S3 success means firm must look further afield for talent


When Prof Maurice Whelan originally founded Silicon & Software Systems (S3) his aim was to stem the flow of bright young engineering graduates from the Republic. Thirteen years later, in a somewhat ironic twist, S3 has just opened a design centre in Poland, following its success in Prague.

Of the 270 highly skilled employees working at S3, there are now representatives from 14 countries. As it continues to establish a name as one of the world's most respected design houses for silicon, software and hardware, it struggles to attract the brightest and best. Today Irish engineers have their choice of careers - at home or abroad - and S3 competes hard to ensure a constant stream of talented workers.

This year, S3 will increase its workforce to 300, and Mr John O'Brien, chief operating officer at S3, resents criticism that has been levelled at his company about sourcing cheap labour in Eastern Europe. "We have found the engineering education system in these countries to be excellent.

"We could have brought these people to work in Ireland, but by establishing design centres in people's home countries from the start it has allowed us attract the very best, because no more than the Irish, not every Pole or Czech engineer wants to emigrate."

Today S3 continues to seek out the best - regardless of location - making it almost a virtual company. Its key strength lies in streamlining design processes for a range of customers in the consumer electronic, telecommunications and semiconductor industries. These typically include Motorola, Lucent Technologies, 3Com and Texas Instruments.

As a 90 per cent shareholder in S3, Philips Electronics, is a key customer. The remainder is owned by Prof Whelan who worked with Philips for 18 years before he returned to the Republic to become Professor of Microelectronics at Trinity College in 1981. In the mobile phone handset market S3's designs generate around $150 million (€137 million) annually in sales for Philips. It is also an approved design centre for IBM Microelectronics.

Three years ago S3 had no presence in the US market, but following the establishment of a US design centre in Dublin, it now accounts for 35 per cent of its activities. Following a recent restructuring process, the US and European centres have merged, and S3 has established seven separate business units.

"We believe this creates clarity in the organisation. We want to retain the start-up mentality in each business unit, where they can develop their own culture," says Mr O'Brien.

"When people feel they are part of a mini start-up project it can be very motivating."

Digital technology lies at the heart of S3's capability. Because of Prof Whelan's early vision of its potential, it has given the company a lead in the area of silicon chip and software system design. Digital systems, which were originally viewed as prohibitively expensive, have now become affordable to develop, and today demand for digital expertise is rocketing.

With its focus on specific markets, including wireless communications, digital set-top boxes, network systems, telecoms switches and consumer electronics, S3 has been instrumental in the development of a number of technologies.

In 1994, it launched a design service for digital cordless communications, which has proven popular with vendors trying to develop products for both voice and data applications.

Its patented software operating on the vendor's chip allows the fast development of wireless products. One of its more successful innovations, the virtual cable product, was selected out of 7,000 exhibitors as a finalist at last year's CeBIT exhibition, and at the Irish National Innovation Awards.

About 30 S3 engineers are working on the development of advanced digital set-top boxes. These are the forerunners to digital televisions, and they act as gateway devices allowing consumers access to digital information services similar to those recently launched by Sky Digital in Britain.

S3's embedded software has also made a significant contribution to the compact disc, with all CD recordable products in the market currently carrying S3 technology.

Mr O'Brien predicts a greater focus on wireless, based on radio frequency technology. "Third generation mobile technology standards are strongly under way. Soon there will be much more data available and the big thing for customers will be continuous access to information."

The primary goal for S3 now is to grow the company on a global basis. With revenues of $25 million last year, it expects to grow by around 25 per cent this year. S3 has achieved annual double-digit growth since it became profitable in 1989. Mr O'Brien sees further growth occurring on an international basis.

"Currently in Ireland there are limitations to how fast you can grow silicon design capability - we already have one of the largest in Ireland but we want to grow this over the coming years."

This year will see the revival of S3's sales office in Silicon Valley, while a number of its engineers are based on customer sites there already. With 70 per cent of S3's business based on repeat business, Mr O'Brien believes it is crucial to expand its customer base. "We need to have our eyes and ears on the ground out there, watching out for opportunities because our business relies on that."

Despite the considerable interest Philips holds in S3, the company operates on a very independent footing, and there is no indication S3 employees see themselves as Philips employees.

There is a general expectation within the company that the ownership equation might change, and while an initial public offering is not on the short term horizon, Mr O'Brien says it should not be discounted in the longer term.