Will Buffet invest in Hon Hai Rival

Earlier this year we reported on Hon Hai's struggle in Shenzhen (Hon Hai Fights in Shenzhen). The basic problem is a main competitor in China, BYD, has been sued by Hon Hai for stealing trade secrets. Delays in legal proceedings in the Chinese court system (which some speculate is aimed at protecting the Chinese company) has resulted in BYD gaining market traction.

BYD has now received a surprising vote of confidence from Warren Buffet who the Taiwan News reports is interested in 10% of BYD shares. According to Taiwan News:

Taiwanese entrepreneur Terry Gou might soon count U.S. investor Warren Buffett among his rivals, if the latter’s investment in a major Chinese company goes ahead, reports said.

Buffett, often mentioned in the past as the world’s wealthiest man behind former Microsoft chairman Bill Gates, is reportedly looking to buy 10 percent of shares in China’s BYD Co., Ltd., a major electronics and auto-parts manufacturer.

The Chinese company is currently involved in a court case pitting it against Foxconn, the brand name of Hon Hai Precision Industries. Foxconn sued BYD in 2006 for violation of trade secrets.

Chairman Terry Gou’s Hon Hai manufactures computers and cell phones for prominent brands such as Apple, Sony, Dell, Nokia and Motorola.

Hong Kong-listed BYD also counts Nokia and Motorola among its customers, and is believed to be those companies’ second biggest supplier behind Foxconn, reports said. The Chinese company is also the world’s second largest producer of rechargeable batteries. Engineer Wang Chuanfu founded BYD in Shenzhen 13 years ago.

Buffett’s reported investment in BYD is seen as a vote of confidence in the Chinese group and in China’s burgeoning technology sector, media reported.

Mr. Buffet is an admirable person. The little I know of him suggests he is a man of integrity and someone who can be admired for the way he conducts business. If he is interested in BYD and will indeed gain a 10% hold in the company, I certainly hope he will be able to have a positive influence on BYD management and urge them to consider fair competitive practices. Chinese tech companies do have a lot of potential but they will only succeed if they can learn to innovate on their own and not by copying.

I personally think Hon Hai has a sufficient competitive advantage to stay ahead of the pack and I do not think BYD will challenge their dominant position for a while yet. That said, BYD should still be willing to develop their own technologies and their own intellectual property and should not steal from others. As for Hon Hai, they must continue to innovate and lead by example. The further ahead they get, the stronger their position will be.

Taiwan News: U.S. W. Buffet and Taiwan Terry Gou likely to turn into rivals in China

MediaTek Upgrade Sales Forecast, Nanya Pessimistic

While The Telecom reports MediaTek is expected to have higher Q3 earnings based on strong demand from China, Bloomberg reports Nanya is expected to have a worse Q3 than expected. According to The Telecom:

Taiwan-based chip designer, MediaTek, today raised its estimate for third quarter sales growth to 22-25% because of high demand for handsets in emerging markets.

This is a significant jump from the previous estimated sales growth of 8-10%, with profit flatlining.

A statement released by the company said ‘better-than-expected’ mobile phone sales in emerging markets during July and August had caused its clients to increase September orders for cellphone chips.

Demand for mobile phones in China has been particularly strong, with 45% of the Chinese population now owning a mobile handset.

MediaTek is Taiwan’s biggest chip designer.

The company designs microchips for mobile handsets, DVD players, and digital televisions, then contracts out the manufacture of the chips to chip makers.

It is good new for MediaTek. However Taiwanese compatriat company Nanya is not doing so well. Bloomberg writes:

Nanya Technology Co., Taiwan's second-largest memory chipmaker, said its third-quarter loss will be worse than the company projected after a glut drove down semiconductor prices.

The loss will probably be similar to the deficit in the second quarter, Pai Pei-lin, vice president of the Taoyuan, Taiwan-based chipmaker, said in an interview today. Nanya, which posted a second-quarter loss of NT$7.29 billion ($226 million), is expected to report a third-quarter loss of NT$6.1 billion, according to the median analyst estimate compiled by Bloomberg.

The company will probably extend losses next quarter as the turmoil in global financial markets spills over to semiconductor demand, preventing chipmakers from selling their products at a profit, Pai said. Spot prices of the benchmark computer-memory chip have tumbled 35 percent in the past three months, according to DRAMeXchange Technology Inc. in Taipei.

Hopefully the memory industry can turn around soon. Companies there have been suffering for a longtime now.

The Telecom: MediaTek boosts Q3 sales projection
Bloomberg: Nanya Says Third-Quarter Loss to Be Worse Than Company Expected

Taiwan WiMAX Plan Joint Procurement

Its been a while since we last commented on Taiwan's burgeoning WiMAX industry. (See Wireless Taiwan and WiMAX Explosion in Taiwan) . Now, China Economic News (CENS) reports the six WiMAX license holders in Taiwan are considering joint procurements to drive down base station costs by as much as 50%. Some operators however have already installed Motorola base stations and will have to solve interoperability issues before being able to come on board.

