The global artificial intelligence (AI) boom has boosted the revenue and market share of chip manufacturers, but it is a different story for local chip designers, which are bracing for growth challenges due to less exposure to the AI chip market and intensifying competition amid escalating geopolitical upheavals.
Revenue at Taiwan Semiconductor Manufacturing Co (TSMC), the world’s biggest contract chipmaker and a major beneficiary of the AI boom, is expected to grow by as much as 26 percent next year, while its market share is forecast to be approximately 73 percent of the world’s contract chip manufacturing, data released last week by International Data Corp (IDC) showed.
TSMC supplies cutting-edge AI chips to Nvidia Corp, Advanced Micro Devices Inc and a majority of AI accelerator companies, due to the Taiwanese company’s unparalleled technology capability.
However, Taiwanese chip designers are facing a contraction of their market share next year to about 40 percent of the Asia-Pacific chip designing market, falling behind the 45 percent of Chinese rivals, IDC said. It would be the first time Taiwanese companies have lost the lead over their Chinese competitors, the researcher said.
It attributed the expected rapid advancement in China’s market share to heavy subsidies by Beijing to push for greater semiconductor sufficiency, especially in the AI segment, and robust demand for domestic data centers. China might not be able to tap into the premium AI market overnight under US bans on exports of chip technology and equipment, but it is nibbling away at the turf of foreign chip companies in China.
Huawei Technologies Co is reportedly to launch its new Ascend AI chip series, targeting space in China once occupied by Nvidia’s entry-level AI chips following the forced retreat of the US-based giant. Additionally, Beijing-based chip designer Cambricon Technologies Corp is reportedly aiming to significantly expand production of its AI chips to fill the void left by Nvidia. This year alone, Cambricon’s revenue is expected to triple compared with last year, IDC said.
Smartphone chip designer HiSilicon Technologies Co, a subsidiary of Huawei, also gained market share with its Kirin processors after making major technological breakthroughs, IDC said, while flash memorychip maker GigaDevice Semiconductor Inc and bitcoin mining machine maker Bitmain Technologies are also expected to extend strong growth momentum next year.
With a lack of support in the domestic market, Taiwanese semiconductor designers are showing little enthusiasm to develop AI chips. Smartphone chip designer MediaTek Inc is the only exception, while Novatek Microelectronics Corp and Realtek Semiconductor Corp are concentrating on display driver ICs and networking chips. Novatek has begun tapping into the AI chip market by offering chips used in high-performance computing devices.
MediaTek in October told investors that its new AI accelerator business would contribute US$1 billion next year and it could reach multiple billions of US dollars in 2027. The firm is widely believed to design AI application-specific integrated circuits (ASICs) for Google’s data centers, aiming to take 10 to 12 percent of the global AI ASIC market by 2028.
IDC’s data did not include revenue from local AI ASIC developers Alchip Technologies Ltd and Global Unichip Corp, given their smaller scale.
China’s rapid growth in the semiconductor designing business would benefit its chip manufacturing business, as Huawei and Cambricon are mostly reliant on Semiconductor Manufacturing International Corp for chip supply. By 2029, China is forecast to overtake Taiwan as the world’s biggest foundry service provider, IDC said.
It is difficult to avoid the changes, as China is leveraging its massive domestic market and government subsidies to expand. To keep up with China, Taiwanese chip designers and makers can accelerate technological migration and deployments in the AI market to fuel growth.
Aid from Taipei is also crucial. While the government’s 10 Major AI Infrastructure Investment project focuses on developing AI-related hardware, including optics, quantum technology and AI robotics, it should consider a more holistic AI development project for Taiwan, including adding new incentives to encourage local chip designers to develop AI chips.
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