CEO Interview: Dr. Leo Li

Dr. Leo Li

Chairman, President and CEO, Spreadtrum Communications
Chairman, Global Semiconductor Alliance

After earning your PhD degree at the University of Maryland, you had a successful career in the U.S. What made you decide to return to China and join Spreadtrum?

After graduation, I worked at Ericsson Rockwell, Mobilink, Broadcom (through the Mobilink acquisition) and Magicomm, a company I founded. I was very fortunate to have a great career, and I had many opportunities to interact with customers and see how the world and the industry was transforming. Although, at the time, the cell phone chipset market was dominated by leading vendors such as Qualcomm and Mediatek, it was obvious to me that the number of users and potential users in China and other developing countries could be enormous. This presented a very big opportunity that all of us in the industry would need to think about how to embrace. When I was approached to join the senior management team at Spreadtrum, it was based on multiple discussions. I even took on advisory positions for almost a year to work closely with the company. So, yes, I did go through a long and careful consideration process since it was a big change for me and my family, but ultimately, I was excited by the opportunity to make a difference.

Spreadtrum has had a lot of success in recent years. After you became the CEO of Spreadtrum in 2009, what were the challenges you faced? What were the key strategies that helped Spreadtrum overcome those challenges?

When I joined Spreadtrum, it was at a crisis point. Due to quality and execution issues, we lost most customers. The situation was very bad, and our stock was taking a severe beating on NASDAQ (it went down from the peak $17.00 USD to $0.67 USD). We were short on cash and lost many engineers. The challenges were many, and you could say, some were losing confidence in the company. What helped us to turn around? I think it is important that we took a hard look at ourselves and recognized we made mistakes. We stopped accepting excuses to justify our failures. That is always the first step: get on the right course and start doing the right thing. Secondly, we listened to our customers. We spent so much time meeting customers. Third, we completely changed the engineering development process and adopted new ways to develop the SOC products. We paid most attention to the quality and time to market. Forth, we hired and promoted new people to the senior management team. So when we introduce the next product, we had corrected our problem and created what the market wanted. The 2.5G modem chip we introduced that year was a hit and anchored our turnaround and later success. From 2009 to 2013, we managed to increase the revenue 12 times, and the stock price went up 31 times. We were considered the best turnaround story among all the companies in NASDAQ history!

What are some of the recent successes about Spreadtrum that excited you? Who are your major customers?

The latest statistics show that Unigroup Spreadtrum & RDA shipped 630M baseband chipsets in 2015, becoming the world second largest mobile chip company with 25.4 percent of the global market share. According to the latest forecast, Spreadtrum is expected to ship 600M mobile phone baseband chipsets in 2016 with more than 100 Million of them for 4G smart phones, a nearly tenfold increase over the previous year.

Our major customers include Samsung, HTC, Huawei, Xiaomi, Lenovo, TCL and many more. Spreadtrum is the number one chipset provider for Samsung.

Since we touch on this a bit earlier, would you take us back to 2013? What was the vision when Spreadtrum accepted the merger proposal from TsingHua Unigroup to go private? How different it is to operate as a private company versus a public company so far?

When we were approached, Spreadtrum was coming off a stream of success and trending well. It is arguably the leading independent fabless design company in China. We were trading on NASDAQ at a historical high (the stock price went up from $0.67 USD to almost $21.00 USD in 2013). When we heard the proposal from Tsinghua Unigroup, it was interesting to me in many ways. First, it did present an opportunity to increase the shareholder value. Secondly, the investment and the credit line that came with the investment would give us the capital and opportunity needed to take Spreadtrum to a different level. We all know that competing in the mobile phone chipset market is cut throat business. It requires a lot of technology and capital investment. In 2013, we were successful, but it was obvious that unless we continue to move forward, we would not be successful for much longer. Few survivors left standing were moving towards FinFET, and it is very expensive. The market was moving towards LTE, which takes a lot of R&D effort and expense to do it well. We probably could have done it organically albeit more incrementally, but at that time, this proposal did provide us the opportunity to move towards our target in a more aggressive way. Also, our P/E multiples of SPRD stock was only around 10 times. If we could list the same company in China stock market, the P/E would have been at least 30 to 40 times.

Of course, there are differences after the company went private. I am expecting us to hit $2.1 billion USD in revenue for 2016 which presents another 20% revenue growth year over year. Our product pipeline is really strong. Along this way, we rolled out products faster. In 2015, we shipped more than 630M units of smart phone and feature phone chipsets combined (combining SPRD and RDA shipment). We shipped more than 200M units of smart phone chipsets, and we are excited we have launched LTE products in the first quarter this year. We have increased the volume of LTE smart phone chips more than 10 times to reach 30M units of LTE global shipment in Q1 2016. We also are excited that our 16nm mid/high end LTE chipsets will be introduced soon. This level of acceleration in product and business development would not have been possible if we were still a public company.

Intel became a key shareholder of Spreadtrum in 2014. Can you talk about what the partnership has meant for you? When will we start to see some product of this partnership?