CENS writes:

The six WiMAX service providers in Taiwan are mulling joint procurement of equipment in a bid to minimize costs, and will announce the decision next month.

The six providers—Vastart Cable TV Network Co., Ltd., First International Telecom Corp., Global Mobile Corp., Tatung InforComm, Far EasTon Telecom, VMAX Telecom—recently met to discuss the joint procurement of base-station equipment, with the majority supporting such idea for team procurement enables more advantageous bargaining power and volume discounts.

Vastar’s executives pointed out that a WiMAX base station, priced about NT$2 million (US$62,500 at US$1:NT$32), would sell for half as much under joint procurement. The six service providers plan to buy 15,000 base stations for over NT$30 billion (US$937 million), or for only half as much if bought jointly.

Global Mobile executives stated corporate backing of such proposal as joint procurement would pare costs.

VMAX executives noted that, despite joint procurement being a good idea, service providers have to overcome interoperability problems that may exist with the systems already installed.

First International Telecom executives pointed out, with Motorola base stations already bought, the company has to deal with potential problems with such equipment before taking part in the joint procurement.

Vastar executives said that the joint-procurement can be tried with the equipment planned for a selected city.

First, its good if the fixed costs can be driven down. It is even better if those savings can be distributed to the end users but that may be doubtful (although we can be hopeful). The base stations are a fixed cost. The marginal cost of using the network will be very small and therefore it is not clear whether the companies can offer any substantial savings on the WiMAX contract prices when they are launched. Maybe!

Secondly, there is a lot of wisdom in the joint procurement. WiMAX has not yet won the "standards war" and there are other competing wireless technologies out there. Which technology will eventually win is not certain yet. WiMAX has a good chance, but then again it is not always the superior technology that wins.

Finally, this is good for company shareholders of course. Lower costs mean more earnings can be distributed to the shareholders through dividends or higher-share prices. So ultimately, it is good to see these companies cooperating like this. It is an excellent illustration that not all strategy must be a win-lose scenario. Sometimes strategy can include a win-win alternative. Although in a joint procurement process the losers are the suppliers.

CENS: Taiwan WiMAX Operators Plan Joint Buying of Equipment

Is TSMC Falling Behind

EE Times reports Taiwan Semiconductor Manufacturing Corp. (TSMC) has announced their 32-nm and 28-nm processing rollout. However, EE Times notes the technologies being used at 32-nm is not as advanced as their rivals and observes the scaling technology being used by their rivals as sub 40-nm processing will only be implemented by TSMC on 28-nm chips. EE Times comments TSMC may be stalling for time and may have fallen behind in the development of the latest technologies. As EE Times notes, this will be the first time in a long time TSMC have fallen behind, if indeed they have.

According to EE Times:

Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) has rolled out its 28-nm process and revealed a surprise: It has pushed out--or delayed--its initial high-k/metal-gate offering until 28-nm, putting it slightly behind its rivals in Chartered, IBM and Samsung. TSMC was originally supposed to have its high-k/metal-gate offering at the 32-nm node.

Silicon foundry giant TSMC (Hsinchu, Taiwan) also provided details of its yet-to-be-introduced 32-nm process. The 32-nm process is a cost-down version of its 40-nm technology, while 28-nm is considered by TSMC as a ''full-node'' offering. As expected, both the 32- and 28-nm processes make use of 193-nm immersion lithography, copper-interconnects, ultra low-k dielectrics, strained-silicon and other features.

At 28-nm, TSMC plans to offer two separate options for the gate stack: conventional silicon oxynitride (SiON) and a newfangled high-k/metal-gate technology. It will offer two 28-nm versions with high-k and metal gates: a low-power and high-performance technology.

But at 32-nm, the company will only offer a SiON for the gate stack, which appears to be a change in direction for TSMC.

Earlier this year, TSMC CEO Rick Tsai vowed that the company would bring out its initial high-k/metal-gate technology at the 32-nm node. Now, TSMC's high-k/metal-gate offering has been pushed out to 28-nm. High-k and metal gates are key building blocks for scaling the critical gate stack, enabling the next-generation transistor.

TSMC declined to comment on the specifics of the technology. Perhaps the Taiwanese company is still developing high-k and is stalling for time. But in any case, TSMC is slightly behind its rivals for the first time in recent memory.

Of course TSMC have denied they are falling behind and suggest the strategy is a repositioning of their product. EE Times continues:

"I would not say we're behind" the competition, said John Wei, TSMC's senior director of the Advanced Technology Marketing Division.

"During the course of TSMC's advanced technology development, we concluded that we could now offer our customers a full-node 28-nm process with both high-k/metal-gate and silicon oxynitride at the same time as our competitor's 32-nm," Wei said.

"TSMC's 32-nm is re-positioned as a cost-down solution for customer 40-nm products and really does not need high-k/metal-gate," he said. "We are offering customer a choice at" 28-nm.

