VIA Rolls Out Car Chip

VIA Technologies Inc., a leading chip designer based in Taiwan, recently announced the establishment of a multimedia consumer-business division (MCE) to explore the automotive processor-chip market. The plan is to cooperate with major original-equipment (OE) auto-parts makers in Asia to turn out x86- and RISC (reduced instruction set computing)-architecture chips for automotive applications.

Paul Hsu, special assistant to VIA's chairman, claims that his company has developed a novel embedded-platform core and system architecture for automotive-electronics devices, as well as related software, hardware, machine-human interfaces, and integrated telecommunication and multimedia solutions.

Industry sources say that VIA's establishment of MCE comes two to three years after VIA began evaluating and developing new chip applications. The new business will help the company reduce its dependency on PC chips.

Veering Clear of Intel

Cher Wang, chairman of both VIA and High Tech Computer Corp. (HTC), a leading supplier of mobile computing and communication devices, says that there is strong growth potential from non-PC sectors. Some industry insiders report that VIA's move into auto IC segment also implies the company's intention in targeting some niche businesses so as to escape fierce face-to-face competitions with Intel, Advanced Micro Devices (AMD), and other rivals in the PC chip market.

Currently, VIA provides mainly x86-archeitecture single-chip system solutions and the company recently added also RSIC-architecture product lines, which stress some traits such as custom-made and power-saving features. Hsu says his company expects to see initial returns from the automotive market by the end of the year.

According to Hsu, VIA is also developing chips for portable devices and settop-boxes. Though Hsu admits that his company falls short of Intel and AMD in the PC market, he is confident that VIA will succeed in the auto IC segment due to the greater need for customer support, especially in the Asia market.

Still, VIA is not the only fish in the pond with an eye on the car market. In 2004, Infineon Technologies AG appointed an ex-automotive industry veteran as CEO, announced plans to build a US$1 billion auto IC plant, and added 45 employees to its Detroit office to support its regional automotive chip business.

How big is the automotive semiconductor business? Statistics compiled by Databeans Inc., which specializes in market research for the semiconductor and electronic industries, showed that auto-electronic chips are expected to be the second-largest segment in the analog-chip application market, trailing only those for portable communications devices. In 2006, the value of analog chips in automotive applications is expected to reach US$4 billion. Texas Instruments, STMicroelectronics, Infineon, and other big established players are expected to dominate the market due to their close contacts with the automotive industry.

According to Susie Inouye, senior research analyst at Databeans, the re-focus on predictable growth markets is an industry mindset change. "In general, I think a lot of suppliers are focused on this area now," she says. "A lot of suppliers are moving more into focus on industrial and automotive markets, things that are a lot more stable. It's probably going to be this way for a while."

When the worldwide semiconductor market dropped by 32%, this segment fell only 1%, Inouye's firm found. Demand for automotive chips reached about US$13 billion in 2004, and it is expected to climb to US$15 billion this year. Even though the market for cars and trucks is growing by only 2% to 3% annually, on average, the market for car chips is expected to gain by 9% a year from 2004 through 2009, according to Databeans.

Too Late?

The lucrative automotive chip business is attracting more and more companies, including many from Taiwan, a global production base of chips. However, according to several industry insiders, newcomers might be too late to hope to get in the auto IC game and cash in on next year's opportunities. With the industry's strict safety regulations, highly demanding original equipment manufacturing (OEM) standards and zero tolerance for flaws, 2005's market was already decided years ago.

"The automotive semiconductor market requires a deep level of commitment at the core of your business," a senior official of Infineon says. "Companies that today are not focused on automotive or traditionally have not been focused there find quite a high barrier of entry in terms of the quality requirements and the cost requirements."

Your nearest revenue opportunity, according to Renesas, will be toward the end of the decade.

"For 2005, the revenue is already determined. The next opportunity we are looking at is for 2008 and/or 2009. That's where our actions can influence our revenue streams now," says a senior official of Renesas' automotive business unit.

Quoting Infineon's example, some industry analysts say that there are many high barriers ahead for entry into the lucrative sector.

Infineon is better known as a major supplier of dynamic random access memory (DRAM), a segment in which it cooperates closely with Taiwan's Winbond Electronics Corp. and Nanya Technology Corp. In fact, Infineon began developing its automotive chip market when it was still a semiconductor business division of Siemens.

Given the difficulty of breaking into the supply chains of major automakers, only major semiconductor makers in major automobile producing nations will be able to cooperate with automakers in joint product development. Toshiba and Toyota, and Infineon and all European major auto brands are examples of such regionally based partnerships.

Currently, Infineon is the largest auto IC supplier in Europe, with a 15% share, and No. 2 in the world, with an 8.7% global share in 2004. Infineon has the benefit of numerous unique technologies for automotive applications, including chip solutions for tire pressure monitoring system (TPMS), anti-lock brake systems, and other safety devices. Many of these chips are made with micro electrical machinery system (MEMS) techniques--one of Infineon's strong cards.

Newcomers' Chance

For Taiwan's chipmakers, breaking into the automotive chip market presents numerous problems, not least of which is their limited design capabilities.

One potential product could be driver Ics for small- and medium-size thin film transistor-liquid crystal display (TFT-LCD) panels, which are widely used by in-car entertainment system makers in Taiwan.

Other obstacles include limited domestic market demand for automotive IC devices and the costly investment and safety certification procedures required. These barriers have largely dissuaded local analog chip producers from the automotive sector.

Local logic chipmakers, on the other hand, have been more aggressive. But even those that are backed by major local automakers are finding it a tough slog. Myson-Century Technology Inc., for example, an affiliate of the Yulon Group, comprising Yulon Motor and China Motor, makes auto IC products, but they have not been used at Yulon's local auto-production affiliates.

The picture looks brighter in the TFT-LCD driver IC market, where Taiwan is a leader. The problem is that most of these chips are currently used in aftermarket (AM) in-car entertainment systems. Directly supplying products to automakers or tier-one parts makers is likely to be the next step for the local industry in upgrading to OE sales.

Other windows of opportunity are seen in chips for in-car electronic devices, such as global positioning system (GPS) units, multimedia systems, and remote controllers.