TV chip leaders MStar Semiconductor Inc (晨星半導體) and MediaTek Inc (聯發科) might change their strategies to preserve their margins in light of reports that US chipmaker Broadcom Corp will give up its TV chip business, the market advisory firm DisplaySearch said recently.
Last week, Broadcom began to shut down its digital TV and Blu-ray operations, closing offices from Canada to China, said the EE Times, a US-based engineering journal.
Broadcom was said to have been steadily losing DTV sockets to two Taiwan-based consumer chip companies, MediaTek and MStar, which hold the lion’s share of the middle to low-end digital TV market, according to the journal.
“It’s no surprise when another TV chip maker vanishes,” DisplaySearch European TV research director Paul Gray said on the company’s blog. “This is an -industry where the winner takes all, and the penalty for making the wrong choices is harsh.”
Gray said Broadcom thrives on defining new specifications, such as 802.11g, and bringing new solutions to market, and then innovating new functions to stay ahead of price erosion.
However, the company never seemed to be able to turn its strategy into world-beating products for multiple customers, he said.
“This is a different skill set from aligning with key accounts and innovating mainly on cost,” he said.
“Broadcom also does not have the cost structure for a business based on frugality,” he added.
MediaTek and MStar survive on a gross margin that is 10 percentage points lower than Broadcom’s, he said.
DisplaySearch said it expected to see other quiet exits of business lines in the next few years, because this scenario is in line with a maturing flat panel TV industry.
The research house predicted that the endgame would include two major cost-based merchant players — clearly MStar and MediaTek — with the market rounded out by a couple of captive suppliers and some specialists.
“The crucial question is what happens next,” Gray said. “Our research shows record market share for MStar. Two paths are possible: profitless prosperity like the TV market, or leaders changing their behavior and acting to preserve margins. It will be interesting to see if these tigers can change their stripes.”
MStar is currently the largest TV chip supplier in the world, taking a 45 percent share of the global market, according to Grand Cathay Securities (大華證券).
The integrated circuit (IC) designer has forecast that its market share will exceed 50 percent by the end of this year.
However, analysts said the company is facing rising competition from other IC designers, in particular MediaTek, which is gearing up to diversify its product portfolio by extending its turf from cellphone chips to the TV chip sector.
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