With Texas Instrument's (TI) 12-inch fab to soon commence production of analog ICs and the company lowering prices since the second half of 2010, a new analog IC price war is expected for the second quarter.
Though TI's latest moves are aimed at other international players and the new capacity will be mostly for the medium-to-high-end segments, Taiwan-based analog IC companies will likely have to cut prices in the low-end segment.
TI has been positioning since the economic crisis in 2009 to expand market share, according to industry observers. The company has acquired a 12-inch wafer fab in the US and established 8-inch fabs in both Japan and China, forcing other analog IC companies such as Linear, Maxim and Intersil to either give up market share or invest to improve production competitiveness, the observers said.
With some companies tight on cash and the credit market still relatively conservative, TI has cut quotes and increased capacity to gobble up market share.
The top-five analog IC suppliers have historically each controlled about a 10-13% share of the global market. Taiwan-based analog IC companies combined for less than 10% in 2010. TI is attempting to leverage its competitive advantages in funding and capacity to shake up the fragmented market structure.
Though Taiwan-based analog IC companies are not in TI's crosshairs, with fierce price competition in the medium-to-high-end analog and power management IC markets, prices in the low-end segment will be forced down as well. Many Taiwan's IC suppliers have dropped quotes to secure orders from main clients. Their gross margins have retreated from around 43% in 2008 to 33-36% in 2010 and will remain at low levels in 2011.