Commentary: Innovation is key to survival for Taiwan IC…

Due to lackluster business performances recorded by most Taiwan IC design houses in the first half of 2017, the overall production value of Taiwan’s IC design industry will see only limited growth for the year despite business turnaround seen in the traditional peak season in the second half of the year. The ranking of Taiwan’s top-10 IC design houses has not experienced a major reshuffle so far this year, but their overwhelming revenue declines have seen little improvement, with MediaTek even likely to fall into the “regression club.” Nevertheless, some Taiwan ASIC designers and suppliers of niche memory ICs and PC peripheral chips have managed to sustain significant growth momentum, amid the business climate that the mobile chip market is maturing with increasingly limited growth but AI applications and business opportunities are flourishing.

Over the past few years, riding on huge demand by China’s chip market and enforcing effective strategies to capture the global mobile chip market pie, MediaTek and other Taiwan designers and suppliers of LCD driver ICs, consumer ICs and analog ICs had enjoyed remarkable business growth momentum for a long while. But China IC design houses, thriving rapidly on strong government policy support in recent years, have aggressively moved to tap the massive chip business opportunities, significantly heating up market competition. In addition, the market demand for smartphones, tablets, TV, and STB products has started to trend downward after hitting a zenith, remarkably undermining the growth in the demand and production value of chips for such terminal devices. As a result, Taiwan IC designers have seen both their revenues and gross margins keep shrinking, and even MediaTek has endeavored hard to reverse the shrinkage trend this year with little success.

Bucking the declining trend

With the gradual waning in the growth of global market demand for mobile devices, Taiwan’s top-10 IC design houses have registered limited increase in the amount of orders from customers while suffering larger drops in chip prices so far this year. Accordingly, these designers may be forced to continue seeking ways to stop revenues from declining further in 2018. In contrast, some Taiwan designers have benefited from the increase in the market demand for ASICs, memory ICs, and chips for PC peripherals. For instance, such memory IC designers and suppliers as Elite Semiconductor Memory Technology (ESMT), Etron Technology, AP Memory have seen their revenues and profits grow at an accelerated pace in the second half of 2017, due mainly to global quotes for memory chips rising steadily, against limited growth on the supply side.

Meanwhile, Taiwan designers and suppliers of ICs for PC peripheral devices have managed to benefit from their increased share of the global market for such chips in 2017, seen in the wake of foreign players exiting the market amid the lukewarm market demand for desktops and notebooks. Some Taiwan players in the sector, such as ASMedia Technology, Parade Technologies, Pixart Imaging, ITE Tech, and Realtek Semiconductor, have advanced remarkably in revenues and gross margins in 2017 and are poised to embrace brighter business prospects in 2018, with some of them having secured long-term orders from first-tier international brands.

ASICs massively needed for AI applications

Particularly worth mentioning is that Taiwan customized ASIC design and manufacturing firms such as Global Unichip, Achip and Faraday Technology have seen their revenues and earnings hit new highs this year on robust market demand for ASICs needed for massive AI applications. With little competition pressure from other IC design houses in Taiwan and China, these companies are expected to continue enjoying solid growth momentum in 218. Among them, Global Unichip is expected to regain its presence in the club of Taiwan’s top-10 IC designers shortly.

Market insiders said that although Taiwan’s designers and suppliers of memory ICs and PC peripheral chips are still able to enjoy much room for business growth in 2018, they should work harder to pursue technological innovations, upgrade their product values and explore new markets to survive the economic and market cycles. ASIC design and manufacturing service providers are also advised to develop more innovative next-generation chip solutions in line with the ever-expanding AI applications.

Categories: Bits + chips IC design, distribution IC manufacturing Memory chips

Tags: AI Analog ASIC ASMedia Commentary ESMT Etron Technology Faraday Technology Global Mobile IC ITE LCD driver MediaTek Parade Technologies Pixart Imaging Realtek Semiconductor semiconductor Taiwan

Companies: Elite Semiconductor Memory Technology Etron Technology Faraday Technology Integrated Technology Express MediaTek Pixart Imaging Realtek Semiconductor

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