In a clear sign that Taiwan's semiconductor industry is making the shift from manufacturing to design, VIA Technologies (
"At this point, the [IC] design strength in Taiwan is much greater than it was 13 years ago," said Morris Chang (
As the virtual founder of Taiwan's chip industry, Chang speaks with authority. His idea of manufacturing chips for customers at the lowest possible price, left the task of research and development to clients.
The foundry industry he created provided IC designers with a low cost alternative to building their own semiconductor manufacturing plants -- a US$2 billion savings.
Since the island's chip industry took off over a decade ago, the IC design sector has since vaulted to number two in the world, according to Dataquest. The nation's 200 design firms produced an estimated US$2.6 billion in microchips last year, 84 percent growth year on year.
This year, a number of forces are propelling Taiwan's IC industry forward, a combination of strong designs and lower prices throughout the industry. Ironically, price cuts due to competition between TSMC and United Microelectronics (UMC, 聯電) is allowing local IC companies to make chips at lower prices than ever before.
As a result, industry players and analysts alike expect VIA to emerge as the nation's first global powerhouse in the design of computer CPU chips, against competition from industry giants like Intel and AMD. A CPU is the brain of a computer and its most expensive part.
In late 1999, VIA bought two US-based IC design firms, Cyrix and Centaur, and started down the road of CPU design. The company added engineering expertise from its operations here and came up with the Cyrix line of computer CPU for the personal computer market.
"If VIA makes solid inroads into the industry CPU market, which is a big market -- US$20 billion -- I think that would be significant," said Calvin Chang, semiconductor analyst at JP Morgan Chase, Taipei.
"It would put VIA really in a different league, VIA would no longer be just a chipset company."
VIA's expertise over the past few years has been computer chipsets, the component a computer CPU is mounted on that enables the CPU to communicate with the rest of the computer.
Chipsets accounted for over 90 percent of VIA's sales last year, while CPUs only made up 5 percent of company earnings.
Most analysts say CPUs will grow to between 10 and 30 percent of VIA's sales this year.
Chang expects VIA to target its CPU products at the value PC market -- personal computers built for between US$200 and US$300 -- which could capture the 90 percent of the world's population unable to afford a computer at current prices of around US$1,000.
The company says the value PC market, along with notebooks and Web Pads, are perfect for its Cyrix family of microprocessors. And the company has priced the chips far below competitors in a bid to capture market share in the coming year.
"Quality products at low prices, you know, that's the Taiwan story," said Chang, "And in chips, VIA can deliver."
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