The Taiwan IC (integrated circuit) design sector is expected to benefit from growing netbook PC demand. Meanwhile, netbook PCs are expected to see stronger growth versus regular notebooks. These trends should accelerate market share gains for the Taiwan fabless sector as well says a recent industry report.
Some of the highlights in the report issued by investment bank Credit Suisse, include:
The Taiwan fabless sector has a comprehensive product portfolio, catering most key IC components for netbook PCs
The bank’s estimates suggest that addressable IC value for netbook and low-priced notebooks, excluding CPU, chipset, memory and touch pads, is US$18.2. This amount is 27% lower than regular value for notebooks, which is estimated at US$13.3.
However, the netbook boom could possibly negatively impact gross margins. Therefore, the major challenge this year for IC design companies would be the management of costs and product mix to cope up with this trend.
Low-price netbooks trend to Taiwan fabless advantages
It’s believed that Taiwanese fabless IC products are typically more price-competitive than their foreign peers.
This fits the low-price proposition of netbooks and many lower-priced notebooks.
Additionally, the Taiwan fabless sector has a comprehensive product portfolio catering to most key IC components used in netbooks and low-priced notebooks. This includes:
- networking ICs (ethernet controller ICs, and WLAN ICs)
- audio codec ICs
- clock ICs
- keyboard controller ICs
- analog and power management ICs
- LCD driver ICs and timing controller ICs for TFT LCD panels
- LED backlight driver ICs
- camera ICs
- CPU and chipset ICs
- care reader ICs, and
- touch pads
Finding balance between lower price / margin, and higher volumes
In general, IC content for a netbook PC or lower-priced notebook is lower than that for a regular notebook model. This is achieved through either simplified component requirements (such as power management ICs) or adopting legacy specifications (such as 10/100mbps Ethernet versus Gigabit Ethernet; 802.11b/g WLAN versus 802.11n).
As mentioned previously, estimates suggest that addressable IC value for netbook and low-priced notebooks (excluding CPUs, chipsets, memory and touch pads) is roughly US$18. Again, this is 27% lower than regular notebooks at approximately US$13. Nevertheless, the lower IC content should be offset by Taiwan’s nearly 100% market share and, higher volumes of netbook PCs.
Nonetheless, this may not necessarily be viewed as negative for Taiwan fabless companies as the lower IC content should be offset by:
- Taiwan’s nearly 100% market share of the netbook market compared with 60% to 70% in regular notebooks, and
- Higher volumes of netbook PCs versus the ‘potential’ incremental notebook volumes — if netbooks had not been introduced
It’s important to note some negative implications could result secondary to electronics component suppliers generally face more price pressure from customers in this value product segment. Therefore, the major challenge this year for IC design companies as seen by Credit Suisse would be management of costs and product mix to cope up with this trend.
Source: Credit Suisse, VentureOutsource.com, April 2009
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