ASIC business will have great potential

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In addition to general-purpose chips, many system manufacturers also use special application IC chips. The Industrial Information Research Institute (MIC) of the Institute for Information Industry pointed out that the diversity of terminal applications is continuing to drive the demand for customized ASIC chips.

Ye Zhenxiu, a senior industry analyst at MIC, said that it seems that new applications including cloud computing, artificial intelligence (AI), and 5G may drive more demand for ASIC chips in the market.

Yeh Chen-hsiu estimates that ASIC customized chips account for about 5% of Taiwan's overall IC design industry output value this year, and is expected to reach 5% to 10% next year.

At the same time, previously, ASIC chips were mostly ordered by IC design service providers such as Creative, Faraday, and Alchip. However, recently, some IC design companies have established ASIC departments or provided customized adjustments for general-purpose products supplied to customers. For example, MediaTek already has ASIC-related layout and has the opportunity to continue to expand its related territory in the future.

MIC mentioned that with the diversification of products, the demand for customized ASIC chips has increased. In addition to IC design service providers, traditional IC design manufacturers have also used the underlying IP accumulated in the past as the basis for developing ASIC services and provided services in combination with advanced process development experience.

Major manufacturers performed well

Due to the impact of the overall industry environment, the performance of special application IC (ASIC) manufacturers related to mining chips has mostly decreased. However, Creative, Alchip and Faraday each have their own advantages. Although there are still uncertainties, the outlook for next year is generally optimistic.

Creative's revenue in the first 11 months was NT$12.478 billion, up 14.2% year-on-year, and its earnings per share in the first three quarters were NT$5.31. Analysts estimate that the company's performance this quarter may be slightly lower than that in the third quarter, and its full-year performance growth may exceed 10%, continuing to set a new historical high.

The mining chip-related performance is expected to account for more than 20% of Creative's revenue this year. However, after the sharp decline in Bitcoin prices, the demand for related mining chips has been suppressed. Legal persons estimate that the proportion of Creative's mining-related performance will be greatly reduced next year. However, legal persons believe that Creative's NRE business growth momentum is still optimistic next year, and its application areas include network communications, artificial intelligence (AI), supercomputers, etc. In terms of mass production business, mining-related income may inevitably decrease, and it will have to be supplemented by non-mining-related cases, such as drones, network communications, and artificial intelligence.

As for Alchip, the progress of virtual currency client cases in the second half of the year was delayed, affecting its performance. Its consolidated revenue in the first 11 months was 3.129 billion yuan, a year-on-year decrease of about 20%. Its fourth quarter revenue may be less than that of the third quarter. However, the company's net profit per share in the first three quarters was 5.31 yuan, and its profit has exceeded that of the whole of last year, so it is safe to set a new record for the whole year.

In the future, with the expected contribution from mass production of Chinese CPUs and Japanese pachinko chips, analysts estimate that Alchip's first quarter performance next year is still promising. This year, Alchip's mining chip-related performance accounted for about 30% to 40% of its total performance, and the proportion is expected to decrease next year.

In addition, Faraday continues to cooperate with Samsung on advanced process cases. This year, the related contribution is mainly NRE revenue, and the contribution from mass production is still small. It is expected that the two parties will have more cooperation opportunities next year, which can further strengthen Faraday's strength in advanced process cases.

In the first 11 months of 2018, Faraday's revenue was NT$4.475 billion, a year-on-year decrease of about 10%. Its net profit per share in the first three quarters was NT$0.74. In the first three quarters, the revenue from new NRE projects hit a record high, and the full-year NRE-related performance is expected to at least double that of last year. Analysts believe that Faraday's performance in the first quarter should be a small single-digit percentage decrease compared to the third quarter, but next year's performance has the opportunity to grow by double-digit percentages, of which IP-related performance may remain flat, while NRE and mass production revenue will increase.

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