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TD Forum Feature Interview - 5

Zhang Daijun: Avoid Homogeneous Competition,
Win-win in TD Era

 


 

Introduction:
Zhang Daijun
Mr. Zhang Daijun currently works as CTO of T3G Technology.

In 1999, he worked in Xinwei Telecom as Project Manager, and successfully developed the first designing of SCDMA WLL mobile phone;

In 2002, he served as project manager in Datang Mobile, and developed the first TD-SCDMA terminal prototype FTMS;

He also served as General Manager for terminal product development in Datang Mobile.
Mr. Zhang Daijun finished post-graduate education in 1997 from Chinese Academy of Telecommunications Technology, majoring in microwave and electromagnetism, and obtained EMBA from CEIBS in 2005.

In Joint-Ventures Partners Need to Complement Each Other in Co-operation

Wang Jing: Today we come to T3G Technology. We will bring to members of TD-SCDMA Forum, the media and audience a fresh, first-hand understanding of the history, situation, and future plans of T3G in the from of interview. We know that T3G is a joint-venture founded in early 2003, with many international top companies as shareholder. Mr. Zhang, please tell us about the condition of T3G at that time.
Zhang Daijun: In 2002, TD-SCDMA was approved by 3GPP as an international standard. And the prototype technology of TD-SCDMA has been verified in an early stage. So Datang began considering the industrialization of TD-SCDMA. In that situation, TD-SCDMA has made great progress in terms of international standard, networking technology and terminal technologies. However the picture was almost blank for the technology of TD-SCDMA terminal chips in China. Given this grand industrial background, introduction of internationalized cooperation became the first choice. T3G was established in January 2003 as a joint-venture. From the very beginning, T3G had been an inter-complementary co-operation of industrial giants, Phillips Semiconductors (now NXP Semiconductors), Samsung Electronics, plus Datang. And in 2005, Motorola also joined in. T3G is a typical example of international hi-tech co-operation.
Wang Jing: Another similar company is Commit. Datang has chosen to set up two companies in one area.
Zhang Daijun: Yes, this is true.
Wang Jing: This is quite necessary under the situation of that time.
Zhang Daijun: Yes. To avoid risk, you need put the eggs in different baskets. And why T3G is a combination of NXP Semiconductors and Datang Mobile? This was because there had been profound co-operation between the high level of NXP Semiconductors and Datang Mobile. And Samsung Electronics had been the strategic client of GSM chips by NXP Semiconductors. This is the historic background of the triangle co-operation. 2 years later, the Investment department of Motorola became interested in the team and co-operation mode, and also took part. In the mean time, NXP Semiconductors can provide GSM/GPRS/EDGE terminal solutions apart from chips. This is a very important technological resource. There had been only T3G doing the development of dual mode technology and products for quite a long time.
Wang Jing: Dual mode referred to GSM and TD-SCDMA at that time.
Zhang Daijun: Yes. The integration of GSM resources wasn¡¯t hard for us. The co-operation with NXP not only solved the problem of chips, but also provided GSM resource in dual mode of TD-SCDMA/GSM. Datang Mobile provided experts in TD-SCDMA technology and terminal. Samsung and Motorola were not only shareholders, but also the most important customers of T3G. This model of profound co-operation covering the whole value chain has been quite successful.
Wang Jing: As far as I know, based on this close co-operation, T3G has become first in several fields. For example, in 2004, you made the first TD-SCDMA telephone call.
Zhang Daijun: Mr. Wang you are so familiar with us that you can remember these industrial achievements. It was October 2004, the first generation of modem chip was successfully made, and we made the first call using a networking mobile phone with special chip. Dec 9, 2004, we made the first international call with TD-SCDMA mobile phone. We called Premier Wen Jiabao who was visiting in Amsterdam using a Samsung mobile phone that uses T3G solution. Then in April 2005, we realized 384kbps high-speed data transmission, another first in the industry.
Wang Jing: And you were also the first to push a dual mode solution.
Zhang Daijun: Yes, T3G was able to provide dual mode solution by the end of 2004. We¡¯ve started early in terms of dual mode, we made the earliest effort and have the most technological accumulation. 2~3 years earlier than other companies. In 2007, we first pushed TD-SCDMA/EDGE dual mode auto-switch solution, which has now passed many kinds of testing, and is known by the industry as the most functional and best performing solution.
Wang Jing: You've also announced that you are the first to achieve 2.8Mbps TD-HSDPA. What is the idea and belief, or way of management or objective behind all these ¡°number one¡± innovations?
Zhang Daijun: In September 2007, the second generation of T3G¡¯s modem chip was made successfully, which enables 2.8Mbps high rate transmission. In October, Samsung mobile phones that use this chip achieve a high rate of data transmission over 2Mbps. All these ¡°number one¡± achievements in the industry are made by the T3G team. This is no coincidence. I think there are several reasons. Reason no. 1, we have the most experienced research team which promises the lead in the area of TD-SCDMA terminal. We have to thank Datang Mobile and NXP Semiconductors. The support of parent companies in fields of protocol stack software, algorithms and other technologies is very important to our success. On the other hand, we are also grateful to Samsung Electronics. As a customer, the spirit of being a pioneer of Samsung has given us a huge pressure, which then turns into our belief and huge motivation. Having such pressure and motivation, T3G was always able achieve those goals and make records in the industry. In the very early stage, we faced pressure, and now the spirit of pursuing the first has become a vital part of our management culture in T3G. Another important customer Motorola has given us strict requirements on product quality, from process to the outcome. Now this is also a pivotal part in the belief of our team, and also a rule of our management. Having these beliefs, we¡¯ll be able to yield more and more leading achievements. Recently T3G has passed CMMI Level 3 certificate, this is also an evidence of our inner spirit and mature management.
