The move is a sign of the increasing competition that Silan Microelectronics Co. here faces in China's small but already fiercely competitive IC design industry. With $23 million in revenue last year, Silan is small compared with fabless vendors in Taiwan and the United States. But in China's nascent IC design industry, the privately held company ranked No. 2 last year, behind state-owned Datang Microelectronics Technology Co.

With the help of Taiwanese investors, the company has managed to survive without the big government contracts some of its competitors enjoy. Silan's products are simple, but profitable. The company has seen its star rise by pushing such low-end chips as 4-bit microcontrollers and LCD controllers into products like calculators, toys, watches and PC peripherals.

Yet even in these early stages of China's IC design industry, the landscape is changing fast, forcing Silan to progress to higher-end products with better margins. "We will take a two-track approach," said Silan president Chen Xiang Dong. "We will continue with our low-end products but we must also look into markets like HDTV, ADSL and mobile-phone chips and A/V digital processors. There is a lot of space for development of these markets in China."

At the same time, there is a lot of homegrown competition. Not far away in Suzhou, Innosis Technology Co. is also eyeing the market for digital TV and ADSL chips. In Shanghai, Comlent Technology is developing RF chips for mobile phones, and in Beijing, Tsinghua Tongfang Microelectronics is already sampling a DTV chip.

These companies are largely hoping to survive without the benefit of huge government contracts, a hallmark of the past and even today an important source of revenue for companies like Datang and Tsinghua Tongfang, which will make IC-based identity cards for the government.

There are a lot of late-night conversations about how to develop IC design and how to leverage the government without totally relying on it, said Pan Jian-yue, China manager for the U.S.-based design tool vendor Synopsys Inc. "Gradually, the government is changing its strategy," he said. "They are trying to support applications with real markets in China, such as HDTV, security [chips] and home networking."

This is where China's young IC design firms may find enough traction to survive. "There is room for American companies and Chinese companies in this kind of market," said Zhao Weijian, executive vice president of Tsinghua Tongfang.

Still, the way ahead for domestic companies is much more perilous than for bigger, foreign outfits. Suppliers like Innosis, Silan and Tsinghua Tongfang have smaller, less-experienced staffs, typically 100 to 200 designers for various projects, and they face mask costs that represent a substantial portion of their total revenue.

It is a growing irony that as China is building some of the world's most advanced chip-making facilities, the majority of its IC design houses cannot afford to use them. Silan's Chen described the 0.25-micron and 0.35-micron nodes as a financial "threshold barrier" that many Chinese companies cannot cross yet.

Sean Chen, the design division manager for Innosis, said his team can't afford to guess on tapeouts. "In the States, if the design is almost all right, we would try it and wait to make changes after the first silicon came back. In China, if you don't think it is 100 percent OK, you don't send it out."

At 0.25 micron, a mask set costs about $250,000, which is probably the annual cost of an average high-level engineer in the United States, including insurance, stock options and other associated costs, noted Chen. "In China, you could hire a whole department for that much," he said.

By: DocMemory
Copyright © 2023 CST, Inc. All Rights Reserved