MediaTek might move production to China next year

MediaTek Inc (聯發科技), the world's largest designer of chips for DVD players, said it may start using semiconductor suppliers in China so it can respond more quickly to customer orders and meet rising demand.

"We'll probably start within one year," MediaTek chairman Tsai Ming-chieh (蔡明介) said in an interview after the Hsinchu, Taiwan-based company announced third-quarter earnings last week.

"Designers of chips are going there to be close to customers and to avoid import duties," said Eric Chen, an analyst with Nomura Securities Co in Taipei. "They will move step by step."

MediaTek's parent United Microelectronics Corp (聯電), the world's second-biggest producer of made-to-order chips, last week said it may hand some orders to He Jian Technology (Suzhou) Co (和艦科技). Bigger rival Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has said it plans to start production at its first plant in Shanghai's Songjiang suburb before the end of next year.

MediaTek's largest market is China, where companies such as Sichuan Changhong Electric Co (四川長虹電器) make about two-thirds of the world's DVD players.

Taiwan's chip-design industry, with sales of about US$3.5 billion last year, is the world's second largest after the US. Major chip designers, which mainly use TSMC and UMC as suppliers, need to move to China to compete with local rivals, Nomura's Chen said.

China grants value-added tax rebates to companies that design and make chips domestically, according to Semiconductor Industry Association. Imports are subject to the full 17 percent VAT.