Wang Jing: This has much to do with your investors. Datang is good at TD-SCDMA, and NXP is especially excellent in the field of 2.75G EDGE products. So when you are doing TD-SCDMA/EDGE dual mode, it will be quite easy since all the technologies are already there. Having a top mobile phone vendor Samsung in front leading you, is also very important for a chip company. It can free you from marketing, and thus allow you a great advantage. I personally think having Samsung as shareholder is a leading factor in your way of development. As far as I know, they are also a pioneer in TD-SCDMA mobile phones.
Zhang Daijun: The effort and support of shareholders are very important to the development of T3G. I also appreciate the devotion and work of the starting team. The significance of Samsung should be noted. Through the deep co-operation with T3G in the whole value chain and its substantial investment, the Samsung TD-SCDMA mobile phones have been pushed to the leading position. Objectively speaking, Samsung is a pushing power to T3G. A top customer always demands a top supplier. Close interaction yields a win-win situation.
Wang Jing: All your shareholders are pioneers in the industry. This is a big support power of your company. And Mr. Zhang, you are young yet you are in the TD-SCDMA technology from the very beginning. As I remember, you are student of Mr. Li Shihe, right?
Zhang Daijun: Yes, I was the first post-graduate student of Mr. Li Shihe. I¡¯ve been led to the field of TD terminals by Mr. Li. It has been ten years till now, and TD-SCDMA has also grown up.
Wang Jing: And how is your progress in TD-SCDMA/EDGE dual mode? Is there process of integration?
Zhang Daijun: Telecom operators are pushing this idea. We¡¯ve divided our products in modules. In terms of technological functions, T3G is internally focusing on the R&D of TD-SCDMA single mode and TD-SCDMA/EDGE dual mode. However we don¡¯t have talents focusing on EDGE single mode. Because our investor NXP has mature commercial use of this technology, we don¡¯t need to make effort in this area.
TD-SCDMA/EDGE dual mode auto-switch is an important bridge built between TD-SCDMA single mode and EDGE single mode. Close co-operation between T3G and NXP is required in the research of this bridge. We are integrating the existing single mode products including chips, hardware, and particularly the part of protocol stack software. We define interfaces, researches collaborative and verify the product together. We have regular phase visits to each other, thus the expert at both sides can have deep technological communications.
Wang Jing: How is the working condition of the ¡°bridge¡±? Is it bi-directional?
Zhang Daijun: In fact the bridge is made pretty well. With the close co-operation, the technological communication is also open and equal. In March 2007, we first realized dual-mode voice auto-switch. In terms of technical specifications, the successful rate is pretty high for rapid synchronous switch. The switch can be done without any notice of the user in conversation.
Now the design of voice switch is bi-directional, voice switch from 3G to 2G has been verified, and the verification of voice switch from 2G to 3G needs support from network environment; the design and verification for digital switch is both bi-directional. Now, the research has finished, besides 3G IOT testing under Datang, Potevio, ZTE, and TD Tech networks is already on the way. Meanwhile, 2G IOT has been carried out under Nokia, Motorola, Alcatel, and Siemens networks. On the track of dual mode auto-switch and EDGE, T3G is leading the game.
Wang Jing: So it is important to see who are in co-operation for a joint-venture (laughing).
Zhang Daijun: Exactly. I think it is important that a joint-venture set up on the ground of equality and mutual respect. It is best when they have an open cooperation. Please note that I said ¡°equal¡± instead of ¡°equivalent¡±. The two sides need to be differentiated, and able to bring valuable resource for the other side. Meanwhile, it is also important that the shareholders have a mutually acceptable business model and expectation for the joint-venture. If they didn't agree with each other at the very beginning, don¡¯t start at all. Choose the most suitable company for co-operation, instead of the most powerful one!
Wang Jing: Money is not the biggest problem for hi-tech companies. When a company has money plus technological backgrounds from parent companies, it will prevail.
Zhang Daijun: That¡¯s right. I think all partners need to have an agreement on the business model. Then the research persons can have very close and open co-operation. We have rapid development in terms of product in recent 5 years at T3G, first we are appreciate the industrial environment created by the government; second we must thank the parent companies for their understanding and agreement on our business model, which allow us free from any trouble and thus we can concentrate on development of products. The management of our company focuses on creating industry-leading products, which in turn satisfies shareholders and customers. Now we have a good operation relationship, and further opportunity for investment and closer co-operation.
Wang Jing: All your problems concerning the upper level and the lower level are handled by parent companies.
Zhang Daijun: Our history of joint-venturing is fortunate and successful at T3G. Business model for co-operation and financial issues are handled by parent companies, and technological resources issues are also supported by parent companies. The management at our company concentrates on internal administration and development of products, and the parent companies all have sincere goodwill. The integrity and stability between the management and core team are very important for today¡¯s success for T3G.

