Fri, Mar 15, 2002 - Page 17 News List

Chip design houses eye China market

GIVE AND TAKE While leading design companies are eager to do business on the other side of the Strait, Chinese manufacturers have proven to be untrustworthy

By Dan Nystedt  /  STAFF REPORTER

Local semiconductor design companies will not use chip-manufacturing services in China nor will they set up R&D facilities there in the near future because of the lack of intellectual property protection in China and strict government regulations in Taiwan, an executive from a leading chip-design company said yesterday.

"[China's foundry chipmakers] are quite aggressively appealing to us [to have chips manufactured in their fabs] ... but cost performance is one issue and intellectual property is another," said Sunplus Technology Co (凌揚科技) Vice President Wayne Shen.

Back in 1996, a manufacturing deal between Sunplus and a Chinese company was scrapped after Sunplus discovered that their products had been copied. Now, "it will take some time to build up credibility in China," he said.

There are a number of reasons for establishing roots in China, such as tax incentives, its huge market and a growing pool of engineering resources.

"We can easily recruit hundreds of engineers in China, but there are some limitations in the local human-resource market ... We are targeting the China market, so we will need R&D capabilities there," he said.

Sunplus, which brought in revenues of NT$6.6 billion last year designing chips for consumer products ranging from karaoke machines and toys to VCD players, is among the top-10 chip designers in Taiwan. The company markets a range of products across the Taiwan Strait.

Last year, the Chinese chip market was worth US$12 billion, 90 percent of which went into karaoke machines, TVs, refrigerators and other devices Sunplus designs chips for.

"For Sunplus, designing semiconductors for the consumer-appliance sector in China is really a no-brainer. It's a perfect fit for them to build up their chip expertise in the China market -- and in China's semiconductor market, the consumer-product sector is by far the largest," said Daniel Heyler, Asia-Pacific regional semiconductor analyst for Merrill Lynch.

Shen said Sunplus would definitely set up operations across the Strait someday, adding that the company was already working with two universities on chip-design projects and research initiatives in an effort to create local talent for its product designs.

"I think eventually the Taiwanese government will allow R&D activities in China ... sooner or later we will be doing research there," Shen said.

The Taiwanese government prohibits companies from engaging in R&D in China, and recently the semiconductor industry has been at the heart of a heated political debate over fears that as companies move to China, local industries will be hollowed out.

Some chipmakers want to sell some of their old equipment used for etching chips at 0.25 microns on eight-inch silicon wafers to upstart Chinese companies. The TSU has come out against such moves, along with some legislators.

Heyler said the sale of the low-tech equipment should be allowed since it is sitting idle for lack of orders.

"Taiwan wants to sell 0.25 micron or even 0.35 micron capacity to China. This is capacity that is in a state of oversupply globally and Taiwan's entire foundry industry is aggressively moving to leading-edge technology. This is a sector that is at 90 percent for TSMC [Taiwan Semiconductor Manufacturing Co (台積電)]," he said.

Taiwanese foundry chipmakers are using 0.13 micron technology and working on 0.10 and 0.09 micron technology to etch chips.

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