Despite having a fast-growing electronics industry that has attracted investments from some of the world's largest chip makers, China is no match for Taiwan when it comes to integrated circuit (IC) design, according to industry executives speaking at the Taiwan Business Alliance conference in Taipei.
IC design companies represent a growing segment of the semiconductor industry. Known as fabless chip vendors because they do not operate their own manufacturing plants, IC design companies contract out production of their chips to foundries, such as Taiwan Semiconductor Manufacturing Co. Ltd.
Taiwan is one of the largest centers of IC design. The island nation's fabless semiconductor industry - which includes companies like PC chipset vendor Via Technologies and communications chip vendor, Realtek Semiconductor - currently accounts for about 20 per cent of worldwide fabless semiconductor revenue, executive director of the industry group, Fabless Semiconductor Association, Jodi Shelton, said.
By comparison, China's IC design industry lags far behind. China has around 150 IC design companies which account for about $US120 million in annual revenue, far less than the $US4.3 billion in revenue generated by IC design companies in Taiwan, Shelton said.
"It's still rather insignificant when compared with Taiwan," she said.
Chinese IC design companies lagged behind their rivals in Taiwan and elsewhere for several reasons, Shelton said.
The design companies were generally poor innovators, had little experience in system architecture and lacked awareness of new products, she said. In addition, they were not very good at marketing and sales and had shown an inability to understand new markets.
As a result, Chinese IC design companies were focused on low-end products, such as chips used in smart cards and some consumer electronics applications, Shelton said.
China was also less attractive than Taiwan for foreign IC design companies looking to set up chip-design centers in Asia-Pacific, said Shih Cheng-chung, managing director of Asian design centers for Broadcom, which designs chips used in networking applications.
A critical difference between the two countries was the protection of intellectual property (IP) rights, he said.
Broadcom looked at both China and Taiwan before deciding to establish a chip design center in Hsinchu, Taiwan, largely because of IP concerns, Shih said.
"Taiwan has much better IP protection than China," he said.