Avoid Homogeneous Competition in 3G Era
Wang Jing: T3G has been leading the industry in the aspects of solution, function and technical realization. However, as TD-SCDMA technology is nearing commercial use, all companies in the value chain are facing a challenge: No matter how your company is doing, when the technology is commercialized, you have to face the market on your own. For example, in the age of 2G, many cell phone vendors peaked around 2003, because most of Chinese cell phone producers are using 2G solutions known as something like a ¡°total solution¡±. However I personally think the thing for 3G is not the same as 2G. In 3G, there are a great number of applications; chip providers won¡¯t be able to give a ¡°total solution¡± as they did for 2G. In this regard, I am wondering how T3G will keep the leading position facing such situation of future market. How will you co-operate with downstream mobile phone customers to keep the advantage in competition?
Zhang Daijun: I think every company should have its strategy. For T3G, as a starting up, we don¡¯t have much resource to do everything on our own. We¡¯ll prefer to do the most competitive part. First survive, and then flourish. In such situation, we¡¯ll discuss with customers what they need us to do most and what they can do. Then we can make up a mutually acceptable solution.
The customer strategy for T3G is focusing on top companies both in China and abroad. Top 5 international mobile phone companies take up 80% share of the market. In China, these 5 companies also take up a large portion. This is a business objective made by T3G shareholders and the management. Subsequently we would define the development interface for internal products and customer support. Now the responsibility of T3G is mostly on designing of base band chips, protocol stack software and terminal reference designs. Since our customers are capable of developing the multimedia applications, we don¡¯t need to do those tasks.
You¡¯ve also given a good question just now: What is the difference between 2G and 3G? 2G and 3G coexist currently. Comparatively, 2G is focused at middle and lower level, and 3G is focused on middle and high-end users, because 3G is capable to provide much high data traffic capacity.
The task for 3G terminal has shifted. The major task for 2G was at chip and protocol software. Now in the ear of 3G, apart from chip and protocol, there is a new demand of multimedia application software. The one who pays most attentions here will lead the game. Many international and domestic mobile phone companies are paying much attention on this part.
Wang Jing: Do you think ¡°application¡±, as you mentioned, is the business of chip maker or mobile phone producer?
Zhang Daijun: I think it's more a business of mobile phone producers. They should pay much more attention on the designing of applications, and make more differentiated multifunctional products. Don¡¯t do homogeneous competition at all. While chip makers shall concentrate on infrastructure communication modules, and provide technical support, and let their customer handle the application module and business development. Many customers of us want to have such a division of work. We have discussed with our international and domestic customers about this business model. Smart phones will be more common in 3G era; the interface is also changing. Users of 3G mobile phones want a multimedia application terminal instead of merely something that you can talk into. If you only want talk, maybe PHS or 2G mobile phones are better!
Wang Jing: In my understanding, the co-operation you¡¯ve just described is very important. There would be many co-operations with downstream companies, because terminal companies face the user and the market directly, and should have a good understanding of the market. They also need to have a platform to co-operate with chip companies. This show how important co-operation is for you. It seems that you have 2 international partners. And last time when I was talking to Mr. Yu of MTK, he said they purchased AID because they have a co-operation partner. This is recognized by the industry. Through this close co-operation, an interface can be established for you to face the challenge of 3G.
Zhang Daijun: As 3G Era nearing, we think the number mobile phone brands will be concentrated. There were so many international brands on Chinese market 10 years ago, and now, there are only 3~5 brands still alive. The concentration of Chinese mobile phone brands is also on the way. In big and middle cities, OEM brands will also be transferred to companies that are capable of branding, research and marketing. In small cities or rural areas, low-end brand might survive for a while, but it won¡¯t be long. User knows what¡¯s good and what¡¯s bad when they use it for one time. So we don¡¯t think something like ¡°turnkey solution¡± in 2G will happen for 3G. It didn¡¯t happen for WCDMA, it won¡¯t happen for TD-SCDMA either. Mobile phone companies all feel it much harder to make money and survive. This is a reflection of such shift.
Wang Jing: So it might be hard to see hundreds flowers flourishing in the 3G era. You can only stand up till the very end if you are competitive.
Zhang Daijun: It is a natural outcome for brands to concentrate. At the first the industry expanded rapidly, every one can make some money no matter what you are. When the development has risen to a certain level, you have to work carefully in terms of branding, quality, R&D, service and channels. The strongest will survive. I think this is the motto for every industry when it becomes mature.
Wang Jing: So in the game of mobile phones, it's no longer only the problem of license?
Zhang Daijun: Yes.
Mou Li (T3G Business Development Director): Both of you were right on this point, and the summary of Dr. Wang is pretty good. We focus on first class customers at T3G. At the aspect of application, they have much technological experience. So in this sense, we are mutually complementary with our customers. I think 3G is different from 2G. In fact ¡°turnkey solution¡± for 2G doesn¡¯t make is flourish like hundreds of flowers, there is only one product, all the same thing, only different brands and company names. That is not a hundreds of flowers. What is the real scene of flourish? Companies should have their own application.
A good infrastructure is important for chip and platform companies alike. We need to concentrate on this at the current stage, because we know if an infrastructure company does application, it will distract its energy. In the beginning of development of a product, customers are not only customers, they are also partners. They help us make our product more stable. We are at the stage of product development, which is quite different from 2G era. 2G products are already perfect. You can handle as many customers as you wish, you don¡¯t need any more resource to serve one more, as the design of product is finished. But in the development stage of 3G product, the product is not yet mature. What we really need is partner. We¡¯ve noticed that in the mobile phone industry, there are many international and domestic players. But those who have deep co-operation with chip makers are international companies, domestic companies are doing OEM. It is important for a chip maker to have different way of co-operation with partners at different stage of development.
Wang Jing: Turnkey solution is always good for terminal companies. But the problem is who will supply? Will it be one chip maker for all, or a chip maker alliance?
Zhang Daijun: We will prefer the latter. The value chain of terminals will only be powered up with the involvement of many players.
Wang Jing: All companies are thinking about this question. But I personally think it will be a great advantage for a chip maker to have strong mobile phone company leading for you. Because for 3G, the market will eliminate many mobile phone companies. Only those who understand the market best and have the ability to do it will survive. This will be tough for Chinese mobile phone makers. Everybody knows this, but the problem is not every company is capable and willing to do this. I guess there will only be 3 to 5 remaining on the market in the end.
Zhang Daijun: Compared with other countries, there will hardly be more than Chinese 5 brands remaining in the market in the end.

