Under Chinese rail company, Dynex looks to turn technology excellence into big commercial success

Nine years ago, Britain's heritage semiconductor maker Dynex and its 250 employees were facing a time of uncertainty. It had been bought by China's Zhuzhou CRRC Times Electric.

But visitors to Dynex today can see a working atmosphere characterized by innovation, enthusiasm and sharing. Workers on the assembly line are focusing on their tasks with proud smiles, while Chinese and British engineers can be seen engaged in discussions side by side at Dynex's new ￡12 million ($16.2 million; 13.5 million euros) research and development center. The team has grown to 350, including a core team of 75 R&D engineers. Revenue is also growing sharply, with 2017 revenue projected between ￡26 million and ￡28 million, up from ￡22.5 million in 2016.

But this is just the beginning of Dynex's path to realize its ambition of becoming one of the world's top three insulated-gate bipolar transistor (or IGBT) semiconductor makers in the world, says Clive Vacher, CEO of Dynex Semiconductor Ltd.

"With tremendous investment into R&D from our parent company over the past few years we've already become a leader in this sector from a technology perspective. It's now time to translate our technology excellence into further commercial success."

Although IGBT semiconductor is a term unfamiliar to most people, it is the heart of many transport systems, including high-speed trains.

Before the acquisition of Dynex, China's huge high-speed train sector had to rely on IGBT technology imported from Germany and Japan.

Because both of those countries had high-speed train companies that were competing head-to-head with Chinese train makers, China's State-owned CRRC decided in 2007 to look for overseas IGBT technology to integrate into its own. The move was designed to give it more reliability in its IGBT semiconductor technology supply to compete with strong international rivals.

That was when CRRC, through its R&D-focused subsidiary Zhuzhou CRRC Times Electric, bought Dynex. Established in 2005, Times Electric has grown over the years into the world's leading propulsion and control systems provider in the rolling stock industry, and is a highly technology-driven subsidiary within the much larger CRRC group.

Following the acquisition, Dynex's management team helped Times Electric construct a similar IGBT manufacturing facility in Zhuzhou, Hunan province, and shared the Dynex know-how and technology on IGBT semiconductor manufacturing with the team there.

Times Electric's 1.4 billion yuan ($225 million; 179 million euros; ￡166.93 million) facility for IGBT production began operating in 2013. It now produces 2 billion yuan-worth of semiconductors annually.

It frequently sends its engineers to the UK to work side by side with Dynex engineers, so that Dynex can develop cutting-edge solutions suitable for the needs of CRRC and other Chinese transport customers.

"The synergy achieved between Zhuzhou CRRC Times Electric and Dynex has been great. This winwin partnership led to large-scale supply of IGBT semiconductors from Dynex and Zhuzhou to CRRC trains," Vacher says. "This increased scale allows us to compete on equal footing with the world's top semiconductor makers, including Infineon of Germany, ABB of Switzerland and Mitsubishi of Japan."

In more recent years, Dynex and Times Electric started investing in R&D on semiconductor applications for electric vehicles, capturing a big forward-looking opportunity as electric vehicles become increasingly popular.

Dynex, founded in 1956 in Lincoln, England, has grown to become the UK's leading manufacturer of IGBT semiconductors. Despite its technology strength, small scale had been a challenge for Dynex over the decades, partly because the UK does not have its own high-speed train manufacturers, and Japanese and European high-speed train manufacturers prefer to buy IGBT semiconductors from their own countries.

Paul Taylor, who was CEO of Dynex at the time of the acquisition, says that he felt comforted by the fact that Times Electric decided to retain the company's existing management post-acquisition, and to invest further in Dynex to support manufacturing and jobs in the city of Lincoln.

"The strategy Zhuzhou CRRC Times Electric discussed with us is to retain our operations here in Lincoln. They wanted us to grow, but we should not grow so rapidly because the rapid growth is something that should happen in China.

"In particular, they want to invest in the technologies and facilities we have here, so we would be able to become a leader in technology," Taylor says.

Taylor is optimistic about Dynex's commercial partnership with the Zhuzhou-based company.

"What surprised all of us is the high level of employee care," he says. "They genuinely want to make us a part of the company, so they try very hard to make sure they're always very thoughtful in dealing with the people here."

After the acquisition, Taylor worked particularly hard to help Times Electric upgrade its technology and management expertise from a holistic perspective. In particular, he facilitated a training program that saw Times Electric and other CRRC subsidiaries sending around 100 management-level staff to the University of Nottingham's Ningbo campus for training every year since the acquisition.

The employees in the training programs learn about new practices and international engagement. Some of them also visited Dynex in Lincoln for work experience as a part of their studies.

"Over the years I have witnessed huge changes at Zhuzhou CRRC. The company is becoming increasingly innovative and our young engineers are incredibly internationally minded. I can see this is a company getting ready for success in the global market," Taylor says.

Earlier this year, Taylor took on a new role in Times Electric's wider expansion in the UK market. He is supporting CRRC's attempt to explore wider opportunities to bid for train manufacturing contracts in the UK, as well as helping CRRC develop manufacturing partnerships with local British supply chain companies.

Aside from the acquisition of Dynex, Zhuzhou CRRC Times Electric also acquired the UK-based Specialist Machine Developments, which manufactures subsea vehicle systems for offshore energy and mining. Since the acquisition, Times Electric has supported SMD to expand its business to the Chinese subsea markets.

Although CRRC is China's largest train manufacturer, with 224 billion yuan in revenue in 2016, in the UK it is only just beginning to grow. Earlier this year, it won a contract to supply heavy wagons to the London Underground. To be used in 2019, the wagons will be used to carry such things as track panels and bulk materials to support maintenance work on the subway system.

Taylor is optimistic about CRRC's expansion in the UK market in the long term, although he also acknowledges that currently the company still faces some challenges of perception. The notion of high technology products from China is still in its early days of gaining international acceptance.

"But I'm confident the perception will change through our consistent supply of high quality products. I believe there will be a time when CRRC will become established in the UK, and UK consumers will become so familiar with it that they will begin to see it as just another local brand," Taylor says.

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(China Daily European Weekly 09/22/2017 page30)