While Digitimes is known as a media outlet, the company also includes a business unit that solely focuses on market research. Run independently from the Digitimes news organization, Digitimes Research provides market intelligence and data analysis on a number of different IT and high-tech industries to its customers. Digitimes recently spoke with Digitimes Research senior analyst & director Joanne Chien to learn more about the seismic shift that is underway in the mobile device supply chain, the concept of Chaiwan (China+Taiwan), and the new English language data services that Digitimes Research is rolling out.Q: The IT industry has been going through a major change over the past couple of years, with the rise of tablets and smartphones and the shrinking of the PC market. How has this shaken up the supply chain in Greater China?A: At this point, I guess it is fairly well known that the tablet and smartphone market is rising at the expense of the PC market, especially the notebook market. Digitimes Research estimates that while demand for mobile devices (smartphones, tablets and notebooks) rose 30% in 2013, notebook shipments dropped 12%, the biggest on-year drop on record. And we expect the slide to continue in 2014. Digitimes Research forecasts that 165-170 million notebooks will be shipped worldwide this year, down from a peak of 204.5 million in 2011.What is less well understood is how this change has shaken up the IT device supply chain. For example, if you look back at the PC industry, it has been the driving force behind Taiwan's dramatic growth over the past 30 years. That growth came about because PC brands started outsourcing their manufacturing, which in turn gave rise to the ODM model where large international brands partner with equally large manufacturers like Quanta, Compal or Wistron to produce devices. And now Taiwan dominates the global market for notebook PC manufacturing, with about an 85% market share.But as I mentioned earlier, while the notebook market is still huge, it is shrinking. If you are looking for growth, you need to look at the smartphone and tablet sectors, where design and manufacturing have either become much more consolidated or become completely decentralized, which is a phenomena that we call the Chaiwan model.Q: Can you provide a bit more color on that last statement?A: In terms of consolidation, you have huge brands like Apple and Samsung, who continue to pursue a vertical integration strategy whereby they can control more of the design, component choice (including software) and manufacturing of their products in order to give them differentiation. These brands still rely heavily on the Greater China supply chain, such as with Apple using large EMS manufacturers like Foxconn or Pegatron. However, this is a much different business model than that seen in the notebook industry, where ODMs provide designs to the brands and choose their own components. ODMs do a lot of heavy lifting in terms of product development, while EMS firms simply provide manufacturing services. The brands have much more control over the overall design and component choice.Q: What about this so-called Chaiwan model of decentralization?A: We use the combination of China and Taiwan (Chaiwan) to describe how the supply chains in Taiwan and China are becoming increasingly more integrated and intertwined and this has given rise to a mobile device supply chain that is producing unheard of time-to-market scenarios while remaining flexible and responsive to market demand.Q: How does it work?A: As I mentioned, a brand like Apple or Samsung controls everything in the process of bringing their products to market. Under the Chaiwan model, each sector does what it does best. For example, it starts with the key component provider, which in the case of smartphones is the application processor (AP). Companies like MediaTek or Qualcomm provide a turnkey solution and reference design to the players in the market.Those other players include independent design houses (IDH), which provide design services and recommendations for components (such as connectors, casing, etc) that are not included in the AP turnkey solution. You also have EMS players, who do the manufacturing. And ultimately you have the customer, which could be a large brand, a small white-box brand, or any vendor that wants to bring a smartphone to market. Moreover, under this model, the order volumes don't need to be very large, which means pretty much anyone who wants to can bring a smartphone to market in China, and it can be done quickly and cheaply.Originally, this business model was developed by white-box players but it has been increasingly adopted by larger brands, such as Huawei, ZTE and Lenovo in China. A vendor such as Lenovo can direct development of one model through one IDH and EMS provider, while working with another pair of manufacturing partners for development of another model.This has been a seismic shift for the market, but players are adapting. If you look at at AP provider MediaTek, the company no longer follows a strict roadmap. It simply reacts to what the market wants. In 2013, for example, MediaTek sometimes went a couple of months without releasing a new product and then would release two products in the same month. They weren't following a roadmap, they were chasing demand.This is also a new model for EMS providers, since they have been used to dealing with huge orders and following longer-term manufacturing plans. They now have to become more nimble and are learning how to cooperate with the IDHs and smaller brands for small orders and quick delivery.Players adapt because this is where the growth is. China-based vendors account for approximately one-third of global smartphone shipments and the region had four of the top-10 