Taiwan needs to start marketing its own brands of semiconductors or risk losing out to competitors in China, US-based technology research firm International Data Corp (IDC) said yesterday.
"[Taiwan's semiconductor industry] has been very successful at aligning itself with good customers to improve quality and drive down costs, but now the game is going to change as local Chinese players are taking a different approach and are focusing a lot on branding," Mario Morales, a vice president at IDC responsible for semiconductor market analysis, said at a research seminar held in Taipei's Grand Hyatt Hotel yesterday.
Several brand name chips, including Intel Corp's Pentium and Advanced Micro Devices' (AMD) Athlon, are household names in developed markets.
With the exception of Acer Inc, the average consumer outside of Taiwan does not know the names of local technology companies.
Meanwhile, China's Legend Group Ltd (
Chinese competitors
In the semiconductor industry, Shanghai-based Semiconductor Manufacturing International Corp (SMIC,
Within four years the Chinese will directly challenge Taiwan's semiconductor industry, Morales said, therefore Taiwanese chipmakers need to invest more heavily in branding and marketing now to compete with them.
"China is going to play a very aggressive role in changing the landscape of the semiconductor industry in general," Morales said.
With comparatively low labor costs, Chinese manufacturers can produce chips for 30-percent less money than the Taiwanese, and this is already attracting heavyweights such as IBM, Intel and ST Microelectronics at Taiwan's expense, Morales said.
Chips used in PCs and cellphones account for over half of the semiconductor market, Morales said.
As China develops, it has dramatically increased its consumption of these products. IDC reports that China is already the world's largest consumer of cellphones, and will become the second largest PC market this year. By the end of the decade, China will be the second largest consumer of semiconductors after the US.
New alignment
Taiwan's chipmakers are already aligning with China-based companies in design and manufacturing, but Morales said that they need to spend more on research and marketing to better differentiate themselves. One way is to acquire intellectual property (IP) from other companies.
"There's a lot of IP out there and a lot of companies running out of money, so this would be a good time to evaluate ways of diversifying and buying some of that IP," Morales said.
Foundries that only make chips and do not offer added value in the form of their own IP, software packages, support and other services, will eventually die, Morales said.
A semiconductor analyst based in Taipei offered a different priority for the local semiconductor industry. "Branding and marketing is one way to increase awareness among smaller Chinese customers, but how soon the foundries can set up in China is more important," said Chris Hsieh (謝偉民), director of ING Financial Markets in Taipei.
China levies a 17-percent value-added tax on imported semiconductors, whereas locally produced ones pay only 6 percent, Hsieh said.
Last year, the government lifted its decades-old ban on investments by Taiwanese companies in the Chinese semiconductor industry, but it has yet to fully approve any such investments. Taiwan Semiconductor Manufacturing Co (TSMC,
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