Silicon Logic Engineering Ramps Up Custom Chips

Interview with SLE President Jeff West
Eau Claire, Wis.—In a business world where even very specialized services and products quickly become commodities, Silicon Logic Engineering is staying one step ahead of the rat race.

The Eau Claire-based company specializes in design and verification of custom processing chips for high-end networking and computing customers such as Nortel Networks, Cisco, IBM, Motorola, Boeing and Texas Instruments to name a few.

WTN sat down with Jeff West, president at SLE’s headquarters to discuss where the business is going, where it’s been, and what the company can do to fend off competitors flocking to IT’s new low-cost paradise, India.

WTN: What are your main product and service areas, and what are their applications?

West: Our main product around here actually is a service. We design computer chips—primarily our customer base revolves around high-end computing and high-end networking. Those have been primarily the customers we’ve focused on—high-end data communication and computing. Those two realms of the world are really starting to combine now; they’re all starting to look as one. Also, in the last year or two, we’ve started generating what we call intellectual property cores, which are pieces of designs that we design that multiple customers have use for. We license that to them. We’ve had one that’s been very hot. It’s done very well for us, [and] it’s been standardized by Cisco and Nortel.

We only do that when it strategically makes sense for us, though. We’re not going to be an IP company where we do a lot of different cores and try to license them. I think the time for small IP players has passed; all the big players are getting into it now. So we do it for strategic reasons. It’s a piece that still shows off our high-end capability if it’s a very complex piece of IP as opposed to just some generic piece.

The problem with the very high-end, tough ones is that they’re time-consuming and expensive for us. Recouping all that is difficult too, sometimes, especially in this environment, where everybody—even with a sophisticated piece of IP—is trying to push it toward commodity pricing. With a lot of smaller companies out there struggling, a lot of them are just giving it away just to keep revenue coming in.

We always knew from the day we came out [in 1996] that we had to really focus on high-end design. You get down to the middle level, the more mundane, that stuff’s all being shipped to India so fast. A high-paid engineer over there is [making] $7,000 a year and no benefits.

Education is roughly equivalent to what they’re getting here. So that’s why all the big companies are opening up their own design groups over there. The amount of engineering work that’s leaving the country right now for [India] is just amazing. It’s almost like the amount of manufacturing leaving for China—same ballpark.

So if we don’t stay on the high end—where we can really show value that they can’t, things they can’t do—when they’re 10 [times] or more cheaper than we are, it doesn’t take a brain surgeon to figure out who’s the best one to do the next design for you.

[West then delved into a recently announced partnership with Mentor Graphics, with which SLE is hoping to speed up the verification process for complex application specific integrated circuit (ASIC) designs.]

We try to do things very high-end that they just don’t have the expertise in. So far, so well; but we have to keep pushing what that means, and this Mentor announcement is one of those things we think will make us unique. As these designs get very big, verification and making sure they’re done and work right before you go out and build them getting to be a real bottleneck. Being able to speed up how fast we can do verification is the real key, and Mentor’s got a box that can help us do that.

That just gives us one more thing we’ll have experience in that other design centers in the U.S. and India don’t have for the time being. So that will buy us a little more time to go find the next thing higher level to climb to. That’s the treadmill you have to stay on.

WTN: That’s what you’ve pretty much built your career on since 1996.

West: Here we have, yes. We’ve got a pretty good track record. Up until this downturn and even through it, through 2001, we still grew revenues 50 percent year over year—very profitable.

WTN: In a market where companies are trying to drive all kinds of costs down, what is the advantage of having you design a custom chip?

West: From a product standpoint, it’s a differentiation.

We have a customer base saying, “We want this, this, this, and this as features. There are some companies out there that will make chips to sell to networking companies. If everybody just used those, only, they’d have no product differentiation. They have to do things their customers tell them give them a leg up in their niche of the marketplace.”

WTN: Looking forward, can you give us a little detail on what you’re banking on?

West: Like everybody else, we just need to get this economy back to where people feel comfortable doing product development and R&D spending is up again. That’s happening. We can see that. Business spending is up four out of the last five quarters again.

While it’s not been easy for us, being a company this size [about 35 employees] and surviving this thing actually will buy us a lot of credibility. Even Nortel, as they were laying off 60,000 employees, we kept doing work for them.

We’re going to be swamped. All these companies we’ve talked to, they’ve pared down literally thousands and thousands of their engineers. They’re not going to hire them back that quickly.

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Lincoln Brunner is a Stevens Point, Wisconsin-based freelance writer and a regular contributor to the Wisconsin Technology Network. He can be reached at lincoln@wistechnology.com.