Global Wafer will acquire Shichuang Electronics! How did Dong Zuo Xu Xiulan “make big snacks” so that Universal Crystal went straight to the second brother of the wafer? | TechNews

“Does the chairman really get up at 3:58 in the morning every day?” At the end of the interview, I asked about the work and rest time of Xu Xiulan, the chairman of Universal Wafer (hereinafter referred to as Universal Crystal) in an earlier interview with the media.

“That was actually mentioned during small talk, and I didn’t want to emphasize it. But that is my real life style, whether it is Chinese New Year or vacation.” Day after day, Xu Xiulan is sure to be in the morning. I drove from Taipei to Hsinchu at 5 o’clock, and I would definitely be able to get to the company before 6:30. She could work quietly while her colleagues hadn’t come. If we started at other times, the road conditions would be an uncontrollable factor.

“I hate things that cannot be controlled or calculated” is Xu Xiulan’s personality and her management philosophy.

Under the leadership of Xu Xiulan, Global Crystal has become the world’s third largest silicon wafer manufacturer by virtue of multiple successful mergers and acquisitions and a rapid turnaround business strategy. In the eyes of the outside world, she frequently uses snacks to make big mergers and acquisitions, and her style is positive and bold, but she says that she is very conservative by nature. If she does not have a high degree of confidence, she usually does not do it.

“Look carefully at each decision, I have calculated and picked the one with the least risk.” Before each decision, Xu Xiulan had already simulated and practiced countermeasures with the internal team, assessed the complementarity of the M&A target and itself, and knew why it was losing. Money, what adjustments must be made to turn losses into profits, “If you can’t see the reason why it is losing money and don’t know how to stop the bleeding, you can’t act.”

Even if the customer was willing to take the initiative to invest in the expansion of the plant, Xu Xiulan did not immediately agree. She depends on whether the price is reasonable and the product specifications must be futuristic. The most important thing is that the customer’s promise is long, “We will not expand the factory to find orders, but take the order and expand the factory.”

Looking back on the eve of the 2008 financial turmoil, many semiconductor suppliers expanded their factories simultaneously, and the oversupply of silicon wafers caused prices to collapse. At that time, Universal Crystal had not become independent from Sino-US Silicon Crystal. “We not only were not hot, but we also benefited a little.” Despite this, Xu Xiulan still bears the lessons of the market supply and demand fluctuations, even if the visibility of Global Crystal’s orders is high, we have already looked forward to the future 3 In the past five years, she still strives to control all capacity expansions rationally and avoid repeating the same mistakes. “As a supplier of raw materials, our responsibility is not to make customers out of stock.”

Choose M&A targets carefully with “complementarity”, buy technology, team and market with low risk

Q: Why did you choose “M&A” as a means of growth?

A: There are two ways for a company to grow. One is to find land to build factories (organic growth), and the other is to buy a company (mergers and acquisitions). For us, the company must continue to grow to meet shareholder expectations. However, when deciding which way to grow, I usually evaluate four aspects: time, cost, technology, and risk.

For example, when I acquired Japanese fab Covalent Silicon (hereinafter referred to as CVS, then the world’s sixth largest silicon fab) in 2012, I did a lot of evaluations beforehand. First of all, CVS is a Toshiba company, and its technology and products have been certified by many Japanese companies.

Furthermore, it has more than 200 engineers who have been trained for more than 15 years. In Taiwan, even if I spend 5 times more time or money, I will not be able to build a factory of the same specifications, but if I buy it, I will be able to get more than 300 patents tomorrow after payment and delivery. Immediately, it is an important supplier to many first-tier companies in Japan. In addition, while I was talking to CVS, another team also went everywhere looking for suitable locations to expand the factory, and calculated the cost of building the factory. The purpose of dual-track parallelism is to ensure that the risk is low.

People outside may think I am very unconservative, because in the past 20 years (1998-2018), our revenue has grown 120 times, and both market value and production capacity have increased a lot. But in fact, if the degree of confidence is not high, we usually do not move.

From this point of view, organic growth will be more cost-effective than buying a company, because current companies are too expensive. At different points in time, even if the approach is the same, the answer will be different. However, each approach must be a decision made after careful evaluation. My actions are bold, but my attitude is very conservative.

Q: What is the judging standard when choosing the target for merger?

A: I care about “complementarity”, that is, it has things I don’t have (technology, market, etc.), and these things are difficult to grow organically, so I will consider acquisitions.

We acquired Globitech, a US semiconductor epitaxy plant in 2008, because it has epitaxy technology (epitaxy; forming a uniform crystal structure on the wafer to enhance the performance of the wafer); in 2012, we chose CVS because it has The Japanese market, which we have been unable to enter, also has the technology and production capacity for 8-inch and 12-inch wafers that we need.

Let’s talk about the two mergers and acquisitions in 2016. Topsil, Denmark, was selected because it has the technology of floating zone growth (Float Zone; silicon wafers produced with this technology are mainly used in high-power electronic components); Sunedison Semiconductor (hereinafter referred to as SEMI), the world’s fourth-largest semiconductor silicon wafer manufacturing and supplier, is also because its market layout is completely complementary to ours. We have almost no markets in it, nor do we have it.

