MIGUEL BOYAYANAt twelve years of age, AsGa, a manufacturer of equipment for telecommunications systems which transmit through optical fiber, is expected to sell R$ 100 million this year. This marks more than just the company’s commercial success shown by a tremendous leap in sales – they were R$ 31.5 million in 2000 and R$ 16.5 million in 1999. In fact, it is illustrative of business success based on technological development. Nowadays, AsGa invests 12% of its revenues in technological research projects in the company at its premises in the town of Paulínia, 118 kilometers from São Paulo, and neighboring Campinas.
Based on a small company structure, AsGa, just like OptoLink, another company manufacturing optical telecommunications equipment, grew spurred by factors such as the teaming up of researchers with academic experience at the Campinas State University (Unicamp) and business experience, as well as financing from FAPESP’s Small Business Innovation Research (PIPE). Headed by the electronics engineer José Ellis Ripper Filho, the company’s CEO, and another partner, the engineer Rege Scarabucci, who is also the Research and Development Director, the company has been able to develop a line of optical multiplexers and modems that are in the forefront of telephone transmission. This equipment is used in telephone access networks – for example, connecting a company’s switchboard to the existing public network and connecting with telephone substations or switchboards.
The multiplexers transmit various signals – telephone calls or data processing – through a single wire, joining and intermixing them. They also enable an optical fiber to carry up to 1,890 times as many lines or voice channels than a copper wire. In addition, the multiplexers have better transmission performance as a result of the reduced need to repeat signals between the call’s starting point and its destination. The modems are attached to the multiplexers and they convert the electric signals into light signals.
AsGA was the first company to produce multiplexers in this country and nowadays it has a 70% share of the market, a slice 16% bigger than the company’s than last year (60%), as reported in Pesquisa FAPESP nº 57. The company’s leading product is the MMO16xE1, 4,000 which have been manufactured in various formats. “It is already used in all the states of this country, in points where connection between optical fiber networks is required”, says Scarabucci. This is the equipment which the object of AsGa’s first project in PIPE. The company, moreover, was one of the first to apply for financing under the FAPESP program, in 1997. “FAPESP’s investment was great encouragement and so we decided to take a chance”, says Ripper.
The greater daring, however, was to come later, in 1998. With a fresh PIPE project, Ripper and his four partners decided to bet on the development of a faster, more sophisticated multiplexer. Out of this, the Synchronous Transport Module (STM) line was born, able to operate at 155 megabits a second (Mb/s) band against the 34 Mb/s of the 16E1.The new equipment will also enable access to digital telephone branches (connecting telephone stations in neighborhoods in São Paulo or towns in the interior of the State, for example) and to Internet Service Providers. “It comes with Internet Protocol (IP) technology”, explains Scarabucci. This new line of equipment is ready to go into production in the company.
“AsGa is the first company other than the big telephone equipment manufacturers to dared moving into the equipment category”, says Ripper. In this field, it will compete head-on with the big companies in the world market. With the 16E1, the company is competing with other small and medium-sized companies abroad. “The STM line represents a shift in the technological and commercial level for the company”, explains Ripper.
Some of the company’s customers are already testing some engineering prototype items of equipment. Ripper expects the same success from the 16E1, as the natural progress of the company’s family of multiplexers and modems. “Our equipment is flexible and easy to install”, says Scarabucci. “We offer prompt, high quality technical support so we can take on the competition”.AsGa’s self confidence enables it to contemplate the export market too. Recently, the company set up an office in Argentina, from where it expects to initiate its commercial take-off in Latin America. Earlier it had already set foot in Mexico, where its equipment has been certified. “Operators there don’t just want distributors. They want the company to have a presence in the country”, explains Ripper.
