDUSTRY STANDARD: 

IC CHIP DESIGN TO SET UP INDUSTRY STANDARD VCD / SVCD LVS – CDMA TD – SCDMA

AGENDA: 

AGENDA A fledging but fast-growing industry Substantial market opportunities Ark Pioneer Micro

DRIVERS OF MARKET OPPORTUNITIES: 

DRIVERS OF MARKET OPPORTUNITIES Gap between demand and available local supply Huge local market demand World manufacturing / OEM base

GAP BETWEEN DEMAND AND LOCAL SUPPLYDemand in China Growing Rapidly : 

GAP BETWEEN DEMAND AND LOCAL SUPPLY Demand in China Growing Rapidly CAGR (98-02) = 3% $B Year World wide market $B Year China market CAGR (98-02) = 46% Source: SIA, Dataquest, and CCID-MRD

GAP BETWEEN DEMAND AND LOCAL SUPPLYTremendous Opportunity for Local Suppliers : 

GAP BETWEEN DEMAND AND LOCAL SUPPLY Tremendous Opportunity for Local Suppliers Year Local companies supplies ~1% of China market % Local suppliers Other Year $M Local suppliers’ revenue growing rapidly 1.2% Source: SIA, Dataquest, and CCID-MRD

GAP BETWEEN DEMAND AND LOCAL SUPPLYAvailability of Local Products for Application Market: 

GAP BETWEEN DEMAND AND LOCAL SUPPLY Availability of Local Products for Application Market N: unavailable A: Available

GAP BETWEEN DEMAND AND LOCAL SUPPLYAvailability of Local Products for Application Market: 

GAP BETWEEN DEMAND AND LOCAL SUPPLY Availability of Local Products for Application Market N: unavailable A: Available

HUGE LOCAL MARKET DEMANDCell Phone: 

HUGE LOCAL MARKET DEMAND Cell Phone Year Million New cell phone subscribers Source: China Mobile Year Market penetration %

HUGE LOCAL MARKET DEMAND Personal Computer: 

HUGE LOCAL MARKET DEMAND Personal Computer Year Million New PCs sold Year Market penetration % Source: UBS and CIC

MANUFACTURING BASE FOR THE WORLD Cell Phone: 

MANUFACTURING BASE FOR THE WORLD Cell Phone Year China’s share in manufacturing cell phones 12% share China ROW 23% 22% 30% Year 54 Units (M) 87 100 233 Cell phones manufactured in China annually Source: China Mobile and UBS

MANUFACTURING BASE FOR THE WORLD Other Products: 

MANUFACTURING BASE FOR THE WORLD Other Products China has developed mature production capability and delivery capacity in the following products PCs PABX Color TVs etc.

AGENDA: 

AGENDA A fledging but fast-growing industry Substantial market opportunities Ark Pioneer Micro

THREE THEMES: 

THREE THEMES How did Ark start Where is Ark now What will Ark be

HOW DID ARK START: 

HOW DID ARK START In 1999 Ark Micro registered in ShenZhen(SZ), PRC RMB3,000,000.00 (~US$400,000.00) 8 people team Dual-port SRAM chip for communication successfully designed and passed a few users’ qualification program An 8 bit MCU core and a few other IP cores designed

HOW DID ARK START: 

HOW DID ARK START In 2000 The JV, Ark Pioneer Micro setup RMB14,000,000.00 (~US$1,770,000.00) COSCO International Holding holds 51% of the stake Ark Micro holds 49% of the stake

WHERE IS ARK NOW: 

WHERE IS ARK NOW In two years Ark has successfully Penetrated the Chinese communication and consumer market Won reputation from the industry and the government Set up professional team with 30 design engineers, 8 sales engineers

WHERE IS ARK NOW: 

WHERE IS ARK NOW In two years Ark has successfully Designed valuable analog and digital IPs/cores Developed valuable algorithm, programs and total solutions for GSM/GPRS cell phone Demonstrated home gateway platform Set up alliance with OEM manufacturers in wafer fab, IC assembly house and IC testing house

WHERE IS ARK NOWAnalog and Digital IPs/cores Products Designed by Ark: 

WHERE IS ARK NOW Analog and Digital IPs/cores Products Designed by Ark FSK, DTMF, USB11, ADM codec, Viterbi co-processor 8bit, 32bit, 64bit RISC CPU GMSK modulator IIR/FIR/SINC filters, SC filters Sigma-delta ADC/DAC SPRAM/DPRAM/ROM

WHAT WILL ARK BE: 

WHAT WILL ARK BE In the coming two to three years, Ark will focus on further penetrating the PRC market by providing more products with its well established technologies and channels Expand algorithm/software/application design team to over 100 head count in 2002 Team up with cell phone manufactures to prototype GSM/GPRS algorithm, protocol stack software and total solution Team up with A/V products manufacturers to promote the consumer ICs and total solutions

WHAT WILL ARK BE: 

WHAT WILL ARK BE Register as a shareholder company and get ready for listing at the Chinese or Hong Kong stock market In the long term, Ark will focus its business on the integration of personal communication and consumer electronics Form alliance with the IT industry Play a role in setting up Chinese standards in personal communication and consumer electronics