TSM Had Importance in Technology
Wang Jing: I think TD went the wrong way at the beginning, and it took some time from TSM to LCR.
Zhang Daijun: Now we can recall the transition from TSM to LCR with peace. The current development of LCR is generally quite good. If we say the path was wrong at the beginning, I would interpret it as beneficial to later development of TD-SCDMA. TSM had successfully proven the original core technology of TD-SCDMA at physical level.
As I remember, standardization was from 1998 when we began the work, to March 2001 when it is adopted by 3GPP. And the prototype demo system was began in 1999, the first terminal physical level call was made on April 27, 2001, and the first network level call was made on January 22, 2002. The core technology of TD-SCDMA was verified in this process. In 2002, when the situation of standardization is changed, if we continued and found TSM is not an international standard, it will be bad for long-term evolvement; if we do not push the industrialization, we¡¯ll face great financial pressure. It was a dilemma.
We did a lot give and take and adjustment about the co-operation between Datang and Siemens. In 2002, Datang Mobile first launched the research of LCR, focusing on the international standard. This was a brave transition that, I believe, established the leading position in the TD-SCDMA industry. It was really a great decision.
Wang Jing: It was a turning point. Many people have forgotten this story. I think as an industrial expert, your telling will be interesting to our readers.
Zhang Daijun: This is a very crucial strategic shift that opened the door to internationalization of TD-SCDMA. On the other hand, many technological advantages of TD-SCDMA were shown. Of course this is also due to the support of government and operators.
Wang Jing: When doing TSM, people were not confident enough, and didn¡¯t think too much. There hasn¡¯t been any Chinese standard accepted by ITU, besides at a stage were technical verification has not been done, thinking about commercialization is not reasonable.
Zhang Daijun: When we were doing TSM, we just thought about technological problems and didn¡¯t imagine the industrialization of TD-SCDMA will be a big thing. We were all trying it out. It was fortunate that in late 2003, the industry turned to LCR. The direction was quite clear.
I still think TSM was important. We were racing with time in writing international standard meanwhile developing prototype technology. TSM was a verification of core technology of TD-SCDMA, which is good news of TD-SCDMA for the industry, the government and operators. If we didn't do it, the industry and the support of policy will all be passive. At the aspect of technical verification, it was quite successful. Of course in terms of industrial push, LCR has pushed TD-SCDMA to a higher level. In conclusion, for 4G, we can develop the technology before we write the standard, which will be beneficial for development and IPR protection.
Wang Jing: After you turned to LCR, it only took you one year to make the first chip. This is also a result of accumulation.
Zhang Daijun: Yes, we switched to LCR in September 2003, when we had accumulated much experience in TSM. Then the first LCR chip was made in 2004, it was a huge success.
Wang Jing: So we should say TSM was quite valuable.
Zhang Daijun: Yes, most technology at physical level is reusable. There¡¯s no doubt that TSM technology was of great value. Many talents of LCR technology was trained in the project too.
Wang Jing: In a sense, it also gave a technological background in TD-SCDMA for T3G.
Zhang Daijun: That¡¯s right. In 2002, a team of 50 talents who have TSM experience joined T3G, which is the basis for today¡¯s LCR technology.