Despite their denials TSMC's main competitors have expressed surprised. In a second article EE Times says:

>

TSMC's foundry rivals are scratching their heads about the announcement. Gary Patton, vice president of IBM's Semiconductor Research and Development Center, raised questions here about TSMC's strategy to extend and scale SiON to 28 nm or even at 32 nm.

"I was confused about [TSMC's] announcement," Patton said. Even at 40 nm, silicon dioxide--or its SiON variant--for the logic gate stack "is running out of gas," Patton told EE Times.

TSMC's strategy to extend SiON is "a risky proposition," he said. The problem with SiON at 40 nm and below is "short channel control" and "VT variability," he said.

In contrast, IBM and its partners plan to offer what they claim is a better gate-stack solution at 32 nm. As previously reported, IBM, Chartered and Samsung plan to offer a high-k and metal-gate solution for 32 nm. The companies in IBM's "fab club" will not offer a SiON option at 32 nm and beyond, Patton said.

I am sure these companies are not writing off TSMC just yet. TSMC have proved themselves to be adept competitors in a very tough industry and are by far and away the leading pure-play foundry in the world. It will be interesting to see how this plays out over the coming months. Can TSMC maintain a competitive advantage at a lower processing technology with older processing methods, or will this be an opportunity for IBM, Chartered and other to gain traction in the market and eat up some of TSMC's market share. Only time will tell!

EE Times: TSMC pushes out high-k in 28-nm rollout
EE Times: IBM questions TSMC's 28-nm strategy

Half-terrabyte Notebooks from ACER

ACER has launched the industry's first notebooks with 500 GB of storage. Digital Home writes:

Still need more storage on your laptop? If so then you'll be happy to hear that Acer has begun begun shipping with the industry's first half-terabyte notebook hard drives.

The laptops feature Seagate's Momentus 5400.6 500GB hard drive which include G-Force Protection, a free-fall sensor technology that helps prevent drive damage and data loss upon impact if a laptop PC is dropped.

Seagate announced the new laptop drives in July along with their new flagship Barracuda 7200.11 1.5TB desktop hard drive,. Both types of drives provide significantly more storage space than previous laptop and notebook drives thanks to perpendicular magnetic recording (PMR) technology.

500 GB is a lot of space, probably more than most people will ever need unless you are into gaming, videos and photos.

Digital Home: Latest Acer notebooks offer half-terabyte of storage

IC Design House Doing Well

China Economic News (CENS) writes:

With an influx of orders from its Chinese, Japanese and Korean clients, the Taiwan-based Ili Technology (Iliteck), an IC (integrated circuit) designer, is very likely to challenge annual shipment of 120 million units of ICs this year, according to company sources.

Last year Ilitek shipped about 64 million ICs and scored sales revenue of NT$2.47 billion, sharply shooting up nearly 500% from NT$550 million posted in 2006, and shining EPS (earning per share) of NT$14.9. So far, Ilitek has shipped 65 million ICs over the first eight months of this year.

In fact, sluggish demand for consumer electronics in China this year has caused unit prices of ICs to drop and undermined Ilitek`s sales performance, as Ilitek saw its sales revenue slip month by month (NT$282 million in April, NT$158 million in May and NT$86 million in June) in the second quarter. Consequently, the company reported aggregate revenue of NT$1.13 billion for the first half of this year, growing only 17.1% from a year earlier, although having shipped 40 million ICs in the span.

Its great to see some design houses doing well in troubled times. What is also interesting is to see how the decreasing demand is pushing down prices. That said, Ilitek is still selling their products well.

CENS: Ilitek to Challenge Annual Shipment of 120 M. ICs This Year

Another Netbook from BenQ

The title says it all. Reuters writes:

Taiwan's BenQ, the branded unit of Qisda Corp, joined PC rivals to introduce smaller, low-cost notebooks carrying its own name on Thursday, and it aimed to grab a 5 percent share of the new market within two years.

Later Reuters has an interesting perspective on the future of the Netbook market:

Earlier this month, Acer, the world's No. 3 PC vendor, said it expects the global netbook market to reach 50 million units in 2009, and it aims to take 30 percent of that market by selling 15 million units of its own mini PCs. "For our new products, we hope we can have about five percent market share in one to two years," BenQ Corp Chief Executive Officer and President Conway Lee told reporters at a news conference, where BenQ displayed its "Joybook Lite" netbooks.

Lee did not give sales and shipment forecasts of its Joybook Lite PC, weighing about 1 kilo, and which has a 10-inch LED-backlit display and a sleek outer shell to attract design-conscious customers.

Only one comment here, I love the name: Joybook. Can you imagine the advertising jingle?

Happy happy joybook
Happy happy joybook
Happy happy joooooooooyyyyyyyyboook.....

Yeah yeah, I have gone back to my childhood roots.

Reuters: Taiwan's BenQ joins low-cost netbook PC market