MediaTek, Ali Leading Taiwan Chip Designers Out of Tech Slump

(Business News & Technology News, 11 May 2009)

MediaTek Inc., the world’s seventh-largest chip designer, and Ali Corp. are leading Taiwan’s chip-design industry out of a slump that impacted the global technology industry starting in the third-quarter last year.

MediaTek’s first-quarter 2009 sales rose by 16.4 percent to NT$17.7 billion (US$522 million) from the same period in 2008, based on information the company released to the Taiwan stock exchange authorities. Ali Corp.’s sales gained by 7.6 percent to NT$728 million during the same period, according to statements released by the company to the Taiwan stock exchange.

Taiwan has the world’s second-largest chip design industry after the United States. Some of Taiwan’s chip designers have bucked the global economic slump by tapping emerging markets such as China. For about five years, MediaTek has been supplying chips for mobile phones to handset makers in China, which has the world’s largest cellphone market.

“Mobile phone market volume in China and India is expected to continue to grow at a steady pace in 2009 and thereafter,” Market Intelligence & Consulting Institute (MIC) analyst Joyce Chen said in a March 2009 report. “Mobile phone market volume in Europe and North America is expected to continue on its downward trend in 2009.”

MIC is headquartered in Taipei and has a research network spanning Asia.

Overall sales for Taiwan’s chip designers during the first quarter this year declined more than 15 percent from the same period a year ago, and MediaTek and Ali are the only companies out of 10 in Taiwan that have posted sales growth so far this year. Still, the first quarter decline for the Taiwan chip designers is an improvement from the 25.8 percent drop in their sales during the fourth quarter last year, when the global recession had its greatest impact, and even sales for MediaTek and Ali declined.

In February this year, MediaTek announced a new chip for mobile phones that integrates more of the functions previously performed by several chips, thereby helping to lower manufacturing cost for handset makers and allowing them to produce more compact and feature-rich phones. The new MediaTek chip is called the MT6253.

“To better address the needs of emerging markets, where handset manufacturers care about the cost/performance ratio more than ultra low cost, the MT6253 provides perceptual peripheral support to bring down costs and reduce space requirements greatly,” said MediaTek Executive Vice President JiChang Hsu. “MediaTek’s MT6253 sets a new standard for cellular systems on a chip.”

MediaTek, which counts on mobile phone chips for most of its revenue, had sales growth that outpaced gains in the overall handset industry during the third quarter last year.

Robust demand in China after the Olympic Games last year together with handset customers’ production increases has helped MediaTek expand market share, the company 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.

Ali Corp. makes chips for set-top boxes and portable media players. Ali is a spinoff from the Acer Group, the world’s third-largest maker of personal computers. MediaTek is a spinoff from United Microelectronics Corp. (UMC) of Taiwan, the world’s second-largest chip foundry. Taiwan Semiconductor Manufacturing Co. (TSMC) is the world’s largest chip foundry. TSMC and UMC provide chip manufacturing services to chip designers and other chip companies around the globe.

MediaTek and Ali are among the 24 chip designers that are listed on the Taiwan stock market and are selling chips under their own brand names. The companies, which make chips for everything from personal computers to mobile phones and electronic games, are part of an industry that earned about $5 billion in revenue during 2008.

Taiwan accounts for about a quarter of the world’s chip production.

To promote the island’s industry, the Taiwan government has made the development of branding the key task for raising the competitiveness of Taiwan’s economy. There are two ultimate goals of the Branding Taiwan program. The first is integrating resources to assist the establishment of brands and create a favorable environment for development; the second is to aid Taiwan enterprises in brand development and increase the value of Taiwan’s international brands.