vendors worldwide in 2013. For 2014, Digitimes Research forecasts that China will have five vendors in the top 10.Looking at the rest of the market (non top 10 or "Other" segment) is even more interesting. This portion of the market is dominated by Greater China vendors and white-box players. The Other segment accounted for 12% of global smartphone shipments in 2012, 21% of the global market in 2013 and Digitimes Research forecasts the share will rise to 25.6% in 2014.This means that the global smartphone industry is opening up rather than consolidating and it is directly a result of the dynamic interplay seen in the Chaiwan model. Moreover, China vendors are now exporting about 30% of their smartphones (as of 2013) and that proportion is forecast to rise.Q: Where are they shipping their products?A: Mostly developing markets like India and Southeast Asia, where "Local King" brands (regional and local brands) are using their knowledge of local markets and ability to get good pricing from China on relatively small orders to compete successfully with top-10 smartphone brands. The interesting dynamic of this relationship is that many of these exported smartphones are supplied by IDHs, which function in a very similar way as ODMs do - providing design and manufacturing services for the international customers - though on a much smaller scale.Q: Is the same thing happening in the tablet market?A: In terms of tablets, if you remove Apple and Samsung from the equation, Greater China vendors account for pretty much the rest of all tablet shipments. And it's not just for local consumption. China players export about 70-80% of their tablets now, with more than 50% of exports going to developed markets. Greater China pretty much dominates the lower end of the market worldwide.Q: It sounds as if you are tracking these markets quite closely.A: This industry transition has been taking place for the past couple of years and Digitimes Research has been watching it closely for our customers. We have analysts on the ground monitoring the market dynamic in China and we have been working with a number of international suppliers to help them get a better understanding of how to compete in this market.We realize that this is a different kind of market dynamic and that it can be confusing, especially for players new to the China market, and we are seeing more and more requests for information about the market. Therefore, we are launching a new off-the-shelf data tracking service in English to help more international players understand the scope and structure of various component and device markets in Greater China. We will start with four data tracking services: China smartphone application processors (AP) shipments; China smartphone shipments; China touch-panel shipments; and Global tablet shipments.Q: What will the services entail?A: Each quarter, Digitimes Research will provide preliminary shipment data from the previous quarter as well as a data forecast for the upcoming quarter. We will follow that up with an analysis report and mid-term data update.In addition to the expertise we have in the local China market, I think one of our key advantages is our supply-side approach. We monitor shipments made to the vendor from the supply chain, rather than from the vendor to the end-user, which other research firms do. This means our shipment results from the previous quarter are actually leading indicators for a shipment forecast for vendors in the following quarter.Q: What do you mean by that?A: For example, when Apple is getting a product ready for the market, the product is in the supply chain pipeline 6-9 months before Apple even announces its launch. So we may provide shipment data for Apple 1-2 months before it even begins selling in the market, because that is when the supply chain delivers it to Apple. Q: Many people consider Digitimes Research to be the same as Digitimes. Is this is correct?A: The slogan at Digitimes is "Media, Marketing, Consulting" which means there are basically three different businesses run independently from each other. So while Digitimes may be best known as a media company, Digitimes Research is actually a business unto itself. We do our own market intelligence gathering and our analysts have a different operating mode than reporters at the Digitimes newspaper, who are more interested in real-time analysis. Digitimes Research is a market research firm, so our goal is to provide our customers with in-depth analysis and market forecasts.Q: Who are those customers, and what kind of in-depth analysis do you provide?A: All of the top ODMs and IT vendors in Taiwan are clients. Name any well-known Taiwan IT company and it is likely to be a Digitimes Research customer. We have been able to build up a customer base of more than 1,000 companies based on our ability to tie together data from the various industries that use Greater China as a supply chain hub. We offer 10 different research areas, including PC and Digital Home, Mobile Telecom, Computing, Mobile CE, Mobile Communications, Broadband and Wireless, Large-size FPD, Small-to-Medium (SM) size FPD and IC design, among others.Q: Do you serve international customers as well?A: We currently provide two data services, which we call Greater China ICT and Taiwan FPD. These services focus on shipment data from key Greater China industries. The ICT service focuses on data for notebooks, digital cameras and handsets, while the FPD service provides quarterly data for large-size LCD panels, small- to medium-size panels, LCD TVs, and monitors. These services are provided on an annual subscription basis. We are also excited to begin providing our new data tracking services for international customers as well.Joanne Chien, senior analyst & director, Digitimes Research

