SiS sales slow last month

Sales at Silicon Integrated Systems Corp (SiS, 矽統科技) were down 29 percent in December from those in November because of slow demand and the impact from a patent infringement case in the US, a SiS official and analysts said yesterday.

The world's third-largest maker of computer chipsets posted sales of NT$1.28 billion, down from around NT$1.8 billion in November.

Jessie Lee (李葦珠), corporate marketing and communications manager at SiS, said that sales revenue dipped last month because of the "economic situation" and a sell-off of older stock at low prices.

An analyst at Primasia Securities Co in Taipei, however, suggested the drop was the direct result of a patent-infringement ruling against SiS by rival United Microelectronics Corp (UMC, 聯電) in October.

"The drop back in sales in December proves there was a negative impact from UMC's lawsuit," George Wu (吳裕良) said.

There were also seasonal factors at play, Wu said. Computer vendors in the US and Europe placed their Christmas orders with Taiwanese chipmakers in October and November for deliverylast month. By December sales traditionally fall off.

The October ruling by the US International Trade Commission (ITC) barred from the US any SiS chips that violated UMC's patented technology.

Others expect the impact of the ruling to be limited.

"The UMC lawsuit is only part of the reason for the drop as sales to the US are only 10 percent of SiS' shipments," said Nathan Lin (林宗賢), an analyst at SinoPac Securities Corp (建華證券).

The main reasons for the drop in sales were slow market demand in the fourth quarter last year and high costs at SiS' foundry, Lin said. SiS opened its own foundry, or chip-making plant, in March 2000. SiS formerly subcontracted production of its chipsets to UMC.

SiS disputed the idea that the patent ruling had impacted last month's sales.

"There was no effect from the UMC lawsuit," Lee said.

SiS and UMC have now settled their dispute. Last month UMC purchased a 4.46-percent stake in SiS, and has been offered three seats on SiS' board of directors. The companies announced last week that they would share technology, meaning there should be no future patent-infringement lawsuits.

The end of the legal dispute should clear the way for new orders from the US. SiS is also expected to clinch new orders from Intel Corp, which is scheduled to upgrade its computer chipsets in the second quarter.

Chipsets allow the different components of a computer -- such as memory and graphics -- to communicate with the main processor.

Intel's chipsets operate at a speed of 677MHz. The upgrade should take this speed to 800MHz. Only SiS and ALi Corp (揚智科技), formerly Acer Laboratories Inc, are licensed to make the 800MHz chipsets in Taiwan. Local rival VIA Technologies Inc (威盛電子) is not.

"Twenty percent of the market in 2003 will be the new 800MHz chipset," Lin said.

SiS supplies 25 percent of the global chipset market, he said. Lin and Wu expect SiS to be a major beneficiary of the upgrade.