Taiwan’s IC design firms see impressive gains in 2021

TrendForce research indicates that the revenue of Taiwanese IC design companies increased significantly in 2021, with many companies hitting record highs due to their active purchases of various terminal applications and the effects of inflation. These companies also performed well in terms of gross profit margin and profitability. Taiwan’s top 10 IC design companies generated revenue of NT$906.16 billion (US$30.7 billion), a year-on-year increase of 54.3% . In recent years, MediaTek has contributed more than half of the output value of Taiwan’s top 10 IC design companies and has become a vital factor in the growth of Taiwan’s IC design industry.

Looking at the first quarter performance of Taiwan’s top three IC designers (Mediatek, Novatek, and Realtek), MediaTek benefited from increased 5G penetration and successive shipments of its Dimensity 9000 chipset. mobile phone in March 2022 produced revenue growth that may offset lower demand for some consumer products due to seasonal factors, while the proportion of high-margin products in each revenue category is expected to increase. The annual growth of the company’s turnover should therefore exceed 20% this year.

As for Novatek, although the stocking of its display driver IC (DDI) and touch/display driver integration (TDDI) products in traditional industries has entered the offseason and demand consumer electronics has weakened, overall market demand still exceeds supply, and trade demand for laptops and automobiles remains strong. New products such as OLED Fingerprint on Display (FoD), OLED TDDI, Fingerprint, Touch, Display Driver Integrated Chips (FTDDI) and Mini LED will ensure continued revenue stability. Although Novatek plans to integrate products such as timing controller chips (TCON) and power management integrated circuits (PMIC) into package sales to provide relative price support this year, the company will still have to adjust its product range according to market developments.

For Realtek, sustained demand in the business, industrial and automotive sectors in the second half of 2021 will continue into the first half of 2022. With the pandemic situation slowly stabilizing, purchases of laptops and commercial equipment has increased, wired and wireless network infrastructure is being upgraded, the automotive market continues to grow, and relevant products such as Wi-Fi 6, Wi-Fi 6E, 5G Ethernet and the new LE Audio Bluetooth integrated circuit are being launched. These developments will improve Realtek’s performance.

On the consumer market side, demand in the PC and consumer electronics markets is expected to return to normal in 2022, and the TWS Bluetooth headset market will face intense price competition, which is expected to suppress Realtek’s shipments in the affected areas. As for the foundry price hikes, some Realtek customers have said they cannot afford further price inflation and are still negotiating the terms of cooperation. Additionally, Realtek destocked in the first quarter of this year due to customers’ year-end inventory audits and component mismatches.

Overall, TrendForce believes the benefits of inflation will gradually fade and consumer electronics demand will moderate but not weaken significantly this year. Meanwhile, continued strong demand for industrial, automotive and high-speed computing will test the ability of IC design firms to optimize their product portfolios and pass on costs.