Global smartphone AP suppliers will see their shipments to China grow only 13.5% on year and drop 3.1% on quarter in the first quarter of 2014. Shipments will total 91.8 million in the first quarter, according to data from a recently published data service report from Digitimes Research.The report explains that in China the first quarter is now transitioning into the slow season for the smartphone industry, as China's mobile communication industry moves from explosive growth to behaving more like a maturing industry. Moving forward, seasonality is expected to have more of an influence on China smartphone vendors' performance, Digitimes Research explained in the report.Decreased orders from smartphone vendors should relatively impact chip suppliers' shipments in the quarter. The largest AP supplier MediaTek is seeing its shipments weakening and its LTE products so far have not been able to help cover its existing product lines, Digitimes Research noted.The report, titled "China Smartphone AP Shipments" is part of the newly launched quarterly data services from Digitimes Research.TOCChina smartphone AP shipments, 4Q13 review, 1Q14 forecastKey factors affecting China smartphone AP shipments in 1Q14China AP shipment share by applicationChina smartphone AP shipments, 2Q12-1Q14 (k units)China smartphone AP shipment share by supplier, 3Q12-1Q14China smartphone AP shipment share by architecture, 2Q12-1Q14MediaTek smartphone AP shipments, 2Q12-1Q14MediaTek shipments by baseband type, 1Q13-1Q14MediaTek smartphone shipment share by architecture, 4Q13MediaTek smartphone shipment share by architecture, 1Q14Qualcomm smartphone AP shipments to China, 2Q12-1Q14Qualcomm shipments by baseband type, 1Q13-1Q14Qualcomm shipment share by architecture, 4Q13Qualcomm shipment share by architecture, 1Q14Spreadtrum smartphone AP shipments to China, 2Q12-1Q14Spreadtrum shipments by baseband type, 1Q13-4Q14Spreadtrum shipment share by architecture, 4Q13Spreadtrum shipment share by architecture, 1Q14Leadcore smartphone AP shipments to China, 3Q12-1Q14 (k units)Leadcore shipment share by architecture, 4Q13Leadcore shipment share by architecture, 1Q14HiSilicon smartphone AP shipments to China, 2Q12-1Q14Nvidia smartphone AP shipments to China, 2Q12-1Q14 (k units)About DIGITIMES Research China smartphone AP (application processor) Data ServiceTo provide a better understanding of the dynamics seen in the local China AP market, DIGITIMES Research provides a quarterly tracking service that updates customers with the latest shipment data and technology trends in the market.Customers of the DIGITIMES Research China smartphone AP (application processor) Data Service are provided with comprehensive data updates, market intelligence and quarterly shipment forecasts in key research areas, including Core Architecture, Top AP Vendor performance, and the shipment structure of top vendors. Data sets are first made available in Excel format and then quickly followed with data analysis and trend updates provided in presentation style.Research scopeThe DIGITIMES Research China smartphone AP Data Service tracks AP shipments made to local China device makers for use in smartphones, including for devices sold in the domestic and international market.Each quarter, customers are provided with previous quarter results and the forecast for the upcoming quarter for the following data sets:1. Overall AP shipments to the China market2. Shipments and forecast by core architecture (Cortex A5, A7, A8, A9, A15, Krait, Scorpion, etc.)3. Shipments by Top Vendors (The vendors DIGITIMES Research tracks currently account for more than 95% of the total market)4. Shipment structure of top vendors: a. Overall Shipments; b. Baseband (LTE, WCDMA, CDMA, TD-SCDMA, EDGE); c. Architecture (Broken down by product line)5. Other content may be included in each quarterly report based on trending topics or important market shifts.Product and scheduleWithin the first month of each quarter, DIGITIMES Research provides preliminary data from the previous quarter as well as a data forecast for the upcoming quarter. These data sets are quickly followed by comprehensive and to-the-point analysis of the data provided in a presentation style report. As DIGITIMES Research continues to monitor the market, approximately midway through the quarter customers are provided with an updated version of the data sets.Pricing and licensingThe DIGITIMES Research China smartphone AP Data Service is priced at US$2,500. DIGITIMES Research is currently offering an early-bird discount of 20% for new subcibers. For more information, contact DIGITIMES. Corporate rates are also available. China smartphone AP research team leader: Eric Lin (eric.lin@digitimes.com)Service Window: Shannen Yang (shannen.yang@digitimes.com)