Hurdles in the path
AsGa’s recent success was not achieved just by growing equipment production and the consequent millions of reals. Not All has been a bed of roses; serious hurdles appeared in the path of the intricate patterns of Brazilian industry. When it began in 1992, the company needed to change direction to avoid going bankrupt. “We used to manufacture components, such as laser sources and optical detectors, but the opening up of imports at the beginning of the 90s took us to the brink”, recalls Ripper. Low prices from abroad destroyed Ripper’s and his partners’ dream of manufacturing electronic components in this country. In the same way, other companies went under when faced with overseas competition, and Brazil today has a large trade deficit precisely because of the import of micro-components for the electronics industry.
The company only recovered by changing the focus of production. At the start of the previous decade it began manufacturing optical equipment for access to the telephone network. The first of these items was an electric signal converter, called the Elo-2, or the e-line, later known as an optical modem. Financing from the BNDESPar, the National Economic and Social Development Bank’s (BNDES) arm for providing capital for private companies, also helped in the rise of AsGa. “We were granted a loan of US$ 1 million in 1993, guaranteed fifty/fifty by stock in the company and convertible debentures”, says Ripper. The Studies and Projects Finance Company (Finep) granted the company another loan in 1997, this time of US$ 2 million. All debt was recently paid back. “We finished paying off the loans in July this year”.
Name from semiconductors
The first large contracts AsGa achieved were in 1996 with various telecoms. The company’s name derives from the time when it produced components, taken from the symbol for a semiconductor material, gallium arsenide (GaAs, AsGa in Portuguese). Also, there was the hope of being able to manufacture laser sources and other components again. This intention is manifest in a project the company is undertaking jointly with the Center for Development Research Foundation (CPqD), financed by FAPESP under the Partnership for Technological Innovation Program (PITE). The idea is to develop various types of high-power laser for use in medical equipment and other commercial applications. “Keeping laser technology alive is almost an emotional project”, explains Ripper.
The micro-components field is treated with affection and lies within AsGa’s future plans. “We could set up another company to manufacture components”, says Ripper. The mission of studying setting up a potential micro-components plant and planning what AsGa will be like in 2005 are in the hands of the partner Francisco Prince. His job is to develop new business, chiefly in the exports. “To do this, he is out of the day-to-day business of the company”, says Ripper. A physicist and professor at Unicamp’s Physics Institute, Prince was Ripper’s student at the university and he did so remarkably well that he was invited to be the master’s partner.
Efficiency and costs
Besides Ripper, Scarabucci and Prince, Francisco Mecchi and Claudio Gouvêa are also partners. Mecchi is another product of Unicamp. He used to be the maintenance technician at Elebra, a Brazilian-owned electronic equipment manufacturer, where both Ripper and Scarabucci worked in the 80s. Mecchi qualified as an engineer and did a master’s degree at Unicamp. Gouvêa worked for IBM, where he was the company’s industrial logistics manager for the PC business. In AsGa, he is in charge of buying components and keeping costs down with no loss of efficiency. “I am always talking about cutting costs. It’s like cutting your nails; you have to trim them every week”, says Ripper.
He also grumbles about the difficulty of preparing a budget. “In recent years, we have never managed to draw up a real budget. By the time we finish one, the assumptions are already different. Changes to the economy in this country happen very fast, and for this reason we need to make fast decisions”. In this regard, he relies on the understanding between the partners, who have 100% power of vote over decisions.
This sense of unity will make it easier for the company to withstand the difficult times of the months to come, when operators’ investment in telecommunications is likely to decline. The operators are bringing forward the targets set for 2003 and the sector’s growth outlook is not as strong as it was two years ago. “The heavy investment boom is over”, says Ripper. “We had the nimbleness to grow and now we are getting ready to shrink without any crisis”.There should be no great change to the number of employees. The cutbacks are likely to be on the factory floor, which should lose the two extra shifts instituted as a result of the company’s rapid growth. At present, AsGa has 140 employees, 15 of which – mostly engineers – are directly associated with product development. Last year, all employees took part in a profit sharing scheme. The reward was 3.5 monthly salaries for everyone.
