Banatao, a native of Iguig, Cagayan in the Philippines, told the staff of the Journal Group Link International in one of his companies, Ikanos Communications, here that the semiconductor industry has been complaining against “China and other parts of Asia” for not respecting “intellectual property by doing reverse engineering of our products but we cannot fight them because” they are tolerated by the entire government.
“Only a government can fight another,” according to the 65-year-old boyish-looking computer chip innovator, who is often described as the “Bill Gates” of the Philippines, and a member of 101 boards in 15 different organizations across 20 different industries.
Credited for coming up with new chip-set design that reduced the cost of producing the world’s most powerful mainframe computer for IBM 360, Banatao, a cum laude electrical engineering graduate of Mapua Institute of Technology, said that if the industry is fighting a company in the U.S., the industry may win in the fight because “we have a legal system here. We are fairly covered here. When a country does not respect intellectual property, I don’t care how big you are. It is hard to fight it.
“The (U.S.) federal government knows about this. It cannot do anything. It is hard to police this thing. Almost impossible. You don’t know where the goods with I.P. (Internet Protocol) are being sold. There is a lot of software piracy in Asia. Even Microsoft is fighting it. At the end of the day, it’s hard to fight. Probably, around (U.S.$) 2- to 3-billion in revenues are being lost by Microsoft because of pirated software.”
Reverse engineering is a method of copying a technology from an existing product and works backward to figure out how it does and what it does. When the product’s basic principle or core concept is determined and it starts to be reproduced by employing different mechanisms to avoid patent right infringement and is sold commercially, it becomes piracy.
Mr. Banatao is also calling on the U.S. Congress to pass the U.S. research and development tax credit of 20 percent requested by the semiconductor industry to make it permanent and should even increase it.
“We are the engine of technological development for the entire ecosystem of tech-based industry here. Semi-conductor is so ubiquitous from simple camera, cell phone, iPod, notebooks, your car, everywhere. Without semi conductors, our computers will probably cost $100,000 or $200,000 each. That is the value of what we do in semi-conductor industry. It is everywhere.”
But because it is very costly to produce a semi-conductor, Mr. Banatao said the industry is outsourcing its “production to Asia, notably in China, by about 70 percent because manufacturing there is so cheap. Not in the U.S., where labor cost is very high.
“But this is a problem of the U.S. government, not the industry’s. The U.S. government should make manufacturing base here affordable. Otherwise, U.S. will be losing its manufacturing industry. Not just Apple. Many companies, including small companies, are taking their manufacturing products to Asia.
CHEAPER IN ASIA
“A few of my companies do manufacturing in Asia. Why? Because it is cheaper. It is the bottom line (that matters to us). If you want to have to look for cost-efficient everywhere, including engineers, here, our salary is too high. Way too many unions. We lost recipes for how to create manufacturing jobs here,” according to the managing partner of his flagship Tallwood Venture Capital and Mayfield Fund and chair of Ikanos Communications and SiRF Technology among other companies.
Banatao said there is no secret to survive the current economic slump in the U.S. that started in 2008 but to “strategize in ways to where companies continue to generate revenues.”
For him and other Filipino Americans, the general economic condition is recovering. “But slow. Unfortunately, we were tracking at a slightly better slope than now. Between now, it is down, the slope is slightly lesser than a year ago. But this is not a “W” as people describe it. That will be back-to-back recession. I don’t think any economy will take that.”
By “W,” he explained, “you went down to recession, recover, went down again, now recover.”
Mr. Banatao said to avoid economic losses, Filipino American businessmen should “work hard” and should avoid ‘CD Swap’ (credit default swap), which started in the real estate industry. Simply, large banks were speculating on loans. These are derived transactions. Bankers and others got greedy and took advantage of very, very marginal loans. That’s what happened. This is the same thing in 2008 that caused the “CD Swap.”
He said there is no “magic bullet” to solve the economic problem.
“No one person can do this. Not even the president of U.S. No magic bullet. If there is magic bullet, it is working hard, not making shortcut, emphasizing business efficiency, cutting cost, attending to blocking and tackling of business.”
When asked how the U.S., the Philippines and the Fil Am communities can cope up with the economic problems, Banatao, said, “For U.S., we have to get rid of that gridlock in Washington in Congress, maybe the Senate. Congress is capable of facing up to difficult issues that is giving the country a lot of debt and too much spending. This is nothing new. A lot of people thought this way, if our Congress will get their act together, we would be a lot better.
“For Philippines, it is slightly different. It should move on to give higher-paying jobs brought about by innovation and that’s what the country needs to focus on. While there are lots of labors being employed to call centers and manufacturers. That is called labor rates technology thru innovation. It should get more value out of our labor.
“For Filams, I am one of them, they have to put their head down and do the work. There is no secret to deal with this economy better than just do the right things. Build the business basically.”(Ronnie M. Estrada contributed to this report.) (firstname.lastname@example.org)