Chinese IC design firms continue to aggressively promote the strategy of pursuing domestic manufacturing while competing on price, still posing a threat to their fellow Taiwanese counterparts, according to industry sources.
Chinese IC design firms have recently gained a cost advantage due to their domestic foundry partners' frequent price reductions. In an effort to catch up with Chinese rivals, Taiwanese fabless chipmakers are considering outsourcing more wafer starts for cost-sensitive products to Chinese foundries, the sources indicated.
In reality, not all products from Taiwanese IC design firms are readily adaptable to Chinese foundries, the sources said. On the one hand, technical reliability must be considered, while on the other, the risk of technology leakage must also be taken into account.
Moreover, Taiwanese IC design firms are observing a rise in Chinese customers who are strategically aligning themselves with geopolitical developments in order to increase their reliance on domestic sources, the sources said. In the past, Taiwanese firms benefited from the de-Americanization effect, which allowed them to secure a large number of orders on the Chinese market. However, they are currently facing a situation in which a portion of these orders will be allocated to their Chinese competitors, the sources noted.
As stated by the sources, it is important to note that Taiwanese IC design companies continue to find their niche through technical advantages. They continue to hold significant advantages in consumer applications with stringent technical requirements and rapid iteration.
Geopolitical considerations are also important to major US system and brand manufacturers when it comes to chip adoption, and Chinese IC design firms are virtually unable to enter the field, according to the sources.
Due to escalating geopolitical tensions, Taiwanese IC design companies may face a number of obstacles when operating in China; however, they have a plethora of new business opportunities in non-Chinese markets, the sources said.
Article translated by Jessie Shen
