US semiconductor maker LSI Logic is to expand its development teams in China and India, as the company moves from a manufacturing company to one focusing on design, according to a top executive.

Abhi Talwalkar, president and chief executive officer of LSI Logic, said the company is looking to set up a research and development centre in China; the decision will be made within six months.

He said the centre would be built solely by the company, or through partnerships or acquisitions.

"In the next three years we will significantly increase our design capability in China and India," said Talwalkar in his first visit to China since he took over his current positions in May.

The US semiconductor firm spends US$40 million on research and development a year, but almost 80 per cent of that work is carried out in the United States and less than 10 per cent in Asia.

China and India, with their talented people and cheaper costs, are attracting more multinationals that want to set up research and development centres.

Talwalkar said the percentage of development by the firm in China and India would be much higher in the future, although he declined to specify how many people would be recruited in the two countries.

According to the Ministry of Commerce, 750 foreign companies have so far established research centres in China.

At the same time, China's integrated circuit (IC) design business has been growing quickly. The professional magazine Electronic Engineering Times estimates there are almost 500 IC design houses in China.

It says industry sales are expected to reach US$1 billion this year, 80 per cent higher than last year.

In September, LSI Logic, a New York Stock Exchange-listed firm, announced it would sell its last fabrication plant in the United States and become a "fabless" design company.

Talwalkar said there are about 10 bidders for that factory, but no potential buyers from China.

Apart from benefits from talented workers and low costs, the vast Chinese market has also attracted LSI Logic to the country.

Although its direct sales to China are still small, the final destination for many LSI Logic products is China, because it is one of the global centres for electronics manufacturing.

Talwalkar said the focus of the firm's development in China will be consumer electronics.

"There is a lot of fragmentation in the Chinese electronics market, so if we did not do design here we would not be able to meet the demands of some customers," he said.

The company has over 200 engineers in China, but their primary function at the moment is technical support and they are seldom assigned to development work.

LSI Logic gets more than 60 per cent of its revenue from storage-related products and only 20 per cent from consumer electronics, but that situation is almost reversed in China.

Talwalkar, a former executive with Intel, will use his close ties with leading Chinese computer servers, including the Lenovo Group, Langchao, Powerleader and Dawning, to break into the storage market.

Source: China Daily