Bangalore, Hyderabad and … Dubai?
Oil-rich Dubai, a modern trading post for the Middle East in the United Arab Emirates, is taking a page from India’s handbook and is looking to woo technology companies to the cosmopolitan city.
The latest: Newport Beach-based Mindspeed Technologies Inc.
The chipmaker recently said it planned to open a design center in the Dubai Silicon Oasis, a planned city that’s developing as a chip center.
Mindspeed, which makes telecommunications chips, is the second chip company to commit to Dubai Silicon Oasis, which is set to eventually have 24 million square feet of office, home and retail space. The other chipmaker there is storage and communications chipmaker LSI Logic Corp. of Milpitas.
There’s a circuit board maker at the business park and another getting started, said Zaheer Hassan, vice president of business development for Dubai Silicon Oasis.
A local software developer, Irvine-based Neudesic LLC, is looking to add engineers by the end of the year.
While Orange County tech companies looking for low-cost, offshore workers have concentrated on India, Mindspeed found Dubai a lure with its share of engineers, its ability to attract workers from around the region and financial incentives.
Challenges Remain
Still, many challenges remain, including Dubai’s small size and rookie status, among other issues.
Hassan said Dubai wants to make technology a key part of its economy. A key example: the government-backed Dubai Silicon Oasis. Aside from the central business park, it features shopping centers, housing and has its own power source.
“There is a concentrated effort to bring in technology companies,” Hassan said.
Companies setting up operations in the complex can expect subsidized engineering labs and housing. There’s no corporate income tax.
Dubai has earned a lot of international respect, though it took a knock with DP World’s failed bid to manage several U.S. ports through the acquisition of Britain’s Peninsular & Oriental Steam Navigation Co. earlier this year.
Dubai has another OC connection after its Emaar Properties agreed to buy Newport Beach-based builder John Laing Homes for about $1.1 billion earlier this month.
Lake Forest disk drive maker Western Digital Corp. also has a sales office there.
The technology effort is about focusing on “knowledge creation versus sales and marketing,” Hassan said.
Mindspeed received financial goodies to help draw it to the site, company spokesman Tom Stites said.
Wages for engineers are less than what the company would pay in the U.S. or in India, Stites said.
India has emerged as a tech hub for global technology companies, especially those in the U.S. and Europe. But in the process, India’s engineers have demanded higher wages, which have bumped up costs.
Another issue for India: With so much demand for smart engineers, workers are jumping from company to company for higher wages or a better job.
Stites said the competitive environment in India doesn’t bode well for a smaller company such as Mindspeed, which is looking to have just 25 workers in Dubai, he said. The company is hiring now and plans to have the design center running before the end of the year.
Mindspeed posted sales of $68 million for the six-month period ended March 31.
Its former parent, communications chipmaker Conexant Systems Inc. in Newport Beach, is looking to spend $250 million on its operations in India. Conexant already has close to 900 employees in the country.
“For us to go into India and compete for talent with the big guys is somewhat difficult,” Stites said.
Taking a Risk
Mindspeed is taking some risk by setting up operations in Dubai,a country that’s fairly new to technology development, Stites said.
But the company, which spun off from Conexant in 2002, still sees itself as a sort of startup that can’t always be conservative, Stites said.
Also, the move is partly out of financial necessity. Mindspeed is looking to post an operating profit in the current quarter, the first since its spinoff.
The company laid off about two dozen people in April, mostly in administrative positions.
“We’re trying to be the most cost-effective company we can be,” he said.
As with many technology companies, Mindspeed expects to keep development of its core chip technology at its headquarters, Stites said. The Dubai office would help the company with combining some of its technologies on chips, among other things.
Dubai is a draw for engineers from around the region,from Egypt to Pakistan, sometimes even from India.
The workers are smart, with skills good enough to work on cutting-edge chips, Stites said. He said all the workers the company hires will speak English.
“If you look at the talent in the Middle East, there are a number of really good engineering schools,” he said.
And once the engineers come, they tend to stay, Hassan said. The visas make moving from company to company difficult, similar to how it is with an H1-B visa in the U.S.
Mindspeed has other international sites, including one in France with 10 to 15 people and a couple of sites in China with less than 10 employees apiece. It also has about two dozen workers in Ukraine.
Software developer Neudesic has a unit in Ukraine as well, where it employs about 25.
The company is looking to add people in Dubai, possibly 10 by the end of the year. It has just one worker now, said Parsa Rohani, chief executive and cofounder of Neudesic.
Rohani said Neudesic decided to set up an operation in Dubai as oil prices shot up during the past few years.
“Oil was heading to $57 a barrel,” said Rohani, who spent much of his childhood in Iran. “We said all that oil money is going somewhere, and we need to get to that region somehow. Dubai was kind of the key location that came to mind.”
The company has annual sales of about $20 million. Neudesic has about 120 workers, double what it had a year ago.
Rohani also intends to tap software developers in India. He said the language skills in India are important.
“Things are getting more expensive,” he said. “Retention of skilled talent is definitely becoming more difficult. They still have one advantage: They speak English.”
A big issue for Dubai is its size. India’s population is 1.1 billion. Dubai’s is roughly 1 million people.
“It’s just a matter of getting some labor,” said Michael DeSalles, an analyst with Frost & Sullivan Inc. in Palo Alto, on Dubai. “It’s still in the infant stages.”
