Taiwan High Tech.Com

Contract Manufacturing and Beyond ....

This week I've been thinking about the ways Taiwan's government provides incentives to encourage multinationals to set up R&D centers on the island. They've recognized the inevitibility of increasing production migration to China and elsewhere, and are taking proactive steps to reinvent the island... It's pretty interesting, and we'll be writing a piece on that soon, so stay tuned....

Outsourcing from Taiwan
In 2004, international companies are expected to purchase US$53B worth of IT products from Taiwan. Top buyers? The usual suspects: HP, Dell, Apple, Sony, and IBM contribute US$34B in value.... This years' numbers are up 8-12% from 2003.

Sun Microsystems server order
Wistron has received an OEM order from Sun for servers, adding the company to its list of contractors that also includes Mitac. IBM and HP are also sourcing more servers from Taiwan.

News Flash - Kodak DSC orders
The plot thickens - THT previously reported that Kodak was switching its ODM DSC order from Altek to Funai of Japan. Kodak has placed OEM orders with Funai (Kodak design), but Altek has kept all of its Kodak ODM orders.

IBM-Macronix
The two companies plan to co-develop non-volatile, high-density memory products in an alliance that will last until July 2007.

Gateway LCD TV
Tatung has received a 30-inch LCD TV order from Gateway. Tatung has close ties to NB maker eMachines, which Gateway now owns.

Actel FPGA Chip
Actel (US) has contracted UMC to build its RTSX-S family FPGA (field programmable gate array) for spacecraft navigation systems. UMC will use a 0.25-micron process to make the chips.

Sun servers
Wistron has received server orders from Sun Microsystems for the first time and is looking forward to another order from IBM for P-family servers, in addition to the X-family servers it already makes. Sun has been ordering servers from Synnex for a while, but is expanding its supplier list.

Wal-Mart NB order
ECS has been delivering NBs branded under Wal-Mart brand name to the giant retailer since May. The order is huge - 40-50K NB/month. ECS delivered only 120K NB in 1H04, but expects to ship 600K for the year thanks to the order. Still, the order might be more a sign of desperation than success. ECS is losing money and given Wal-Mart's notoriously tough pricing policies, we're doubtful that the deal will do more than get ECS factories buzzing.

Toshiba, Panasonic LCD TV panels
CMO has a 24.2% global market share for 20-inch plus LCD TV panels, #2 after Sharp.

HP, Kodak DSC orders -- not to Taiwan
Kodak will use Funai to make its high-end DSCs, while HP will give its order to Sony. Uh-oh for Taiwan - Taiwan DSC makers are are losing their edge to Japan DSC makers, especially Sanyo. Taiwan firms that are still competitive are Premier, Ability, and Chicony.

Philips cameraphone
Quanta has received ODM orders for cameraphones from Philips, to be shipped beginning 4Q04.

Motorola cell phone screens
AUO received orders for 1.8, 1.9, and 2.2 inch color TFT-LCD panels for handsets. Shipments have begun, scheduled to begin volume delivery of up to 1M/month in 3Q04.

OEM @ CHINA

Investment in China IDMs
It is becoming increasingly popular for multinational chip designers to invest in China chipmakers as a great way to save money, a move which many see as threatening Taiwan chipmakers. Xilinx invested in He Jiang Technology over a year ago, SST invested in Shanghai Grace Semiconductor Manufacturing Corp. ,TSMC customer Nvidia has released first orders to China chipmaker Semiconductor Manufacturing International Corp. (SMIC) , Taiwan companies Novatek and Mediatek are working with He Jiang.

Samsung, Panasonic DSC
Ability has received new ODM orders from Panasonic for 4MP DSC and Samsung for 6MP DSC, to begin shipping in 3Q04.

Gemtek
Gemtek is moving more manufacturing to China, hoping to increase the share of revenue contributed from China from 20% to 50% by year end 2004. Gemtek's WLAN module sales are doing well due to increased bundling with Centrino NBs, with sales expected to grow 15% in 3Q04 and 20% in 4Q04.

SPI Electronic
LCD Integrated Power Supply maker SPI expects to ship 5M units this year, with monthly shipments of 240K units at its WuXi plant beginning this month.

