Face-to-Face:  Mike Green Meets Dr. Jalal Bagherli, CEO of Dialog Semiconductor

Dialog Semiconductor has had a something of a rollercoaster ride in recent times. Once part of the European semiconductor industry’s first order, it suffered many years of poor management and complacency that left it foundering. With the appointment of Jalal Bagherli, the firm is finally back on its feet. He has put together a ‘redeem team’ of executives to aid him in recapturing the glories of the past. ECN’s Mike Green gets some insight on how he is going about it.     

Mike Green (MG) - The company was in a poor state when you took up the CEO position at Dialog. What were the first issues you had to deal with, in order to bring it back into a healthy condition?

Jahal Bagherli EMJalal Bagherli (JB) - One of the first things was to look at the business model and key competencies of the company. As a result, significant changes were made: we closed all in house test operation, tape & reel and warehousing functions. All of these operations have now been subcontracted off-shore and managed by Dialog experts. As a results we became truly fabless.  We have focused our product development and marketing to leverage our power and energy management skills as well as high mixed signal integration.  We have discontinued commoditised low margin businesses such as CSTN display drivers. Most of our products now are in wireless and smart phones and portable media players, all of which are lithium ion battery charged.  System power management is a theme running through most of products with addition of high quality audio, battery chargers and other mixed signal functions. Ultra low power displays controllers for PMOLED and E-Ink are also developed for personal portable products.

In addition we have focused our automotive activity to highly integrated motor controllers for different applications in the car (windscreen wipers, cooling fan control, seatbelt control.)
MG - Most of the company's major opportunities will be located in Asia. What is being done to make sure that it has the strongest possible presence there (in terms of direct sales, distribution channels, application engineers, etc)? Also which major OEMs are you now engaged with in this region?

JB - We have an established sales office in Japan for a number of years and have added a small design team locally to address Japanese customers. We have recently opened our first sales and technical support office in Korea and also have added to our sales and FAE resource in greater China. We have distributors and technical Reps in Japan, Taiwan, Korea and HK. The major OEM’s engaged with are Sharp and TDK in Japan, and all the top customers in Korea. Also Asus, Arima and Foxconn in Grater China are major customers. We have also our own manufacturing support engineers embedded within the manufacturing partners and subcontractors in Asia to ensure quality and volume support to our requirements.
MG - The analogue/mixed signal sector, where much of your business is based, has proved rich pickings in recent years, but aren't there now just too many companies targeting it?

JB - I think the mixed signal and power management expertise still carry a premium relative to other segments of semiconductor market. As always it depends on segments targeted and the products offered. Dialog has focused on high integration and innovation products and mostly they are customised to customer requirements. The crowded area of the market is commoditised and relatively simple standard parts, which we do not play in.
MG - Are you worried that the company's renaissance could be cut short by the economic downturn that is now under way? How can you make sure that Dialog's products get a good share of the remaining business?
JB - I think the economic downturn affects most companies in the industry and we will see the impact on us as moderating our growth rate in most cases and drop in revenue in a small number of cases. As Dialog’s new products are still taking market share within large accounts, we believe our growth engine and momentum remains healthy, all be it growing at a slower pace while the economy is in a bad shape.  We believe the products we have custom developed for our key clients are innovative and saving significant costs for their equipment and hence will continue to be used. In the 3G/HSDPA phones, we are adopted by more and more customers and many new phones. As these are based around chipset and software platforms, the lifetime of these platforms likely to remain  3-4 years.
MG - How did you go about finding and then attracting the people to make up the executive team that would help you restore Dialog's fortunes (such as Jean-Michel Richard and Udo Kratz), and was it difficult given the company's prior track record?
JB - In most cases we headhunt and in other cases it is my personal reputation and network that attracts good people to join us. We present the challenges of the company in an open style to candidates but also show them the potential to build the next large semiconductor company out of Europe, given the actions we are taking and our ‘start-up’ approach to run the company. This appeals to certain people who would like to build something new and dynamic out of European technology expertise (mixed signal power management, automotive) and compete with the best in the world.

MG - Do you expect to have to make acquisitions in order for Dialog to maintain its long term growth? If so are there particular areas that are likely to be of interest?
JB - I think we will be active in the M&A area as we build the company. Our interests lie in the mixed signal & energy efficient product innovations of particular relevance to personal mobile and Automotive products. We do not have an active target list at this time.

MG -  As many of your direct competitors (such as National Semiconductor and Intersil) are larger than Dialog, are you having to choose your battles and concentrate your sales and development resources on specific areas rather than spreading yourself too thin?

JB - Given our relative size, we will be doubly careful where we spend our R&D dollars. Maintaining tight focus is always key. We re-appraise our targets regularly and adjust accordingly to market and customer changes.

MG - Improving power management in electronics goods has become a top priority for the industry, however do legislative measures such as the EU Code of Conduct and EnergyStar 2.0 in the US go far enough? Also do enough manufacturers use power as a way to differentiate themselves from their rivals, or do they still concentrate on features first?
JB - The energy management is a significant requirement by most of our customers. In particular battery life time required for long ‘hours of call’ or ‘music playback’ are now becoming the key features our customers use to differentiate their designs.

MG - The display driver market, in which you have a strong presence, is currently very overcrowded. Is the reason that you have tended to concentrate a lot of your new product development on drivers for the passive OLED and e-Ink displays sector in order to try to establish yourself as the innovation leader in these potentially high growth areas, rather than to compete in the more generic side of the market? If so, is there a risk that if these areas don’t progress as quickly as planned that Dialog might be in trouble again? Could you end up having bet on the wrong horse?
JB - We believe in choosing areas of the market with significant growth potential and where we can bring our advantages and expertise to bear. As discussed earlier, we moved out of commoditised CSTN drivers due to large number of players and falling prices.  We believe we have unique IP for extending the life and size of  PMOLED panels to enable its use as the main display for a cell phone. Although, it is not a foregone conclusion at this time as there are competing technologies to PMOLED, we believe we have a great growth potential. Like any products, we will be expecting to benefit from this technology from introduction to maturity, probably for 10 years, which would make this a compelling investment.

MG - Where are the best long term opportunities likely to be for Dialog within the automotive market, and which of the major system integrators do you currently work with?

JB - The only open customer on our list currently is Bosch. Our products end up in cars made by VW, Mercedes, Audi among others. Our focus in this area is on intelligent motor controllers and intelligent sensors, as well as infotainment, where we share a lot of expertise with our mobile power management products. Given the life cycle of automotive products, this will create a long term platform for Dialog to innovate and grow in this massive market.

Company: Dialog Semiconductor
Established: 1988
Headquartered: Kirchheim, Germany
Employees: 240
Business: Mixed Signal & Power Management ICs
CEO: Dr. Jalal Bagherli