TAIPEI, Taiwan Core logic maker Silicon Integrated Systems Corp. is girding for another run at the cutthroat market for discrete graphics chips, where it hopes to carve out space by offering lower-priced add-in cards than competing products with similar performance. The company is also shifting from its strategy of integrating core logic and graphics functions in a system-on-chip and is moving instead to develop a two-chip discrete solution.
If successful with its SiS315 VGA device, company officials said SiS will be ready to challenge Nvidia Corp., ATI Technologies Inc. and STMicroelectronics in the more-competitive sweet spot of high-end graphics. "[The 315] to us is like a Marine team, and the next one will be the army," said Thomas Tsui, director of SiS' Multimedia Products Division. "When the Marines secure this segment, the next [chips] will come in. Our target is the [Nvidia] MX400, but our solution will still cost less than theirs. Be cause we are the latecomer, we believe that is the only way to win."
While allowing that a single-chip integrated solution may be in its future, SiS' two-piece chip set bucks industry trends. SiS is also bucking the fabless trend of graphics chip makers by committing $1.6 billion to build a 12-inch wafer fab and R&D center in southern Taiwan, which gets under way in mid July. That facility will eventually be followed by another.
SiS officials said the additional capacity is critical for ensuring its survival in core logic and boosting its presence in the graphics chip market. SiS is setting its sites on the low-end of the mainstream graphics market, where the SiS315 will compete against similarly configured products like Nvidia's GeForce2 MX200 and ATI's Radeon. Despite being behind competitors the SiS315 is just now ramping to volume the company believes it can snatch market share away from Nvidia and ATI by undercutting them on price.
Once Taiwan's top chip set maker, SiS has had few outright victories of late. In 1999, the company slipped into the underdog role after chip set rival Via Technologies Inc. raked in market share with its PC133 offerings. To make matters worse, SiS' foundry relationship with United Microelectronics Corp. soured at the end of 2000 after the foundry accused SiS of using its process technology at SiS' new 8-inch wafer plant. A lawsuit is pending.
After suffering through more than 12 months of year-to-year revenue declines, this year seemed to be shaping up for the better. By boosting its product line with the discrete SiS635 for Intel processors and the SiS735 for Advanced Micro Devices processors, the company saw its year-to-year sales surge 76 percent in the first quarter, but a first-quarter loss put a damper on that increase.
Nonetheless, SiS officials say this year is a new beginning, and Tsui pointed to its graphics chip as an example of a more spirited fight to come. SiS also defended its decision to build another fab fab depreciation was cited as a source of the first-quarter loss and said it makes sense to build more to achieve economy of scale. "In December '98, we introduced the 630, the world's first highly integrated chip set for graphics, communication and core logic. We were using the most advanced quarter-micron process. But we can get only 1,000 or 2,000 wafers per month, which was meaningless for us," said Alex Wu, director of the Integrated Products Division at SiS. "We were ahead of the industry, but we didn't have the equipment or capacity to make it happen, so we lost almost one year. If we cannot control the technology and the capacity we cannot make it happen."
SiS is hoping to capture about 15 percent of the global graphics chip market this year, which would put it into thick of things with market leaders Nvidia, ATI and Intel. That won't be easy.
SiS is upping the ante just as the market is shrinking for discrete graphics chips. Last year, many OEMs redesigned their PC desktops to use integrated chip s ets. The change, in part, prompted Nvidia's recent move into the integrated chip set business and influenced ATI's plan to outsource much of its manufacturing to high-volume board makers in Taiwan.
Tsui acknowledged the difficulty but said the company is making steady progress. As evidence, he said the company is closing in on a deal with a top U.S.-based PC maker looking to use the SiS315, which will be made on a 0.15-micron process. Chinese PC maker Legend Holdings is also interested, he said. A handful of Taiwanese companies, including Chaintech, ECS and Aopen, are also developing graphics cards using the chip.
Despite its aggressive effort with graphics chips, Tsui said SiS has no plans to move away from the core logic business. Last year, SiS gained about 8 percent to 10 percent of revenues from its graphics chip business, and this year will probably be the same, Tsui said, although the absolute cash figure should be higher.
The emphasis on a discrete graphics chip is a switch from SiS' t rademark focus on system-on-chip core logic. Last year, SiS' strategy was to quickly integrate every new VGA core into a chip set. "But then we ran into the problem of our VGA core not being very mature, yet we still tried to do the integration," Tsui said. The unstable core made the integration far more complicated, and SiS feared the problem would only get worse as gate counts doubled from core to core, he said.
The Pentium 4's 400-MHz front-side bus helped spark the decision to separate the VGA from the core logic and split the SoC into a two-chip product. "Whenever there is a new standard that comes down, such as a new front-side bus or a new VGA, we will go for the standalone VGA and standalone core logic," Tsui said. "Then three to six months later we will come out with the integrated core logic. After the two are very stable, the integration is much simpler. Once we know how to optimize, maybe we will go back to a single chip."