We don’t do unfamiliar things, so we always look at our peers when we select the targets for mergers and acquisitions. If the two parties are complementary in terms of market and technology, you can observe carefully for a while.

The reason is not necessarily for mergers and acquisitions. Sometimes it is for benchmarking (benchmarking, comparing the performance of the company with industry benchmarks), observing the growth rate of other people’s turnover, gross profit margin, and price, and seeing where you are You can learn to improve.

However, frankly speaking, it is only SEMI that we proactively contacted each other. The other companies encountered financial difficulties and came to ask if we could buy it.

Q: Why do these foreign companies take the initiative to look for Global Jing as buyers?

A: On the one hand, it is trust, on the other hand, it is goodwill, because everyone feels that we can make a profit quickly by joining in our company, and we have acquired so many times, each time we use the original team to operate, and then let the business growing up.

These records have been recognized all over the world, so even if others want to buy the company at a relatively high price, they are willing to trust us.

Like the Danish silicon wafer supplier Topsil, our business relationship has been maintained for 15 years. I also served as their chairman in 2001, and they are very close working partners. They hope to sell the company to people they know, knowing that the other party will not take away the patents, shut down the factories, and lay off employees the day after they buy the company.

We have never done this before! Because we have grown slowly from a small company in Taiwan along the way, it is impossible to send a team to the United States or Japan to replace the original management team. This is unrealistic. And because they have lost money for many years, they already know which way to go. Compared with us, they know how to avoid mistakes, choose to let them continue to operate, and keep in touch with the head office is a more efficient management method.

Find out the problem, think clearly about the solution, respect the original management team, and quickly turn loss into profit

Q: What is the key to business operations that can turn the acquisition target back into profit within one year?

A: Among the companies that have been merged in, Globitech has the longest turnaround time, starting to make money in 15 months, and the others are less than 12 months. Usually, before deciding on a merger, the internal team will conduct a simulation exercise to know why it is losing money and what adjustments it needs to make to turn losses into profits. If you can’t see the reason for its loss and don’t know how to stop the bleeding, you can’t act.

When I was about to buy Globitech from the United States, I found that this company would “lost money” no matter the economy is good or bad. After careful study, I realized that the problem was that their business model was to buy wafers for processing into epitaxy. When the boom is good, wafers are expensive and profitability is poor; when the boom is bad, raw materials are cheap, but the demand from customers is relatively small. When it becomes a part of Global Crystal, raw materials are available no matter the economy is good or bad; for us, the added value of wafer processing into epitaxy is also higher.

Furthermore, Globitech had an annual turnover of approximately US$30 million at the time, but the bank debt alone was as high as US$29.5 million. The money earned was used to pay interest, let alone repay the principal. If we buy it and borrow money to pay off the debt first, the company’s burden will be reduced a lot; for us, the money is also lower than the cost of rebuilding an epitaxial plant.

In the end, they used the best clean room equipment from the beginning of the establishment, but the market at that time did not need to use such high-end equipment. Insufficient order quantity and high equipment depreciation rate have pushed up operating costs. When we acquired it, the requirements of these clean rooms were fully in line with market demand. They were originally a source of pressure, but now they have become precious assets. After analyzing these points, I think we should have the opportunity to make it better.

When evaluating whether to acquire a company, we will first look at where it is losing, and then think about what synergy we can achieve together. Of course, it will not be 100% as we expected, but as long as it seems that the opportunity is not small , We will rush.

Q: So far, every time I buy a merger has a good result? Is there something tricky?

A：Because the money in all our mergers and acquisitions is borrowed from banks, we must try our best to stop the bleeding within 12 months and pay back the money within 5 years.

Reducing losses and turning losses into profits as soon as possible will probably go through this process. Taiwanese people are very frugal. We use one dollar as one and a half and do a lot of simplified work, but the actual execution is still the original team. .

Like SEMI, which was originally a Nasdaq listed company, it had to bear the daily operating expenses such as directors and supervisors’ fees, and listing attorney fees. When it becomes a Taiwanese company, these things are no longer needed in an instant, and we will ask the top executives to leave according to the contract. This is the most distressing aspect of mergers and acquisitions. There must be repetitive functions or manpower. We must constantly explain to employees, “It’s not because of his poor ability, but because of changes in the organizational structure. There is no need for such high-level people.”

In hindsight, people who really do things and know the job content will get better results, because they usually know better than the top people why the company loses money. My experience is that as long as the team is good enough, and the product and technical capabilities are sufficient, basically this company has a chance to turn around.

Q: The supply and demand of the silicon wafer market has gone from “falling to bottom” to “supply exceeds demand”. How to respond to the fluctuations in industry supply and demand?