We have a great partnership going on. This is a partnership formed between different cultures and two large organizations. The reasons all sounded good, but it was really hard to carry out the vision. In our case, we saw the mutual benefit, and we worked really hard to make it materialize. This could not have been possible without the open communication and material support from both sides. Today, we have no less than 700 engineers on joint projects. There were technical challenges in the beginning, but now, we have overcome the major hurdles. We are seeing good early results and will be able to share by the end of the year.

When everyone talks about the rapid development of the Chinese semiconductor industry, Spreadtrum is often cited to be one of the shining example. Do you feel any pressure? How do you feel about the future of Spreadtrum? What products are you working on to ensure that future?

(laughs!) Sure there is pressure. I think if you are in this industry, everyone feels pressure. It is a wonderful industry with so many smart people competing so hard with each other. But, I am excited about our future. We already made it clear that we will become more and more in the leading edge. We will ship more 4G products with 100 millions by the end of this year. We are an active contributor in 5G development and probably will be one of the earliest suppliers. Just like always, we believe in the hardworking culture. If we work hard, we will be rewarded with a bright future.

While the Chinese semiconductor industry is energized by government support and growing markets, we see the general sentiment at the global level seems to be more challenged based on the lower growth level at PC and mobile phone segments. What is your view on the China semiconductor industry and the worldwide industry as a whole?

I think Chinese semiconductor industries are going through a phase of faster growth. You can look at it in many ways, but to answer it simply, the end market in this region is growing and the regional semiconductor suppliers have been underrepresented in the past. There is more room for the region to grow, and there is a willingness from both the government and the private sectors to invest in it. There are more opportunities for local suppliers to meet the requirements for some customers in the regions. With that said, I am still confident that the global semiconductor industry will come out this cycle as strong as in the past. The industry growth is always driven by innovation and new applications. There are so many new applications on the horizon that are set to break out. We are investing heavily in 5G. We are integrating new applications and features into our cell phone chipsets. There are many new IoT devices to come out, and we will work on connecting them to the cloud. There are new industrial and automotive electronic applications that are getting introduced. We see some new chips coming out for machine learning and so on. Many engineers and companies are working on new ideas. The challenge for us in China will not be very different from the rest of the world. We just have to work hard, innovate, and move forward.

You just became the chairman of RDA as well. Can you tell us about the challenges to integrate the two companies? What are your plans going into 2017 for both of them?

We are integrating the two companies under the same management system mainly to pool together the technology and IP so we can be better positioned for the future growth. We are very lucky that although both companies are in wireless communication, we don’t really have a lot of overlaps in the customer space. We are keeping both brands because both of them have great equity and familiarity among customers. Spreadtrum has many great products that are targeting high end segments coming out, where as RDA will continue to focus on cost sensitive segments that we have been very successful in the past.

You’ve already got a big job with many different hats. Why in the world did you agree to take on an additional role as the GSA Chairman?

First of all, I want to say that I am very honored and humbled to be trusted by my distinguished colleagues for the opportunity to serve as the chairman of the GSA board. I have been a member of GSA’s AsiaPac Leadership Council since 2010 and was elected to the board in 2012. But, I was familiar with the cause and work of this organization long before that. There is simply no other platform in the industry that gives all of us the opportunity to collaborate, network, and share our experience and knowledge for the development of the industry. I personally have had great experiences meeting and working with many brilliant leaders from all over the world. These discussions and exchanges have been valuable and meaningful. We will collectively benefit from a vibrant and thriving industry. As we talked about earlier, the industry is changing. The timing feels right. Hopefully, I can help to grow this platform and increase the representation from my region so we have a more inclusive platform that allow us to collaborate and explore new opportunities together.

 

A Short Bio of Dr. Leo Li

Dr. Leo Li, Chairman, CEO and President of Spreadtrum Coummunications,. Inc, has more than 25 years of experience in the wireless communications industry., joining Spreadtrum in May 2008. From 2005 to 2007, Dr. Li served as the CEO of Magicomm Technology Inc., a cell phone product development company. From 2002 to 2005, Dr. Li served as Senior Business Development Director at Broadcom and was responsible for a line of GSM/GPRS/EDGE/WCDMA baseband business. From 1998 to 2002, Dr. Li served as General Manager of Mobile Phone Product and Vice President of Moblink Telecom, a GSM baseband start-up company that was sold to Broadcom in 2002. Prior to 1998, Dr. Li held various senior engineering and program management positions at Rockwell Semiconductors and Ericsson. Dr. Li holds 10 patents in wireless communication systems, RF IC system and circuit designs, and RFID applications.

Dr. Li received a BS degree from the University of Science and Technology of China in Hefei, China; a MS degree from the Institute of Electronics, Chinese Academy of Sciences in Beijing, China; a Ph.D. degree in Electrical Engineering from the University of Maryland in College Park, Maryland, USA; and an MBA degree from the National University in La Jolla, California, USA.