COMPANY NEWS AND MARKET TRENDS

Gigastorage
Gigastorage, taking the typical Taiwanese route to compensate for dwindling margins, is looking to diversify its product line due to falling DVD prices, shifting business to consumer IC.

Intel MB, ATI VGA card
Intel plans to bundle ATI's own brand add-in-board cleints with Intel MB. The co-marketing initiative will offer channel distributors in Europe and N. America US$20-30 discounts on the package.

MSI - expanded too fast?
MSI has long been a top Taiwan MB maker, then, a few years ago, it decided to branch out into manufacturing.... uh, pretty much every product out there, to compensate for declining MB margins. Now it is restructuring its EIGHT business units and plans to sell off its optical drive business.

Taiwanese don't buy software
Software vendors trying to license their products to Taiwan hardware manufacturers shouldn't wonder why they find it so difficult to close the deal. According to a new study from US-based Business Software Alliance, 43% of software installed on computers in Taiwan was pirated in 2003, compared to a world average of 36%. Of course China's rate is 92% (which means that even the government there doesn't pay for software), but given that Taiwanese don't like to pay for software for their own PCs, it's no wonder they don't want to pay to license software for bundling...

Acer
Taiwan's media is reporting (quoting IDC) that Acer is now the #1 NB brand name in W. Europe, having displaced HP. B.S.... If IDC and the others are getting their info from Acer's PR dept, THT doesn't believe a word of it!

Taiwan mobile phone market
Local distribution giant Synnex now has over 50% market share in Taiwan's cell phone market, having shipped 1.5M phones in 1H04. Synnex supplies CHT, Far EasTone, Taiwan Cellular (Taiwan DaGeDa) and TransAsia. Synnex is making good money from the market too...

Altek DSC
Altek's main DSC customers are HP and Kodak, although channel sales (especially in China) are growing. Altek shipped 1610K DSC units in 1H04. Altek sells mostly 2-3MP cameras and its migration to 4MP has been slow. That, plus competition from Japan ODMs, threaten the company.

Ability own brand DSC
Ability used to make Casio's QV-R50 DSC and it is now releasing that model under its own brand as Q-Shot Digimaster in Taiwan, under an agreement with Casio.

GemTek
GemTek is Taiwan's largest ODM networking equipment maker in Taiwan.. Its 2004 shipments remain strong due to its strong R&D, high yield rate and strong client base (Dell, HP, Intel, Cisco), despite overall declining margins in the line.

DVD Prices
Due to a market oversupply and dropping ASP for CD-R, Taiwan manufacturers are looking for a consensus on DVD prices and supply for 3-4Q04 and beyond to stabilize market prices. Taiwan CD-R companies control 50-75% of the global DVD market.

TGP
Taiwan Green Point is a handset casing company that is showing early evidence of a slowing global handset market. Orders from companies such as Motorola, Sony Ericsson, Philips, and Alcatel should pick up in August.

SOLD!! TO TAIWAN..

Fixed-line in Taiwan
Taiwan plans to issue more licenses for fixed-line networks and underseas cable circuit leasing services, beginning this September. The bidding requirements will be lower than last time around and the entrants are expected to begin offering their services by the end of 2004.

NEW: R&D IN TAIWAN:
A couple of years ago Taiwan's government announced plans to turn the country into a regional R&D and logistics center through government incentive programs. This corner tracks the results of this initiative.

IBM
IBM plans to set up a server development center at the Nankang Software park near Taipei to develop xSeries platforms using Intel's Xeon processor. It will be IBM's first server development center in Asia and its second in the world. IBM also has a biotech research center and a software development center in Taiwan.

DuPont
DuPont will open an R&D center at the Hsinchu Science Park to develop and produce semicon materials. DuPont has seven factories in Taiwan.

ACCOUNTABILITY CORNER

Anybody tired of Taiwan companies (especially publically listed ones) beginning the year with high targets, lowering them during the summer months when nobody's paying attention, and then suddenly meeting or exceeding their targets at the end of the year?
Well, THT is, and we've decided to call them on it....

Chaintech: Chaintech's original target for 2004 MB shipments was 1.1-1.2M units; now they're targeting 1M.