A: I joined Sino-US Silicon Crystal in 1998. Most of the time, it was a buyer’s market (buyer’s market, which means that the supply exceeds the demand, which is beneficial to the buyer). The visibility of orders 6 months in advance is very good. This time the visibility has increased to 3 to 5 years, which is relatively healthy for us, but I would not extravagantly think this is the norm.

The demand for silicon wafers will be so tight because in 2008, many semiconductor companies expanded their factories simultaneously. As a result, the financial turmoil that year occurred and the market collapsed, causing many people to lose their money.

After that, the attitude of wafer suppliers turned conservative and did not make any major moves to expand production capacity. Spreading out the 10-year timeline, raw material vendors have not expanded their production capacity, but many new applications (such as lens chips, IoT sensor components, etc.) appear downstream, and the supply will not be available.

In the early stage of rising demand, suppliers will use “de-bottleneck” to increase production capacity by adding equipment or clean rooms to existing plants. Compared with expanding factories, this approach is relatively rational. We currently have a total of 16 factories. In 2014 and 2015, the capacity of 8-inch wafers has been expanded by 15% for two consecutive years. The number of factories does not seem to have changed, but the output of each has increased. This is the “de-bottleneck” result.

It is the supplier’s responsibility to keep the supply stable without rushing to expand the factory rashly with demand

Q: The order visibility has been looking forward to the next 3 to 5 years. Will you consider expanding the factory along the way?

A: In the long run, I am not worried about demand, because in the future of the Internet of Things, there will only be places where our imagination cannot reach, and there will be no demand.

The uncertain factor is the supply. If everyone expands irrationally as they did 10 years ago, or if new entrants join, it will affect the balance of supply and demand. At present, I hope that the supply will not be cut off before the new production capacity is opened.

In fact, the visibility of current orders is not limited to the next 3 to 5 years, and some customers even actively invite us to expand the factory. The other party knows that I am a super conservative person, and they also know that because we spent a lot of money on SEMI in 2016, they are willing to help us build the factory, which is equivalent to paying for the goods in advance. But even so, I’m still very cautious. I don’t want everyone to talk too much. It is more important to make it than to say it. I hope that the conditions can meet the following principles, and then a large-scale plant expansion can be carried out.

First, the price must be right. If the other party wants us to expand the factory and the price is unreasonable, I don’t need to expand the factory just to grab turnover. Because building a factory will definitely increase turnover, but not necessarily profit.

Second, if the product specifications belong to the “tomorrow” specifications. For example, now everyone’s product specifications have progressed to 7 nanometers and 10 nanometers. Customers still want us to continue to produce 40 nanometers. This is not cost-effective for us, because it may be done in one or two years. , The product has no life span.

Finally, I hope that the promises made by customers are long. If the price is right, the product is right, and only a two-year contract is signed, I will feel uneasy.

As a supplier, the responsibility is to serve the needs of customers, but I also hope that customers can promise me not to repeat the mistakes of 10 years ago. If the customer gives me a long-term commitment, we will expand what he wants for him, so we will not expand the factory to find orders, but take the order and expand the factory.

Xu Xiulan’s M&A mentality

Since 2008, Xu Xiulan has been leading the merger and acquisition of Global Wafer, almost every time the acquired company turns into profit within a year, and the subsidiary is on track. Under the leadership of enlightenment teacher Lu Mingguang, chairman of Sino-American Silicon Crystal, Xu Xiulan gradually explored her own M&A mentality. From selecting the M&A target, simulation countermeasures to implementation, each step has her own merits and differences. for.

Step1: Select the target

Xu Xiulan is always diligent in reading the quarterly reports and financial reports of peer companies, observing whether there are areas for Global Crystal to learn and improve. Most of the M&A targets come from this. When choosing a target for mergers and acquisitions, her first priority is whether the market or technology of the company and Global Crystal is “complementary”. In future mergers and acquisitions, there will be no overlap of functions or competition for resources.

Step2: Simulation countermeasures

After selecting the target of the merger, the decision cannot be made rashly. Xu Xiulan will discuss strategies with the management team, first observe the organization’s physique. If the team has good skills and talents but has been unable to make a profit, it is necessary to find out the reason for the loss of the organization, and then think further, if the other party is included in Global Crystal’s One member, how to complement each other and exert synergy.

Step3: Implement actions

After the countermeasures are simulated, the company will be approached. Xu Xiulan prefers to use the original team and operate in situ, because they already know which way to go. As long as they are in close contact with each other and simplify the organizational hierarchy and heavy industry, they can increase efficiency and achieve the desired results.

Xu Xiulan’s Management Handout_ Dos & Don’ts

From

1. The company must continue to grow to meet shareholders’ expectations of us.
2. If the team is good enough, and the products and technology are enough, there is basically a chance.
3. If the product specifications belong to the “tomorrow” specifications.

Don’ts

1. If you don’t see the reason why a company is losing money, and you don’t know how to stop the bleeding, you can’t act.
2. I don’t want everyone to talk too much. It’s more important to do it than to say it.
3. Will not expand the factory looking for orders, but take the order and expand the factory.

(This article is from Manager Monthly Authorized to reprint)

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