ADD Semiconductor (Advanced Digital Design S.A.) is a Spanish company set up in 2001 by two professionals from the Zaragoza University with more than 15 years of experience in microelectronic design. ADD develops systems of high efficiency and low cost in one chip (System on Chip) for telecom application and signaling processors. ADD is growing fast and nowadays has 40 employees between Spain, India, China and USA.
In 2009 ADD identified India as a priority market. Along with China and USA, India is one of the biggest markets in this sector. The country has more than 135 millions power meters where the ADD chips are inserted. Compared to the European average of one meter per inhabitant, and making a conservative estimation, in 10 or 12 years India can reach 700 millions of meters.
In addition, India is experiencing a robust development in infrastructures, which is pushing the electronic sector. ADD’s product has several applications such as controlling public lighting, controlling solar energy panels, home automation, etc.
According to its International Sales Vice-president, Jesús Teijeiro, “we were aware that, for entering the Indian market, our physical presence was required. Speaking the same language and sharing the same culture is basic to do business”.
The basic structure needed by ADD to set up in a country is composed of two people: one Business Development Manager, who must have a good knowledge of the region and the potential customers, and one Application Engineer for giving technical support to their clients.
Instead of choosing the traditional strategy of creating a commercial subsidiary, ADD opted for recruiting these people on a contractual basis through a third party (INDOLINK). Ensuring their full dedication to ADD would guaranty their objective of establishing quickly in the market without the need to create their own legal structure, avoiding several duties and diverse legal, accounting and financial costs.
“At the time of deciding which company was going to support us in our entry strategy we assessed a couple of options. We chose INDOLINK due to its experience with other clients in the industrial sector. We wanted a sound consulting firm that knows how to move fast in the market. The promptness in hiring our technical staff and their Business Centre guaranteed a fast set up at a reasonable cost”.
In September 2009 the recruitment was finalized and the two newly hired professionals joined duty. The experience is being more positive than expected, in less than a year they have got important contacts and brought in the first big sale, “normally it takes between one year and a half to two years to recover the initial investment. In India we hope to recover the investment in our first year working there. We expect our turnover to be around one million Euros in the next financial year. We plan an exponential increase; by 2012 we hope our turnover to reach 5 to 6 million Euros.”
According to ADD, the main causes for their success are, firstly, having a sound and robust technological product very suitable for markets like the Indian. Secondly, recruiting the right people with a deep knowledge of the market, who have effectively conveyed their product value to the client. Finally, the support and orientation provided by INDOLINK to ADD and their local staff.
When compared to other countries, their experience in India shows particularly positive. ”We have been working in China one year prior to India, but it is only now when we are starting to receive the first orders, and they are still much smaller than the Indian orders. We have noticed that the Indian market is more open, more prepared to listen, and there are less idiomatic barriers than in China. ROI is higher in India than in China. We would recommend consolidating first in the Indian market and then trying the Chinese one. In EEUU we are also having good results because it’s a market that is not so price sensitive”.
Currently ADD is recruiting a new engineer and they are planning to continue expanding their staff. In the medium term they will establish a subsidiary company, once their sales confirm their real possibilities in the Indian market.
Recruitment on contractual basis through a third party is a convenient alternative for SME’s that are willing to enter in international markets, but prefers to avoid incorporating a subsidiary company ad hoc.
Advantages of this type of strategy:
SOURCE: INDOLINK