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IC design houses form alliances to strengthen competitiveness

IC designers in Taiwan are poised to embrace the most lucrative year in 2021 amid the persistent crunch of chips, but they are also facing increasing cost pressure on developing new-generation chip solutions, which may reshape the IC design sector and restructure terminal chip markets as a result. All these prompted them to form alliances with peers and partners in other semiconductor segments or integrating subsidiaries to build their own fleet of design forces, according to industry sources.

Many fabless chipmakers in Taiwan had their first-half 2021 revenues grow over 40% or even double on year and are expected to post record sales and profits for the year, and the growth momentum is likely to last into 2022, the sources said.

But opportunities always co-exist with risks. Those IC design houses which are unable to sustain technology R&D and innovation momentum and absorb excellent design talent are likely to suffer vicious competition after the market demand returns to normal, and they may also face ever-rising R&D costs for new chips and ever-falling investment recoup rates, the sources noted.

Persistent wafer foundry capacity and chips supply shortages worldwide are gradually reshaping Taiwan's IC design sector. The one with an individual designer is no longer able to thrive on any single-chip platform. Instead, creating alliances with peers or partners in other semiconductor segments could be the best way to counter the changing industry and market landscapes, the sources added.

The multiple chip alliances will cause direct competition among different camps or ecosystems, including those headed by MediaTek, Foxconn Technology, and Sunplus Technology, apart from the veteran UMC team and grand TSMC Alliance, the sources said.


Robust TSMC-led alliance

Among them, TSMC Grand Alliance has attracted many industry-leading players from the segments of EDA, IP, and IC design services, significantly strengthening their presence in the terminal ASIC market, bolstered particularly by the foundry's most advanced manufacturing and packaging processes, the sources indicated.

China's chips vendors have shown sharp demand for IC design services and silicon IPs needed to support their in-house chips development, sending the unit prices growing exponentially in 2020-2021 for chip design services, IPs, and ASICs offered by TSMC alliance members. CMOS ASIC specialist Alchip Technologies and MCU vendor RDC Semiconductor have seen their revenues more than double over the past year, and other members such as ASIC specialist Global Unichip, logic non-volatile memory vendor eMemory Technology, embedded processor IP supplier Andes Technology, as well as IP, EDA and IC design services provider M31 Technology have also recorded sharp increases in NRE (non-recurring engineering) incomes.

Many local IC designers have been tagged as members of the UMC camp, including MediaTek, Novatek Microelectronics, ITE Tec, Faraday Technology, PixArt Imaging, Davidcom Semiconductor, Amic Technology, Realtek Semiconductor, and Holtek Semiconductor, as they were established in the course of UMC being split from an IDM into chips foundry and design entities.

Among them, MediaTek, Novatek, and Realtek are now Taiwan's top-3 IC designers, who and other peers in the UMC team all managed to post higher revenue increases than the industry average in the first half of 2021 despite severe foundry capacity shortages, indicating their crucial position in the country's IC design industry.


Waning UMC camp

But as UMC will focus on developing more specialty foundry services rather than sub-14nm processes, many of its associated IC design houses, such as Novatek, ITE TEC, PixArt, Realtek, and Holetk, have no other choice but to gradually part ways with the foundry while proceeding with their own product development roadmaps.

MediaTek has been the first and most aggressive among UMC team members to build its own group strength by acquiring IC design houses at home and abroad, including taking over ASIC specialist MStar and Wi-Fi chip vendor Ralink Technology, buying stakes in industrial and USB Ethernet IC designer Asix Electronics and in Ethernet switch system maker IC Plus and restructuring its chip-making subsidiaries in Taiwan and China. It is also actively recruiting high-end talent in Taiwan to further strengthen its IC design power.

While consolidating its presence in semiconductor equipment, foundry and packaging segments, Taiwan's leading EMS Foxconn Technology is also actively strengthening its own IC design capability through Its subsidiaries, including Fitipower Integrated Technology and Princeton Technology engaged in display driver ICs (DDI) and power management ICs, and Advanced Power Electronics versed in offering MOSFET, IGBT, and other power chips.

Sunplus Technology's own fleet of design forces is also taking shape. Its affiliated FocalTech Systems is dedicated to LCD DDI chips, touch controllers, fingerprint sensor chips, Generalplus Technology engaged in voice ICs and multi-media product solutions, and Sunplus Innovation Technology specialized in web, notebook, and IoT camera controllers and MCUs.