Taipei-headquartered Alchip Technologies, a leading fabless ASIC provider to the world's top system and semiconductor companies, reported a profit in the first quarter of 2009 as it completed work in delivering multimedia services in Japan and developed key integrated digital TV circuits (ICs) and 3G networks throughout China. As one of an array of companies registering for an Initial Public Offering (IPO), Alchip aims to be a fully registered IPO by the second half of 2009.

Mr. Kwan indicated that the number of IC suppliers outsourced to an ASIC company is rising because of the combined benefits of shortened lead time and lower risk of failure when tapping out. This phenomenon is becoming much more prevalent due to the global financial crisis. Many large integrated device manufacturers (IDMs) such as IBM, NEC, Fujitsu, Infineon, etc, are finding it increasingly difficult to compete against fabless ASIC solution providers. As a result, the fabless ASIC market is growing.  The ASIC market, estimated to be worth US$200 billion in 2006, accounts for less than one percent of the overall IC design market.  However, with demand in China continuing to grow, the fabless ASIC market promises to increase dramatically in the future.

Currently, there are more than one hundred IC design service vendors in the market, however, only ten companies are considered to be unyielding strength. Alchip is able to outperform the competition because of its well-established and superior core technologies as well as operating the most advanced processes for design development. However, what is especially commendable is Alchip’s track record of first silicon success which has notably earned the trust of its Japanese customers. Taking Sony as an example, Alchip completed not only the 90nm SoC design of the Playstation Portable (PSP), but also successfully developed the 65nm SoC design of the HD camcorder and digital TV imaging IC in 2006, and was responsible for the mass production of those products in the first quarter of this year. Sales of these products are expected to soar over the coming years.

With domestic demand in China gradually heating up, Alchip is accelerating its investment locally, along with extensive cooperation with various mobile phone operators on TD-SCDMA baseband chips. When China issues the full 3G license in late May, the benefits will become even more considerable. In addition, Alchip has teamed up with China ’s biggest digital TV and ADSL chip manufacturer, a move expected to yield positive results in the second half of 2009.

Out of Alchip’s 20 existing customers, approximately 6 are considered top-tier companies, and Alchip aims to increase this tally to 12 in the future.  Alchip’s Japanese customers account for half of their total revenue, Chinese customers make up 30 percent, and Taiwanese and the U.S. customers contribute the rest.

Mr. Kwan noted that the more advanced the IC process is, the higher the cost of tapping out, which increases the risk for IC design companies when tapping out voluntarily. Consequently, the ASIC market has been flourishing over the past two years. Alchip provides design services for numerous complex SoC devices at 90nm, 65nm and can even handle the more advanced design capabilities of higher-end processes, such as 40nm, and is therefore obtaining new customers consistently.

In 2007, Alchip registered an annual revenue of US$ 67million, but in 2008 its revenue fell by about 50 percent. However, in the first quarter of 2009, Sony increased its number of first chips for digital TV, which has helped Alchip turn a loss into a profit. With the other four types of chips currently under development, plus a step-by-step verification of chips for 3G networks and digital TV in China, Alchip will no doubt handle order-taking smoothly in the second half of 2009, and will make an even greater leap forward in 2010.

Kin-ying Kwan, President and CEO of Alchip, is confident that the company faces superb growth prospects in 2009 following its notable achievements in Japan, and its successful development of integrated 3G networks and digital TV circuits throughout China.

Photo: Alchip, April 2009

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