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May 10th, 2010
Lucky Star GalaxyCore: the incredible success story of a Chinese CIS design house!
There aren't too many CMOS image sensor design houses yet in China.
However, three companies are now appearing in the local CMOS imaging landscape: SuperPix Beijing is focusing on high-end type of CMOS image sensor and was the first Chinese company to introduce 3MPixel resolution sensors in 2007. PixelPlus Shanghai is mainly focusing on the development of high quality sensors for big Asian companies such as Samsung and Sharp, relying on Dongbu Anam Semiconductor CMOS foundry manufacturing technology. GalaxyCore is mainly focusing on low-end CIS market, and has today become one the biggest customer of its foundry partner SMIC, given the recent sucess of its recent image sensor designs onto the Chinese local market. But these 3 chinese CIS design houses have something in common: most of their employees are actually coming from abroad, with past experience in US companies. All these players today differenciate by providing lower cost CMOS image sensors: they are typically pricing 20% lower in cost compared to foreign competitor's Omnivision and Aptina Imaging.
Just moved into a new office in Zhangjiang in May 2009, the CEO of GalaxyCore Inc., Lixin Zhao, was worrying about their office space again. The original plan of their relocation as considered to meet the needs for 3 years but just several months later, it is already full of employees. GalaxyCore has been working at full capacity: for the last four days of September, there was still a supply gap of 4 million chips and they had already shipped 20 million units in this month. The uprushed demand surprised Zhao and some female employees of the production line even burst into tears under the pressure. But they do not know the fact behind: GalaxyCore is becoming the champion of the segmented industry.
Founded in 2003, GalaxyCore is a semiconductor design company focusing on developing and marketing CMOS image sensors. Their products are mainly used in mobile phones, PDA, computer cameras, toys and other consumer electronics. In 2008, Galaxycore became the largest customer of SMIC (Semiconductor Manufacturing International Corporation) in the local. Currently, the company has occupied more than 50% market share of low-end image sensors in the world.
The ignorant is fearless!
The ignorant is fearless!
Despite the rapid growth, Galaxycore and its CEO, Lixin Zhao still maintain a low profile. Before starting his business, Zhao was just an ordinary engineer back from the United States, "At that time, I was just an ignorant and the ignorant is fearless."
Before coming back to China with his patents in the field of high-end image sensors, Zhao had worked in Singapore’s Chartered Semiconductor, in ESS Technology in the United States and in UTStarcom. At the beginning, he chose to do high-end image sensors design, but because of problems in R&D, he turned to work on base band research and development. After some ups and downs, he finally started working in the field of low-end sensors. How to find the correct market positioning is the main difficulty for many chip design companies. Zhao originally wanted to do high-end, but he found the market, the capital and other areas are not ready, so he had to start from the low-end, "start-up companies have no choice." said Zhao.
In the early days, Zhao used to plan the development of GalaxyCore: starting with image sensors process, digging in technologies, and then running the production. It is not quite the business logic by starting technical and leading to the market Zhao has admitted, "I was somehow crazy, like Don Quixote." That plan was meant to fail in the market environment of that time. GalaxyCore was not the first image sensor company in China. There were already some companies in 1990, however, the immature conditions of wafer factories made computers and mobile phones only had camera functions a few years later in China and some of these image sensor companies declined eventually.
Although the start was difficult, fortune smiled on Zhao. When Zhao came back to China, he ran into a high school classmate, who has already owned an asset of more than 100 million Yuan (about 12 million USD). This friend invested 2 million USD without hesitation. “This was not an ordinary opportunity.” Recalls this, Zhao still felt inconceivable, but he was sure that this friend was not very familiar with the field of chip design at the time, “If he knew the risks, he would have never invested.”
Fortune knocks at the door over and over
Chip design is a high input industry, 2 million USD was far from adequate, but SMIC helped a lot GalaxyCore. At that time, SMIC had also started their image sensors business, but because of their lack of technology, they had to invest a lot to purchase from abroad. Thus, GalaxyCore and SMIC began their cooperation. GalaxyCore helped SMIC develop their silicon wafers production line and SMIC was in charge of the R&D costs. But it was difficult for GalaxyCore to be recognized because at the same time SMIC had also chosen several companies in Taiwan for cooperation.
