Tech firm to form tripartite alliance

A proposal by three of Taiwan's leading technology firms to set up a company making the chips that drive flat-screen computer displays was called a "win-win-win" deal by analysts yesterday.

Venture capital companies tied to BenQ Corp (明基電通) and the world's largest maker of custom-made computer chips, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), are in discussions with liquid crystal display (LCD) chip designer Media Reality Technologies Inc (晶捷科技), to open an LCD--driver chip company later this year, Chinese-language media reported yesterday.

One market watcher said the prospects for the plan look good.

"This is a win-win-win situation for all three companies," said Benny Lo (盧志恆), an analyst at Primasia Securities in Taipei. "TSMC will be able to continue using its older 0.35-micron manufacturing facilities, BenQ will secure its LCD-driver chip supply and Media Reality will have a ready customer for its chips."

LCD-driver chips are made with transistors measuring 0.35 microns across, while the chip industry standard is now less than half that size. By securing orders from the new chip company, TSMC won't have to retire its older equipment.

BenQ currently buys LCD-driver chips from overseas companies like NEC Corp and Texas Instruments Inc, and from local supplier Novatek Microelectronics Corp (聯詠科技), but the two foreign companies plan to bail out of the unprofitable LCD-driver chip business next year.

BenQ also buys controller chips -- another chip needed to run the display of a flat screen -- from Media Reality's US rival, Genesis Microchip Inc.

Media Reality is currently being sued by Genesis in the US, claiming the Taiwanese company is infringing a Genesis patent and requesting Media Reality's products be banned from the US market.

Media Reality is expected to gain orders from Taiwan's largest maker of flat-screen computer panels, AU Optronics Corp (友達光電), which makes LCD displays for BenQ's booming brand-name business.

Last month BenQ shipped 370,000 flat-screen computers, up 45 percent from March. BenQ is also a major shareholder in AU Optronics.

The tie-up should lead to cost savings.

"The alliance will help AU Optronics to increase its component control ability and reduce costs also," said Nathan Lin (林宗賢), an analyst at SinoPac Securities Corp (建華證券).

But the new company is bad news for Novatek.

"AU Optronics accounts for around 40 to 45 percent of Novatek's total sales," Lin said. "As a result, we consider the alliance as negative news for them."

The three potential partners remained tight-lipped about the alliance yesterday. BenQ spokesman Alex Liou (劉維宇) refused to confirm the tie-up and TSMC's spokesman, Tseng Jin-hao (曾晉皓), was not forthcoming.

"One of our investment arms is talking with BenQ's investment arm," said Tseng. "They might have some project under discussion at the moment."

Media Reality's spokesman did not return calls yesterday.