Julian Matthews, Kuala Lumpur

IDT Banks on Winchip to Drive Growth

Integrated Device Technology (IDT), Inc (www.idt.com) of the US expects to expand chip sales in Asia in the next two years despite market softness and the prolonged economic crisis in the region.

Integrated Device Technology (M) Sdn Bhd managing director B T Tan said the high inventory causing the current industry-wide weakness will be over in six to nine months.

"Although we see an impact in demand, I believe the semiconductor industry still has a bright future in this region, and will bounce back by next year," he said.

Tan said his confidence stems from the fact that many contract manufacturers for personal computers (PC) and PC parts have established their presence in the region and have become increasingly important purchasers for chip products. "More and more of such manufacturing will be done in the region in the coming years," he said.

Tan is confident of growing IDT sales in Asia, which currently comprises about 20% of its worldwide market, particularly in China, Japan and Taiwan.

IDT is banking on its WinChip C6 family of microprocessors, targeted at the sub-US$1,000 desktop and sub-US$1,500 notebook markets, to provide the impetus for revenue growth.

Tan said the company's introduction of WinChip 2 and WinChip 2 3D processors, in speeds of 266MHz and 300MHz, by the last quarter of this year will boost sales.

The company shipped more than 100,000 of the WinChip Socket 7-compatible processors worldwide in the first quarter of the year and expects to double or triple that volume in the coming quarters.

"IDT Malaysia will increase production of the WinChip to between two to three million units in the next two years," said Tan.

In that period, the company will invest about US$12.5 million in training to upgrade its 1,500 staff and re-equip its 13,470m2 assembly and test plant located in the Bayan Lepas free industrial zone in Penang.

Cutting Outsourcing

As a cost-saving measure, Tan said both the Malaysian and Filipino plants have enlarged their in-house manufacturing rather than subcontract it to manufacturers in Korea, Taiwan and Hong Kong.

"We have invested about US$1.25 million in the last year to increase in-house volume by 25 to 40%," he said.

IDT Penang currently produces about five million units of chips per week, including first-in first-out (FIFO) memories, multiport memories, network communication products, SRAMs, high-speed logic circuits, 32-bit and 64-bit embedded RISC controllers, and the WinChip processors.

Headquartered in Santa Clara, California, IDT reported a pre-tax operating loss of about US$15 million in its June quarter, its first loss after five consecutive profitable quarters, mainly due to a drop in demand for memory products and a slow ramp up of the WinChip processors.