Taiwan's top-three IC foundries will see their combined revenues drop 6.2% sequentially in the first quarter of 2014, due to seasonal factors and continued inventory adjustments at their clients, according to Digitimes Research.A fall in 28nm chip ASPs was another factor causing the revenue drop during the quarter, as a result of lower capacity utilization rates, said Digitimes Research.Combined revenues for Taiwan Semiconductor Manufacturing Company (TSMC), United Microelectronics (UMC) and Vanguard International Semiconductor (VIS) totaled US$6.15 billion in the fourth quarter of 2013, down 9% from US$6.76 billion in the third, Digitimes Research disclosed. Disappointing sales of PCs and high-end smartphones and a seasonal slowdown in orders coming from the games console industry led to the revenue decrease.The top-three IC foundries are expected to see their combined revenues register another sequential decline in the first quarter of 2014, but rebound to growth in the second quarter thanks to a pick-up in end-market demand and rising product ASPs, Digitimes Research indicated.Top foundry TSMC is set to ramp up production of 20nm chips in the second quarter of 2014, while benefiting a pull-in of orders for 28nm chips, Digitimes Research noted.

Taiwan-based makers are expected to ship 7.96 million LCD TVs in the first quarter of 2014, down 16.3% sequentially, according to Digitimes Research.Competition and unsteady TV demand throughout the global market are the main reasons for the decline. About 46.7% of Taiwan makers' shipments go to North America while 25.2% go to Asia and 22.2% Europe.Going into the first quarter of 2014, 11.9% of the makers' TVs shipped will be for 50-inch and above size units while 43.5% will be for 37- to 39-inch units.TPV, Foxconn Electronics and Compal are expected to be the top-three Taiwan TV makers in the first quarter, said Digitimes Research.

Taiwan touch panel makers' shipments of handset touch panels dropped 3% in the third quarter of 2013. While shipments did stabilize in the fourth quarter, the makers expect another 7.5% decline in the first quarter of 2014 largely due to decreased iPhone 4/4S touch panel demand, according to Digitimes Research.Taiwan makers are also seeing orders from Samsung Electronics transferred to other makers, but still expect steady orders from China-based handset vendors in the first quarter.In terms of tablet panel shipments, Taiwan makers' 11-inch and below size units dropped 2.1% on quarter during the fourth quarter due to yield issues in producing Amazon entry-level tablets, said Digitimes Research.Taiwan makers' shipments of touch panels used in notebook applications grew 13.3% in the third quarter of 2013 but are expected to drop nearly 20% in the first quarter of 2014. The drop will come as China makers such as O-Film develop thin-film projected capacitive touch panel solutions such as metal mesh, and offer the technology at competitive prices in the market, added Digitimes Research.

Taiwan-based LCD TV makers' shipments reached 9.51 million units in the fourth quarter of 2013, according to Digitimes Research.Growth during the period represented an on-quarter rise of 5.8%, and an on-year decline of 9.5%.Digitimes Research said the makers' shipments were slightly below the 10 million plus mark market observers had originally estimated, which largely came as a result of lower-than-expected shipments during the latter part of the fourth quarter.About 45.1% of Taiwan TV makers' shipments go to North America while about 23% go to Europe. However, the proportion of shipments going to the Asia market is increasing due to developments between the makers and TV vendors in China.TV makers did see better-than-expected results for large-size TVs during the fourth quarter of 2013. Makers such as TPV saw its proportion of 50-inch units increase more than expected on quarter while other makers saw steady demand from Vizio for 60-inch and above size units.TPV, Foxconn Electronics and Amtran were the top three TV makers in Taiwan during the fourth quarter, noted Digitimes Research.

China-based handset companies are expected to see their shipments of smartphones decline lightly in the first quarter of 2014, after combined shipments posted a 13% sequential growth in the previous quarter, according to Digitimes Research.Efforts by brand vendors to clear out entry-level models in previous quarters and increased overseas shipments by Huawei, ZTE and TCL contributed to shipment gains the fourth quarter of 2013.Additionally, first- and second-tier vendors also launched a number of new models in the fourth quarter to meet demand during the year-end buying season, ramping up total shipments in the quarter.For all of 2013, China-based handset makers shipped a total of 314 million smartphones, increasing 62.4% from a year earlier, Digitimes Research said.Second-tier vendors, including Xiaomi Technology, TCL, Oppo Mobile and Gionee managed to ship over 15 million smartphones in 2013.More information about the report can be found here.About DIGITIMES ResearchDIGITIMES Research is the research arm of DIGITIMES Inc., Taiwan's leading high-tech media outlet. Operating as an independent business unit, DIGITIMES Research focuses on monitoring key high-tech industries, while also guiding clients toward suitable new business as well. Market intelligence and analysis is provided to more than 1,000 corporate customers worldwide. Research and consulting services cover a full range of industries, including information and communications technology (ICT), flat panel display (FPD), renewable energy and semiconductor design and manufacturing.