Encourage with prizes
As a way of encouraging new entrepreneurs and motivating research, AsGa recently launched the AsGa Ciência (Science) award for first and second grade students and teachers in the telecommunications and information technology fields. “We want students and teachers in the Campinas region to develop school projects and research”, says Ripper. The awards are diplomas, trophies, and a PC for the school plus another for the teacher.
Immediately after picking the winners along with the jury, made up of notable figures such as the physicist Rogério Cerqueira Leite, of Unicamp, on November 10, Ripper and AsGa as a whole will be getting ready to inaugurate the company’s new building on November 26. “There will be a further 2,000 square meters available for production and new product development”, says Ripper.The inauguration of the building will be the crowning achievement of a brilliant year for AsGa. It has become a reference point in the industry and an example of a company engaged in developing technology based on the knowledge of its executives, implementing an efficient commercial project. But for Ripper there is still much to be done. “More “AsGas” are needed in Brazil. There is both the room and the need for more companies like ours”.
Between the origins of, and the reasons for, success
AsGa began when José Ellis Ripper Filho returned to Brazil, in 1971, to set up the Research into Optical Communication Group at Unicamp’s Physics Institute. He left the United States after obtaining his doctorate at the Massachusetts Institute of Technology (MIT) and working in ATeT’s (today, Lucent) Bell Laboratories. Even before leaving Brazil, Ripper stood out at the Aeronautics Technology Institute (ITA), in São José dos Campos, in the graduate electronic engineering course. “As an end-of-course project (in 1961), three other colleagues and I built the first computer in Brazil, called the Zezinho (Joey)”. It was a teaching computer employing Brazilian transistors that was used to show the workings of the new machine.
In 1962, it was the turn of AsGa’s present Research and Development director, Rege Scarabucci, to win the ITA diploma and go on to Stanford University, in the United States. Like Ripper, he returned to Brazil, in 1971, invited to Unicamp by the founder of the University, the MD Zeferino Vaz. In 1974, Scarabucci presented the first optical modems at the Engineering School. They were the result of the financing of two projects ordered by Telebrás, the state-owned holding company for telephone operators.
Professor Ripper coordinated the first project, on optical communication, and the other, on digital transmission, was headed by professor Scarabucci. “The university began to produce knowledge, but it was not the right environment for turning it into a product”, comments Ripper. This task was carried out by the Telecommunications Development Research Center (CPqD), created in 1976, by Telebrás, which began hiring Unicamp researchers and using the results of the research.
Ripper and Scarabucci only ceased full-time dedication as Unicamp professors at the beginning of the 80s when the Brazilian-owned company Elebra hired them. “Elebra was the first company to benefit from the CPqD’s technology and to produce it”, recalls Scarabucci. With the opening up to the overseas market and the succession of economic plans, Elebra faced financial difficulties at the beginning of 1987. Part of the company was sold to the Itaú bank and to the multinational Alcatel. Ripper wanted to remain with an Elebra subsidiary producing electronic components. With money from his family and a former colleague from his time at ITA, João MacDowell, Ripper set up AsGA. MacDowel, later sold his share of the business.
Scarabucci was only to join AsGa in 1997, after having left Elebra in 1990 and returning full-time to Unicamp. The career of both shows that investment made 25 years earlier, with the setting up of Unicamp and the CPqD, enabled Brazil to be one of the six countries at the end of the 80s to have its own optical fiber technology for use in telecommunications. The investment is still yielding a return.
1. Development of 16xE1 Multiplexer/ Optical Modem with Technological Innovation (97/07321-2); Type: Small Companies Technological Innovation Program (PIPE); Coordinator: Rege Scarabucci – AsGA; Investment: R$ 299,810.
2. Development of STM-1 Multiplexer for the Optical Access Network (98/14805-9); Type: Small Companies Technological Innovation Program (PIPE); Coordinator: Rege Scarabucci – AsGA; Investment: US$ 153,060