Broadband and Multimedia Application Is the Push of 3G in the Future
Wang Jing: From the middle of 1990¡¯s, the development of 3G around the world has been more than 10 years. The development curve of both technology and market is quite smooth, and slow. One or two years ago, it was misunderstood that 384k is the data capacity for 3G. And the market also developed slowly. Now there¡¯s HSDPA, and the capacity is over 1M, it seems the market is on the increase again. As one the first technical experts engaged in the development of TD-SCDMA, how do you see the development of 3G in the world, and how do you expect the future of TD-SCDMA?
Zhang Daijun: I, as an insider, am quite confident about the growth of 3G. Though many people are showing disbelief on this, however we can see the rapid development of WCMDA in Japan; but in other markets dual-mode mobiles phones have much bigger share of the market. So it can be sure that dual-mode or multi-mode will be a trend in the age of 3G.
There are interesting points to be made, like the driving force of 3G. I think there are two, first is mobile data bandwidth, and the second is multimedia application. When you have adequate data bandwidth and the rate is over 1Mbps, you can enjoy much more data applications that were not supported in 2G era. Let¡¯s move back to TD-SCDMA, except for the support for domestic research and development, we also push the market by these two driving forces. TD-SCDMA has to promote its capability of data transmission and provide more ability in multimedia applications. Currently TD-SCDMA can provide 384kbps capacity of data transmission, and a capacity of more than 2Mbps with HSDPA. Next will have HSUPA. On this track, along with the consideration of mobility coverage, TD-SCDMA will enter into large scale production pretty soon.

