Domestic Ic Companies Take Center Stage
Local IC suppliers in China have been developing in-house solutions, which have helped reduce prices of consumer electronics products. They are now working to produce chips for a wider range of applications using more advanced process technologies.
Adopting turnkey solutions has helped design companies in China to become the main IC supply group for white-box consumer electronic factories in the country, due mainly to function-packed releases and low costs. Such products are said to meet the requirements not only of suppliers that cater to the domestic market but also export manufacturers and overseas buyers.
Having garnered success in capturing some market share from international players, suppliers are now focusing on improving their capability to fabricate chips for more applications. These include SIM cards, mobile phone basebands, portable media players or PMPs, and audio and video processors.
Some IC providers have even started mass production using the 65nm process technology. Among these are Hisilicon, ZTE's Microelectronics Research Institute and Nationz. Analysts project that in the next few years, IC suppliers will be able to design chips for, netbooks, LED lighting solutions, medical and automotive electronics, and industrial computers.
There are currently more than 400 IC design companies in China, most of which are small businesses with less than 100 employees. Only 30 earn more than $30 million annually, with just five breaching the $100 million mark. These are Hisilicon, Telegent, Availink, Spreadtrum and RDA Microelectronics. But with the speed at which the industry is developing, it is believed several IC design companies will be generating $500 million in annual revenue by 2013.
Following the steps of mobile phone IC designers
Mobile phone IC providers in mainland China, including Spreadtrum, RDA Microelectronics, SG Micro and GalaxyCore, engage mostly in baseband and RF chips for GSM and 3G standards. They are also involved with operational amplifiers, LED and video drivers, power management ICs, and CMOS image sensors. These companies, together with Taiwan's MTK, are responsible for promoting turnkey solutions in the mobile phone manufacturing industry, and lowering the technical threshold and production costs.
Now, white-box mobile phones in the mainstream feature standard and popular applications such as multimedia playback, digital cameras, e-book readers and WAP browsing. The price of an entry-level phone, meanwhile, dropped to $28 from about $100. Spreadtrum is said to be the first to enable dual mode and standby on a single baseband chip, which then became a basic GSM feature from China mobile phone makers.
The second-largest mobile phone IC supplier in the mainland, Spreadtrum's market share grew from 4 percent in Q1 2009 to 15 percent in August 2010, and is projected to increase further to 20 percent by year-end. White-box makers in Shenzhen said Spreadtrum's 6600L costs approximately $1 less than a similar model from MTK. This is significant cost savings when average earnings per mobile phone exported is $1.50.
The success of turnkey solutions in the mobile phone IC industry encouraged consumer electronic IC suppliers to develop a similar business model. These include companies designing ICs for PMPs, GPS units, netbooks and e-book readers.
Turnkey solutions helped domestic PMP IC suppliers to gain market share. Back when audio MP3 playback was the key feature of PMPs, SigmaTel and Philips dominated IC supply. By adopting turnkey solutions, local IC design company Actions was able to release a PMP chip that supports image and e-book viewing, and audio and video playback. Although not the best solution at that time, its low cost and easy availability made it a popular alternative to imported models, most of which are priced two or three times higher.
Since then, local design companies, including Fuzhou Rockchip Electronics Co. Ltd, have become the main IC supply group for PMPs. Among the milestones are support for AVI, RMVB format, 720p and 1080p HD, and multiple formats.
Fuzhou Rockchip entered the smartphone line in late 2009, and released the RK2816 in August 2010. The chip is designed to work on an Android platform, and supports 800x480 resolution, 720p HD, G-Sensor, full-screen touch and HD output. It is touted as a mainstream IC solution for white-box makers of devices patterned after the iPad.
Arayon, meanwhile, offers capacitive touchscreen modules that cost 25 percent less than what Taiwan-based Wintek provides for the iPad. The module passed Microsoft's multitouch test, supports Windows mobile, CE, XP and 7 OS, Android, and Linux.
The SaiLun paper screen from Guangzhou OED can reportedly reduce e-book reader retail prices from about $130 to$75. At roughly $45 per unit, E Ink screens account for 60 to 70 percent of e-book readers' materials and components costs. The less expensive version from Guangzhou OED can support viewing of up to 15,000 pages, and flash and video playback. It comes in many colors and has a 20-millisecond refresh time.