After experiencing annual growth of 43% in 2013 on shipments of 1.32 billion, the global application processor (AP) market is forecast to see decelerated growth in 2014, with shipments increasing 23% on year, according to a new Digitimes Research Special Report. The report, titled "2014 Global Mobile Application Processor Market Forecast," explains that a maturing smartphone market, especially in China are the primary reasons for the slower growth rate. Worldwide, shipments will reach 1.53 billion, but while China accounted for 38% of shipments in 2013, its share will drop slightly to 36% in 2014, Digitimes Research stated. While market drivers will still include the usual suspects of Apple and Samsung in 2014, demand from local China players will not see the robust growth that it experienced in 2013. Annual shipment growth in China topped 60% in 2013 but will slow to 17% in 2014, as China's local brand and white-box companies shift their target market abroad, Digitimes Research forecast. In terms of products in the market, with its Cortex-A12 being widely adopted, ARM will see its market share for APs in smartphones climb substantially in 2014. Meanwhile, with support from Apple and Samsung, the ARM 64-bit architecture will stand a chance of grabbing more than 30% of the market in 2014, according to Digitimes Research. The research arm of Digitimes added that except for Samsung, Qualcomm and Apple, other vendors are unlikely to adopt 64-bit architecture in their chip designs until 2015. More information about the report can be found here. About DIGITIMES Research DIGITIMES Research is the research arm of DIGITIMES Inc., Taiwan's leading high-tech media outlet. Operating as an independent business unit, DIGITIMES Research focuses on monitoring key high-tech industries, while also guiding clients toward suitable new business as well. Market intelligence and analysis is provided to more than 1,000 corporate customers worldwide. Research and consulting services cover a full range of industries, including information and communications technology (ICT), flat panel display (FPD), renewable energy and semiconductor design and manufacturing.

Why is Apple so eager to adopt 64-bit technology for its processors? Digitimes Research believes it is because in the 32-bit segment, Apple is unable to use the existing architecture and low clock frequency setting to achieve performance similar to that done by the Android camp, which has been blindly pursuing performance while ignoring the balance between power consumption and performance.The Android camp's pursuit of performance comes as a direct challenge to Apple's high-end platform. But its A7 processor, which features enhanced ARM v8 instruction set and highly-efficient circuits transformed from A57, will enhance Apple's competitiveness against the Android camp.Other application processor (AP) suppliers originally did not plan to enter the 64-bit segment so early since their manufacturing processes still had yet to catch up and neither did Google at the time have plans to optimize Android for 64-bit applications. However, Apple's move forced its AP competitors to change their minds, with Qualcomm - which originally did not believe the 64-bit architecture had much value - becoming the first among the Android AP camp to announce a 64-bit roadmap. Others have also started adjusting their roadmaps to include 64-bit products.However, the mobile application segment is evolving, with many high-workload applications having already shifted their focus from pure CPUs to independent DSPs or GPUs. Therefore, Digitimes Research is skeptical about 64-bit processors' ability to bring significant improvements to mobile user experience.Mobile DRAM suppliers such as Samsung Electronics and Elpida Memory are aggressive about the 64-bit business opportunities. The technology's improved memory addressability is expected to create demand for more mobile DRAM capacity and bigger bus width designs are needed to enable better mobile storage performance. For these firms, the 64-bit battle promises huge business opportunities.

Why has MediaTek stepped into NFC (near field communication) technology? Digitimes Research thinks that there are two main motivations, one to increase the exclusiveness of its platforms and the other is to hike the added value of the main components of its turn-key solutions.Being its proprietary technology, MediaTek is willing to license Hotknot to other chip developers, but the latter may not be interested. As touch chips have been a main part of MediaTek's turn-key solutions, MediaTek hopes Hotknot can enhance the competitiveness of its turn-key ecosystem through adding features that are difficult to replicate.According to Digitimes Research, Hotknot is completely incompatible with existing NFC standards and therefore is unable to replace NFC-enabled applications or devices. In addition, Hotknot is practically applicable to smartphones and tablets only. However, the application of Hotknot for smartphones and tablets is enough for MediaTek. Adoption of Hotknot from main clients could help MediaTek and themselves differentiate their products to avoid price wars.