2008 Will Be the Beginning of TD-SCDMA Commercial Service
Wang Jing: What real service do you expect TD-SCDMA would provide in 2008?
Zhang Daijun: I wish 2008 will be the beginning of TD-SCDMA commercial service. People are all busy of TA certificate testing, field testing. We expect bid offering for mobile terminal will begin soon. And mobile phone shipment would begin in Q1 2008, advertising will begin in Q2, commercial use would begin before the Olympics. The Olympics is a great change for TD-SCDMA to prove to the industry.
I think there¡¯s still some way to go before the total commercialization of TD-SCDMA. When passed the checkpoint of Olympics, the industry and operators will all believe in the commercialization of TD-SCDMA. So we can regard the Olympics as a beginning of commercialization, there will be many more mobile phone orders in Q3 and Q4 next year. I believe there will be more mobile phone types available by then. In terms of chips, the supply will be sufficient. I think the verification should be done in an actual network. The network, mobile phones and chips and even the industry can all be verified for commercial use.
Wang Jing: Yes, I'm absolutely with you on this. People are talking about immature, substandard for commercial use, but the problem is TD-SCDMA is developing, there hasn¡¯t been a big commercial networks, no one has done this before. Take auto-switch as an example, all these things cannot be tested in the network without load. You have to test it in a big network. It's better to call the Olympics a chance and starting point rather than the objective. The Olympics will be a showcase for TD-SCDMA, but it still has long way to go.
Zhang Daijun: I agree. The development of technology needs the promotion of actual operation. WCDMA also had many problems in the early stage. But with commercial use environment in Japan and Europe, it has developed rapidly. The same thing is true for TD-SCDMA. A commercial use environment is needed, industrialization will also be pushed. All this should be applied in the real network environment. This is the only best way to help the market and help the technology get mature. Internal testing is far from enough.
Wang Jing: Testing will never make it mature.
Zhang Daijun: When commercial use standard is achieved, the actual use in real environment will push the industry as well as the technology further improve.
Wang Jing: Actually we already have the conclusion: There's no disastrous technological problem for TD-SCDMA, the only thing left is a very big testing environment.
Zhang Daijun: Right.
Wang Jing: I think China is especially suitable for this. We have a huge market and huge user base here. The large-scale networking testing condition is ready. There are also issues of business model and operation. But I think that the problem of telecom operators. Of course in terms of technology, from the aspects of capability, performance, and functionality, the requirements for 3G have largely been fulfilled.
Zhang Daijun: Yes. As an international standard, the value chain of TD-SCDMA has went through internationalized co-operation, and TD-SCDMA has made significant progress.
Wang Jing: Since I began doing the Forum, my opinion has always been that to join the value chain, chip makers, terminal producers should all be competitive. The development of the Forum has been quick in these two years, because powerful international companies have seen the chance of TD-SCDMA, and want to join the game. And I think this is a good thing.
Zhang Daijun: The Forum is very good at internationalization.
Wang Jing: We think T3G has a lot of advantages from its technological background to your policy and your future consideration. You guys need to continue the co-operation with the best partners, and fight in the market. Make the thing big. This is the real good attitude for an enterprise in TD business. The strategy of T3G will yield a lot of fruit in the upcoming TD-SCDMA commercial use. This is my wish.
Zhang Daijun: We¡¯ll try our best.
Wang Jing: Wish you can go from success to success. Today¡¯s interview is over.
Zhang Daijun: Thank you!

(The End)