01.29.2001
Impact of IC fabricator price competition on IC design houses

• Price competition has begun amongst IC fabricators with UMC leading the way in Jan. 2001.

• Positive for the IC design industry. The move can strengthen IC design house gross and net operating margins. IC fabrication costs generally account for 50% of IC design houses’ total costs. A 20% price cut will generate a 10% gross margin improvement.

• Through new product creation, expansion of market share. and control of production costs, listed IC design houses in 2000 were able to generate average gross and net operating margins of 40% and 20% respectively.

• We see a further price cut in the cost structure as of definite benefit to the profitability and hence the share prices of IC design companies such as VIA (2388 ‘Wei Sheng’) and Sunplus (2401 ‘Ling Yang’).

AngelLo@Primasia.com +886-[0]2-2547-8865