Sondrel’s CEO Takes the Long View

　　A recent uptick in merger, acquisition, and expansion activity among Europe’s chip-design and -development providers could signal that the sector is rebounding after several difficult years. Two examples this summer were Leti’s launch of an emulator service for European chip makers and a pair of moves by Sondrel IC Design Services that will aggressively expand its engineering head count.

　　Late last month, Sondrel (Reading, U.K.) said it would hire 100 electronics engineers in Europe over the next three years, at an investment of ?10 million ($ 13.5 million). The announcement came on the heels of Sondrel’s acquisition of Imagination Technologies’ IMGWorks SoC design and software integration services team. The acquisition brought Sondrel’s IC design group engineering head count to more than 250.

　　EE Times recently caught up with Sondrel founder and CEO Graham Curren, who started Sondrel as a privately financed and independent IC services company in 2002. The affable technologist shared his views on topics ranging from the benefits of market-driver diversity to the competitive pros and cons of China’s market growth and the possible ramifications of Brexit.

　　Bubble-proof?

　　Curren is bullish on Europe’s silicon-device-manufacturing market and Sondrel’s role in it, following some admittedly difficult years for the company and the European industry at large. A migration of design services activity into Asia has affected manufacturing as well as systems companies, and the three big semiconductor companies of 10 years ago have all undergone difficult transitions. But Curren now sees positive signs for startups and investment.

　　“The most encouraging thing to me, I think, is that the drivers right now are not limited to one segment,” Curren said. “After 2000, we had the Internet bubble, and then we had a burst of activity in the mobile space, so right now there’s a whole bunch of different application driving growth. From cars to artificial intelligence to video processing and transmission, [there is] a whole range of different things all happening at once, and I haven’t seen that for a long time.

　　“It’s very good to see,” Curren added. “It makes me feel that the industry growth is much less likely to peak in the near term. [The industry is] much less susceptible to a bubble because it’s got those multiple drivers, and they’re all relatively early in their growth curve. I am very positive about the next few years.”

　　One of those drivers is the video game industry, which has become a surprising target of governmental focus here in Germany. German Chancellor Angela Merkel even addressed the crowd at the opening of a recent video game conference in Cologne, where she stressed the importance of the video game sector to the country’s industrial base. You never would have heard such a speech from a characteristically conservative government a decade ago.

　　Curren acknowledged that “in the area of video games there is a lot going on; there’s a lot of interest,” but he added a word of caution for Germany. “I guess I’m a little bit concerned about people jumping on bandwagons. That tends to be what screws things up in the end,” he said. “But there’s some very good, solid foundations around at the moment, areas they excel in — automotive being one of the biggest ones, where the business that’s driving it is really quite long term, and that’s good. Industries like that aren’t going to be overcome by investors jumping in and trying to make a mark. It’s a much more stable, long-term industry … There’s an extremely long tail with automotive, and it’s not susceptible to short product lifetimes.”

　　Barriers to homegrown hires

　　The foundry market is now a worldwide business, with new competition from some of the growing economies in Asia and a rise in entrepreneurial activity. In this flat-Earth manufacturing environment, one of the biggest risks to European industry is the lack of focus on engineering training and the resultant dearth of new engineers entering the job market. Most of the engineers Sondrel has hired in Europe over the past few years have been immigrants. Any tightening of immigration rules as a result of Brexit and other factors could limit European companies’ ability to in bring in qualified people, Curren said.

　　“If I look at the people within Sondrel, the vast majority are over the age of 40, and yet if I look at our office in India or our office in China … almost everybody is under the age of 40, so the demographic is hugely different,” said Curren. “Of course, move on 20 years, and it’s pretty obvious where that’s going to go. That’s my biggest concern, at least in the semiconductor industry, but I think in engineering in general.”

　　Sondrel might have gotten “a lot of attention” of late, Curren added, “but the growth in the company hasn’t suddenly just taken off. We’ve grown at 25 percent to 30 percent per annum for 15 years, on average … Our strategy is very much to continue to grow, but we are a global company. We have half our workforce outside of Europe, and we will continue to grow in all of the different areas. Our competitors are mostly from India. We can’t compete directly on a cost base with a cost-driven company.

　　“If we could hire more graduates and junior-level engineers in Europe, we would do that. The last time we did a hiring round from the university, we ended up, purely through competitive selection, finding what we considered to be the best candidates, [and] all three of them were Chinese. They couldn’t get visas to work in the U.K. at the time, and therefore we sent them all to work in our Shanghai office. That was not great. That wasn’t the intention. But that is going to be the result not only for us, but for other companies who will have to export the work.” In a dynamic worldwide market, moves like Sondrel’s, taken with an eye on the long view, can help a company maintain its intellectual property within the organization. Indeed, in the current environment it is arguable whether a company’s base is where its corporate headquarters are or where its IP is.

　　The long view works for entire markets as well as individual companies. China’s chip design and manufacturing services sector is a case in point. “We’ve got all sorts of different opinions about China, but one thing you can say for sure is that they’ve outgrown any of their competitors in the world by a very long margin over the last 10- or 20-plus years, and part of that is a willingness to take long-term views,” Curren said. “If you have quarterly reports and quarterly shareholders, and very, very short-term considerations, you’re quite hampered in your ability to do that.”

　　Sondrel isn’t a public company, Curren noted, but it does “require banks,” and among its greatest challenges is “trying to explain to a bank why you’re running a business in a particular way. It’s impossible, because they just don’t understand it, and they’re not interested.” The emphasis on “producing things in a way that fits the box the banks like and technology doesn’t” hampers a company’s ability to plan for long-term growth, he said.

　　“I think we need to run our businesses as businesses,” Curren said. “If we want to build a long-term strong business, we need to look at the long-term goals. At the moment, there are a lot of startups that tend to be run, understandably, as short term: put a lot of money into it, [make] short term gains, exit out in a couple of years. That doesn’t work with a big company, though. If we’re going to get some big or medium-sized companies coming out, then [we need] we need more focus on pure business profitability and cash flow.”

　　As companies plan for the long haul, the Sondrel CEO added, “anyone who isn’t looking at China is making a bad mistake. China is both an opportunity and a threat. There is a huge amount going on in China, and I think anybody should look at it. Whether they want to go into that market or whether they just want to defend against it, they need to know what’s going on … The amount of money and new ideas and the speed of work [in China] are going to catch people out, so let’s make sure that we’re watching that. It can be good and it can also be bad.”

　　On Brexit

　　Brexit is another issue for the chip engineering and manufacturing segments both within and outside the United Kingdom. For Sondrel, Curren said, “one issue is the restrictions on the movement of people; we need to move people around. As I said, a lot of our internal growth, in the U.K. in particular, has been from bringing people into the country. … As to whether or not you want to have more people in the country, we’ll leave that to the politicians and the public. But if we can’t bring people in, then there is only one outcome, which is that the work’s going to go outside. We can cope with that as a company — that’s fine — but that’s one decision that has to be made. It’ll be a pain in the neck if we have to get visas every time we want to go to France and Germany, but we’ll see what happens.” Curren is not concerned that Brexit-related import/export restrictions will affect Sondrel’s business. “If the economy took a downturn again, I’m not too concerned, as ours is an international business; it’s mostly international customers with international revenue themselves,” he said.

　　“I’m a big believer that businesses and economies and people will thrive regardless of how much the politicians try to screw things up,” Curren added. “They seem to be quite intent on scoring public points against each other, rather than just getting on with what makes any sense in the moment. It’s like having children, sometimes, isn’t it?”