Taiwan IC firms under pressure to lower quotes for smartphone clients

Cage Chao, Taipei; Jessie Shen, DIGITIMES

Major China-based smartphone vendors including Huawei, Oppo, Vivo and Xiaomi have gained more bargaining chips when negotiating prices with their chip suppliers, according to sources at Taiwan-based IC design houses.

Many Taiwan-based IC design houses have come under pressure to lower chip prices for their smartphone clients – mainly China-based ones – and have to find ways to cut manufacturing costs to maximize their profitability from the lower quotes their offer to smartphone companies, the sources indicated.

Obtaining orders from the four major China-based smartphone vendors is crucial to company competitiveness and growth, the sources said. However, while vying for orders from China’s first-tier smartphone companies, most Taiwan-based IC design houses are encountering declines in chip ASPs and gross margins.

Huawei, Oppo, Vivo and Xiaomi have seen their combined share of China’s smartphone market exceed 70%. The proportion is likely to top 80% in 2019, the sources noted.

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