Taiwan Chip Designers Counter Downward Trend in Global Economy

Companies Tap Demand in Emerging Markets, Helping to Shore Up Sales While Global Economy Enters Slump Taiwan, with the world’s second-largest chip design industry, has some companies that have countered a slump in the global economy by tapping emerging markets such as China. The strategy has helped the chip designers boost sales. MediaTek Inc., the world’s seventh-largest chip designer, said in an Oct. 30 statement that its third-quarter revenue of NT$28.1 billion (US$856.9 million) rose 5.1% from NT$26.7 billion in the same period a year earlier primarily because of strong sales in China. The company, which counts on mobile phone chips for most of its revenue, had sales growth that outpaced gains in the overall handset industry. The worldwide mobile phone industry felt the impact of the global financial crisis in the third quarter of 2008, U.S. market research firm IDC said in an October 30 statement. Mobile phone manufacturers shipped a total of 299.0 million handsets in the third quarter, up 3.2% from last year, according to IDC. “Handset vendors felt the pressures of the dismal economy in the third quarter of 2008, and as a result, shipments and revenues were down almost across the board,” said Ryan Reith, senior research analyst with IDC. MediaTek started making mobile phone chips about five years ago and it sold them primarily to handset makers in China. Robust demand in China after the Olympic Games this year together with handset customers’ production increases helped MediaTek expand market share, the company said. The third quarter of the year has historically been a strong quarter as manufacturers load their sales channels with handsets in preparation for the holiday season, producing year-over-year growth rates as high as 20% as a result, IDC said. This year has not witnessed a similar increase, largely due to the current economic situation, IDC said. MediaTek’s largest competitors in the handset chip business are Qualcomm Inc. and Texas Instruments Inc., both based in the U.S., which has the world’s largest chip-design industry. Qualcomm reported today that sales in its most recent fiscal quarter ended September 28 rose 45 percent from the same period a year earlier to US$3.33 billion while net income declined 22 percent during the period. Texas Instruments on October 20 reported that its third-quarter sales of US$3.4 billion fell 8 percent from the same period a year ago and profit in the period fell by 26 percent. Global Unichip Corp., Taiwan’s third-largest chip designer, had a 37 percent gain in third-quarter revenue compared with the same period a year earlier, based on information the company provided to the Taiwan stock exchange authorities. The company offers chip design services to customers around the world. Still, many of Taiwan’s chip designers could not escape the downturn in the global economy. For eleven of Taiwan’s listed chip designers, their overall third -quarter revenues fell by more than 19 percent to NT$39 billion from NT$48.4 billion in the same period a year ago. The revenue figures came from monthly reports that the companies provide to the Taiwan stock exchange authorities. Global chip design revenue totaled US$13.9 billion in the second quarter of 2008, rising 9 percent year-over-year, the Global Semiconductor Alliance (GSA) reported. During the quarter, chip design revenue equaled 21 percent of total worldwide chip revenue, according to the GSA, a market research organization that includes chip companies around the world among its members. Worldwide semiconductor revenue totaled $67.4 billion in the second quarter of 2008, rising 5 percent year-over-year, the GSA said. As bullishness turns to caution, Asia Pacific organizations are expected to delay computer hardware upgrades and large technology projects and focus on efforts to improve client retention and acquisition, technology research firm Gartner said on Oct. 29 in a statement. In a worst-case scenario, information technology (IT) spending in Asia Pacific is forecast to grow 8.3 percent in 2009 to reach US$585.7 billion, compared with Gartner’s previous forecast of 11 percent growth. MediaTek Inc. http://www.mediatek.com/ Global Unichip Corp. http://www.globalunichip.com/ Please visit www.taiwantrade.org.tw or www.brandingtaiwan.org for more information. Taiwan External Trade Development Council (TAITRA) The Taiwan External Trade Development Council (TAITRA) was founded in 1970 to promote Taiwan’s foreign trade and competitiveness in world markets. Over the past 38 years, TAITRA has played a key role in the development of the Taiwan economy. TAITRA is jointly sponsored by the government and commercial associations and is viewed by all as the business gateway to Taiwan for the international business community.

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