Taiwan: Fabless companies endure declining price trends

As consumer devices diversify, the IC design industry follows the trend by providing chips with multiple functions at low costs. Keeping costs at a minimum level is a major challenge for fabless companies, especially since the industry has not found an obvious killer application to boost chip revenues.



The two methods of addressing this issue are to either lower costs, or to provide value-added solutions for emerging markets. An advantage that Taiwan fabless companies have is keeping the costs of mature products at a low level. Examples of this can be seen in Flash devices and single-chip DVD segments.







FLASH IT

The proliferation of Flash devices in high-volume products, such MP3 players and thumb drives, has created a strong demand for Flash controllers.



Phison Electronics, ranked as one of the top five fabless design companies in Taiwan, has joined the bandwagon of manufacturing Flash controllers. The company has already launched a series of controllers for card readers, pen drives, MMV, MP3, and memory cards. Says K.S. Pua, president of Phison, “We have shrunk our geometry from 0.22 micron to 0.18 micron. We are also focused on the future growth of NAND in Taiwan. Should the local shipping volume of NAND Flash increase, we are confident that our revenue will soar.”



DVD PLAYER

The single-chip DVD player is another mature market.



Mingto Yu, CFO and spokesman of MediaTek Inc., another local fabless IC design company, says, “The average selling price of DVD chipsets is expected to decline, but the shipment of DVD players continues to increase. As we shrink the cost structure and launch a new series of SoCs for DVD-RW, the effects of declining average selling prices to our margin can be limited to only two percent by the end of this year.”



Although mature products appeal to many local fabless design companies, emerging technologies and products such as LCD TVs are also being rapidly developed in Taiwan. “We are shipping LCD TVs, SoCs for DVB-T, SoCs integrated with MPEG2, and TV controllers for ATSCs in high volumes,” adds Yu.



PBX

Meanwhile, new players are looking for different ways to stay afloat in the face of sinking IC price costs. Yan-Ming Chen, CEO of Essence Technology, points out that the implementation of IP phone stimulates the evolution of IP PBX. The penetration rate of networking in Asia is quite high, and many chip design players anticipate the surge of VoIP market.



“Today, the total revenue of global PBX market is around $60 billion. For the first time this year, IP PBX shipment will exceed traditional PBX systems. The value of chipsets depends on their applications,” says Chen.