ASIC market is rising rapidly, is there hope for MediaTek's revival?

Source: Content from "China Business Times", thank you.

Applications such as artificial intelligence (AI), data centers, the Internet of Things (IoT), and automotive electronics have risen significantly. In order to meet differentiated needs, system manufacturers hope to be more customized in chip development. However, due to the lack of a complete IC design team and diversified silicon intellectual property (IP) in system manufacturers, the highly customized application-specific integrated circuit (ASIC) market has emerged.

The industry believes that MediaTek has been in the IC design industry for 21 years and has accumulated a large amount of silicon intellectual property and development experience. ASIC orders from system manufacturers will become a new battlefield targeted by MediaTek in the future.

Since the beginning of this year, artificial intelligence applications have begun to grow rapidly and have also become the focus of system manufacturers. Among them, high-performance computing (HPC) has become the main ASIC order released. In addition, data centers have begun to grow rapidly with the amount of data they calculate and transmit, but the scale and needs of major data centers are different, and the performance and applications of network chips are naturally different. Therefore, network chips have also become one of the important markets in the ASIC field.

Diversity has now become synonymous with the IoT ecosystem. The small number and diversity of IoT applications have completely broken the single and large-scale market applications of the past PC and mobile phone generations. Counting the IoT application products, smart homes alone include smart speakers, smart lights, smart TVs and other applications, and in the future, TVs, refrigerators and other products are expected to be added.

With the rise of applications such as AI, data centers, the Internet of Things, and automotive electronics, system manufacturers hope to develop customized chips to meet differentiated needs. However, most system manufacturers do not have a complete IC design team or even enough silicon intellectual property. Therefore, the low-cost solution of turning to IC design factories to complete chip design has become the first choice for system manufacturers.

Therefore, the common ASSP business model in the past has been gradually swallowed up by the highly customized ASIC market. Analysts predict that in the future, manufacturers with complete R&D capabilities and abundant silicon intellectual property will be able to emerge in this ASIC field dominated by system manufacturers.

MediaTek has been established for 21 years, and has experienced the era of DVD, feature phones, TVs and smartphone chips. It has even acquired power management IC manufacturer Richtek and wireless communication manufacturer Ralink to expand its silicon intellectual property layout. Legal persons said that with the arrival of ASIC business opportunities released by system manufacturers, coupled with MediaTek's experience in advanced process development and back-end packaging and testing, it is expected to start eating into the ASIC pie in the future, becoming a new growth driver for MediaTek.

MediaTek's application-specific integrated circuit (ASIC) layout will reap great rewards. In addition to the 7nm ASIC chips that will be mass-produced and shipped at the end of this year and will enter data centers, market rumors have it that MediaTek has entered the supply chains of two major game consoles through ASIC, which is expected to drive a significant increase in the proportion of MediaTek's growth product revenue, becoming another major growth pillar after the mobile phone chip business.

In recent years, MediaTek has not only had to face price competition from Qualcomm in the mobile phone chip market, but is now facing the dilemma of slowing growth in smartphones. Therefore, MediaTek has decided internally that it will vigorously develop growth products including ASIC chips in the future, and has formulated a growth plan for the ASIC business in the next 5 to 10 years, with the goal of catching up with mobile phone chip revenue.

Since MediaTek announced the launch of the industry's first 7nm FinFET Silicon-Proven 56G PAM4 SerDes IP in the first half of this year, the industry has heard that MediaTek's first 7nm chip has successfully entered the data center supply chain and will be put into mass production at TSMC in the fourth quarter of this year. It is expected to start contributing to revenue next year and become MediaTek's first chip to be mass-produced and shipped using the 7nm process.

In addition, MediaTek has also made some gains in the game console market. Legal persons pointed out that MediaTek's network communication ASIC chips have entered the TV game console market and will start mass production next year and contribute to performance. In fact, MediaTek's WiFi and Bluetooth chips won Microsoft's Xbox One S order in 2016, so the market expects that it is not impossible to return to Microsoft's supply chain this time, and it is even possible to win Sony's new game console order with ASIC chips, and take the market share of the two major game consoles. However, MediaTek does not comment on rumors about a single customer or legal person.

MediaTek currently classifies ASIC chips, IoT, automotive electronics, power management ICs and other products as growth products. According to information released at MediaTek's recent earnings conference, growth products account for approximately 30% of total revenue.

Legal persons pointed out that the Internet of Things is still the chip with the highest revenue share among MediaTek's growth products, but as ASIC products will gradually increase in volume at the end of this year, there is a chance that the revenue share of growth products will exceed that of mobile phone chips in the future. Therefore, ASIC occupies an important position in the MediaTek Group.

The supply chain pointed out that the development of advanced processes is relatively difficult, and the threshold is not easy for small and medium-sized IC design companies to enter. The profit from developing ASIC products is naturally much higher than that of mobile phone chips, which have become a red ocean. Once the proportion of MediaTek's ASIC performance increases, a significant recovery in gross profit margin will be just around the corner.

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