Fortunately, with SMIC's platforms, GalaxyCore succeeded after testing more than 40 versions while other companies had no progress. Then SMIC decided to focus their R&D funds on GalaxyCore. While other image sensor design companies complained about the huge costs, GalaxyCore survived incredibly. “If it was our own money, the investment would have been already gone.” Zhao added.
GalaxyCore’s luck continued. “When we started selling our products, the market was unexpectedly out of stock”. In early 2005, GalaxyCore got some national orders of PC camera image sensor chips. But because of some problems, GalaxyCore did not manage to deliver the products in March, as originally scheduled. The delivery was postponed until October. Although with much delay, the customer did not cancel the order because the market had been out of stock since many image sensor companies focused on the mobile phone market and neglected the relatively small PC market at time time.
After seizing this market gap, GalaxyCore sold 16 million units in 2005 with sales of 5 million USD and had profits. This performance was rare at that time in the market, GalaxyCore received Sequoia Capital and Walden International’s investment in 2006. Zhao admitted, in fact investors did not really think that they had good products because while GalaxyCore introduced their first 1.3MP image sensors, there were already 5MP products in the market. Zhao explained, “It was just because our company did can make money.”
Since then, many other companies began to shift from mobile phone to the field of PC cameras. With the increased competition, the chip design industry started facing severe pressure in 2007. But Zhao felt relaxed, “We did not fear because we had funds.” GalaxyCore began its image sensors R&D for mobile phones and in 2008 introduced its new products with 20% lower cost than competitors. 3,5 million chips were sold in the world that year and GalaxyCore’s revenue was over 20 million USD.
Competitors’ error could be another kind of luck. In the year of 2009, the market share of GalaxyCore continued to grow rapidly, from 15% at the beginning of the year and then it exceeded 50% in October. In 2008, the CMOS sensors field leader Omnivision had a decreased profit due to the economic crisis. In order to reverse the situation, it raised the prices of its products. At the same time, Zhao’s strategy was to reduce the cost and to develop the new generations of GalaxyCore’s products. He introduced new products with 35% cost reduction and 40% performance improvement. They were recognized by the market and GalaxyCore occupied the market share of Omnivision. Zhao admitted, GalaxyCore’s chips are mainly for low-end brands but he is still confident, “There is not a big difference with high-end mobiles phones’. Good-selling products definitely have their merit.”
Scared errors
Although lucky enough, GalaxyCore used to face a lot of difficulties. When developing the product earning the first barrels for him, Zhao did not do any market research. After the product came out, he discovered that the cost was only the half of his competitors’. He had no idea about his design advantage before that. Talking about ignorance, the mere thought strikes terror into Zhao because the cost advantage is not necessarily good news. Due to the lack of market research, he did not even think over how to do packaging, compatibility, sales and how to reduce customers’ difficulties. Engineer’s thinking caused troubles like that. “I had no sense of marketing.” Zhao said. Even though he had great experience in technical aspects, he had hardly knowledge in marketing operation.
“Like those unsuccessful companies, I have made all their mistakes, or even more.” At the beginning of the company, Zhao hired mostly fresh graduates, and then the whole company’s database was taken by one of these students. He obtained 4 million USD’s investment and began to compete directly with GalaxyCore. Zhao said that he was not very familiar with the local personnel management when he came back from USA.
“I had committed some fatal errors, but carried through my business.” Zhao preferred to ascribe GalaxyCore’s success to good luck. “Many companies failed in their mistakes. In fact we can still try after our first mistake, but the market would not necessarily give a chance…”
Currently, the global image sensor market is estimated to be about 3 to 5 billion U.S. dollars, profit is focusing on high-end products and low-end products only occupy 20% of the market. "Even though I am making low-end products, there is a lot of growing space." Zhao expects that this year GalaxyCore’s sales may reach 60 million USD. He now has very good market awareness, emphasizing on market demand in his R&D strategy. "To be pragmatic, not too ahead." As the company continues to grow, Zhao told reporters that GalaxyCore could be listed abroad in 2010 market shares!
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