Taiwan Bets on System-On-Chip Technology

The blueprint for Taiwan’s semiconductor industry to become an almost US$30 billion business by 2006 has the usual proposals to look for new markets, increase investment and R&D, and create more tax incentives.

But the island’s government and industry believe that one of factors that would help Taiwan’s semiconductor industry advance further lies with a new functionality for chips – system-on-a-chip (SoC) – a technology that focuses on integrating as many functions of different chips as possible into one single chip. With SoC, devices will be smaller and lighter than before, in line with what the consumers want, said Edie Wang, deputy director, Office of the Committee for Information Industry Development, Ministry of Economic Affairs (MOEA).

“SoC, with a CAGR of 30.6 percent, is the next battleground for Integrated Circuit (IC)
design,” added Steve Lin, director of the newly-established Semiconductor
Industry Promotion Office, Industrial Development Bureau (IDB), MOEA, and deputy director-general of the Industrial Technology Research Institute SoC Technology Center.

Lin acknowledged that Mainland China is one of Taiwan’s biggest competitors in this area, but is sanguine about Taiwan’s success.

“The Taiwan government and the private sector will invest more than US$225 million within the next few years to develop SoC technology. We are prepared to move forward and are not afraid of China,” he said.

However, Lin admitted there are some problems that need to be addressed. These include shortage of talent and weakness in the SoC-related supply chain. But plans are in the pipeline to solve them. One of which is to establish a National Science and Technology Program for SoC Technology, which together with a new semiconductor institute provided for under the Challenge 2008 six-year plan, will help
solve manpower and talent shortages. Foreign talents will also be recruited to help boost the industry.

As for SoC-related supply chain, Wang pointed out that Taiwan will rely more on the domestic market for SoC components instead of overseas suppliers. She explained that Taiwan expects to have more than 60 percent of its SoC intellectual property developed on the island by 2006.

Despite these plans, if Taiwan wished to move up the ladder as the world’s third largest semiconductor industry using SoC technology as one of its strategies, more has to be done.

According to Ted Lee, VP, Via Technology, the semiconductor industry in Taiwan is being torn apart by internal strife. He said: “A lot of small companies are competing against each other. Eventually, a lot of companies will be squeezed out as slashing prices is not a healthy way to grow.”

The solution? “Taiwan needs to go international and create its own brands,” Lee commented.

Based on the findings of the Industrial Economics and Knowledge Center of the Industrial Technology Research Institute, Taiwan ranked number 4 in the semiconductor industry in 2001 with revenues from IC design and manufacturing (minus foundry services) amounting to US$6.5 billion, or 5.5 percent of the world’s total revenue.

The US took the number 1 position with revenues of US$68.1 billion, or 49 percent of the world total, followed by Japan with revenues of US$34.7 billion or 26 percent market share, and Korea with revenues of US$11.1 billion or 8 percent market share.

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