Taiwan’s IC Design Firms See Impressive Gains in 2021

TrendForce research indicates that the revenue of Taiwanese IC design companies grew significantly in 2021, with many firms hitting record highs due to their active procurement of various terminal applications and the effects of inflation. These companies also performed well in terms of gross profit margin and profitability. The top 10 Taiwanese IC design companies generated revenue of NT$906.16 billion (US$30.7 billion), an increase of 54.3% from the previous year. 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 primary factor in the growth of Taiwan’s IC design industry.

Taking a look at the Q1 performance of Taiwan’s top three IC designers (Mediatek, Novatek, and Realtek), MediaTek benefited from the increase in 5G penetration and successive shipments of its Dimensity 9000 chipset. A mobile phone release in March 2022 produced revenue growth that can offset lower demand for certain consumer products due to seasonal factors, while the proportion of high-margin products in each revenue category is set to increase. The company’s annual revenue growth is thus expected to exceed 20% this year.

As for Novatek, although stocking of its display driver IC (DDI) and touch/display driver integration (TDDI) products in traditional industries has entered the off-season and demand for consumer electronics has weakened, overall market demand still exceeds supply, and commercial notebook and automotive demand remain strong. New products such as OLED Fingerprint on Display (FoD), OLED TDDI, fingerprint, touch, display driver integrated (FTDDI) chips, and Mini LED will drive continued revenue stability. Although Novatek plans to integrate products such as timing controller (TCON) chips and power management integrated circuits (PMIC) into package sales to ensure relative price support this year, the company will still need to adjust its product mix according to market changes.

For Realtek, buoyant demand in the corporate, industrial, and automotive sectors in the second half of 2021 will continue through the first half of 2022. With the pandemic situation slowly stabilizing, purchases of commercial laptops and equipment have ramped up, 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 IC are being launched. These developments will lead to improved performance for Realtek.

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 competition over price, which is expected to suppress Realtek shipments in relevant sectors. Regarding foundry price hikes, some Realtek customers have reported being unable to afford further price inflation and are still in the process of negotiating terms of cooperation. In addition, Realtek has been destocking in Q1 this year due to customer year-end inventory audits and component mismatching.

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