Taiwan's microchip designers are bucking a global industry downturn by increasing sales of specialty chips at low prices, an industry group said last Friday.
Chip design firms draw up the blueprints for the internal structure of a semiconductor.
Market researchers estimate that the worldwide chip market will shrink by a third this year. Despite the dire prediction, the domestic chip-design sector saw a 10.5 percent sales growth in the third quarter, according to the Taiwan Semiconductor Industry Association.
"Taiwan is the second-largest design base outside of the US, and the local industry will continue to grow," said John Leong, a chip sector analyst at Deutsche Bank in Taipei.
Close proximity to major chip users and access to low production costs have been key to their success, he said. Some of the hottest chips designed in Taiwan are purchased locally by TFT-LCD computer screen makers, the CD-ROM, DVD and CD-rewritable manufacturers and other companies. Designers are also able to keep costs low by relying on contract chipmakers such as Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) for production.
The chip-design sector used to be restricted by the high cost of manufacturing. The capital necessary to build a state-of-the-art chip plant is nearly NT$100 billion.
The development of the foundry industry in Taiwan allowed the chip designers to thrive, since they could rely on manufacturers to shoulder the cost of building and operating a plant while the designers are free to focus on research and development.
One firm that analysts say is making waves, MediaTek Inc (
"Sales are not a problem for this company," said Henry Wang (
MediaTek has already reached its profit forecast for the year, because of high profit margins on its products, he said.
Only a few companies in the world design chips for the same products as MediaTek and they are located in Japan and the US. Quality designs at lower costs are what keep MediaTek ahead of rivals, Wang said.
MediaTek is not the only chip designer beating out US and Japanese rivals. RealTek Semiconductor Corp (
RealTek is thriving against its top competitors, which include Intel, by designing less expensive chips. The firm has also gotten a boost from telecom-equipment sales to China, which seeks lower prices on the equipment it buys, Wang said.
Chip designers will be the only sector in Taiwan's semiconductor industry to grow in terms of revenue this year, according to a forecast published earlier this month by the Industrial Technology Research Institute. Chip designers are expected to grow 3.5 percent more than last year to NT$119.2 billion.
Revenues in the chip industry overall are predicted to drop 26.4 percent this year to NT$525.9 billion, compared with the same time last year. The chip-manufacturing sector, which includes memory chipmakers and foundries, will be hardest hit, with revenues plummeting 35.2 percent, while chip packaging is likely to drop 18.7 percent and the testing sector may fall 28.4 percent from last year, according to the research institute.
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