When a big Chinese company took over a small British one, it turned out to be a very even partnership

Paul Taylor remembers feeling apprehensive five years ago when a Chinese investor bought the British semiconductor company that he headed.

"Back then, there was a lot of bad press about Chinese acquisitions, including the movement of manufacturing to China, and technology being taken away," says Taylor, the CEO of Dynex Semiconductor Ltd.

But he need not have worried. With funding from its Chinese parent company, Zhuzhou CSR Times Electric, the number of employees at Dynex has grown from fewer than 250 in 2008 to around 300 today. It has upgraded production facilities and found a route into China's expansive market for high-voltage semiconductors.

Moreover, Taylor now believes Dynex can compete on an equal footing with the world's top semiconductor makers, including Infineon of Germany, ABB of Switzerland, and Mitsubishi of Japan.

"In the past, our scale of production was small compared with our competitors, but from a technology perspective, we've always been leading," Taylor says.

"With the help of Zhuzhou CSR Times Electric, we now have access to a huge market, and that would put us in the top platform of the semiconductor industry."

Dynex, founded in 1956 in Lincoln, England, has grown to become the UK's largest manufacturer of HV semiconductors.

Taylor says that Dynex had no commercial relationship with Zhuzhou CSR Times Electric before the acquisition, although he had known some members of the Chinese company's management team from his trips to China.

Zhuzhou CSR Times Electric, a subsidiary of the Chinese state-owned electric locomotive manufacturer CSR Corporation Limited, was looking for a partner to develop IGBT (insulated-gate bipolar transistor) semiconductor technology in 2007 and found Dynex.

As IGBT technology is relatively advanced, most IGBT semiconductors used by CSR and other Chinese high-tech companies were imported from leading international suppliers in Europe and Japan.

But as Europe and Japan have their own locomotive manufacturers competing head to head with CSR, the Chinese corporation decided to develop in-house technology for IGBT semiconductors to reduce reliance on foreign suppliers, Taylor says. CSR's competitors include Germany's Siemens and France's Alstom.

In 2008, Zhuzhou CSR Times Electric bought a 75 percent share in Dynex. It retained Dynex's management board, and added two managers to head sales and marketing, and research and development.

With financial support from Zhuzhou CSR Times Electric, Dynex built a 12 million pounds ($19 million; 14 million euro) new R&D center to focus on developing IGBT technology. Dynex's R&D team also increased from 12 to about 40, including those from the Zhuzhou company on secondment.

Taylor says these technicians play an important role in facilitating technology transfer between Dynex and its Chinese parent company.

The intellectual property rights of the newly developed semiconductor technology are shared between the two companies.

Meanwhile, Dynex helped Times Electric establish a manufacturing line for IGBT semiconductors in Zhuzhou, in Central China's Hunan province, including the installation of production equipment and design of the assembly process.

Dynex regularly sends experts to Zhuzhou to ensure the new production line is similar to Dynex's in Lincoln.

Times Electric's 1.4 billion yuan ($225 million; 179 million euros) facility for IGBT production will become operational later this year. It is expected to produce 2 billion yuan worth of semiconductors each year.

Taylor says the Zhuzhou plant will specialize in producing low-voltage IGBT semiconductors, which are needed in greater quantity, while Lincoln will specialize in high-voltage ones.

"The strategy Zhuzhou CSR Times Electric discussed with us is to retain our operations here in Lincoln," Taylor says.

"They wanted us to grow, but we should not grow so rapidly, because the rapid growth is something that should happen in China.

"Particularly, they want to invest in technologies and facilities we have here, so we would be able to become a leader in technology."

He admits Dynex cannot afford facility upgrades as a standalone entity.

Since the acquisition, CSR has become the single biggest customer for Dynex's semiconductors, accounting for around a third of total sales.

Meanwhile, Zhuzhou CSR Times Electric also acts as the distributor for Dynex's products to Chinese companies in a range of high-tech industries, including transport, smart-grid, aerospace, electric vehicles and renewable energy.

Taylor is optimistic about Dynex's commercial partnership with the Zhuzhou company.

"What surprised all of us is the high level of employee care. They genuinely want to make us a part of the company, so they try very hard to make sure they're always very thoughtful in dealing with the people here."

Every year, Zhuzhou CSR Times Electric invites four outstanding employees from Dynex to its company awards ceremony in China. They are also taken on a short tour of China before returning to Lincoln.

Taylor visits China about four times a year to meet the management team of Zhuzhou CSR Times Electric and its clients.

He says China's manufacturing industry has undergone a facelift in terms of facilities compared with 20 years ago when he first visited.

"My impression is that the standard of technology in China is top rate, and the equipment used in China is world-leading."

But he also points out that there is still a problem in how Chinese manufacturers are perceived internationally, which affects their ability to bid for high-tech projects, especially in developed economies.

"Perception is still a huge problem, and we find this every day," Taylor says.

"People would refuse to buy from us things manufactured in China. But what we'd like to do is to take our customers to China and show them the facilities we have."

Taylor grew up in Yorkshire, in northern England, and studied semiconductor research at Leeds University. He joined Dynex as an R&D employee, and became its CEO in 2004.

He says he is trusted by Zhuzhou CSR Times Electric to run Dynex as he sees fit, which he greatly appreciates.

"They give us a high degree of autonomy, and they did not place a Chinese manager at the top after the acquisition."

With the help of Chinese-speaking employees at Dynex, Taylor regularly reports to the Times Electric management board.

"We find the Chinese welcoming, and they have a good sense of humor. We feel much at home."

cecily.liu@chinadaily.com.cn

(China Daily 01/25/2013 page16)