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VIA becomes a dangerous challenger to Intel
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Jiang Nan
VIA Technologies is demanding recognition, and market share in the Chinese mainland. In a bid to shrug off its low-profile image, the Taiwan-based chipmaker has spent over 20 million yuan this spring in erecting big outdoor advertisements all over Beijing's Zhongguancun, also known as China's Silicon Valley.
Its aim is no less than to cut into Intel's tight hold on the CPU (central processing unit) market in China. "In the year 2000 we had around 5 per cent of the market. We expect to double it this year," Frank Jeng, marketing director of VIA, was quoted as saying by a Beijing-based business journal.
VIA is making sure that this is no empty talk. So far, this Taipei-listed company, with revenues of US$1 billion last year, has invested around 700 million yuan into Beijing, Shanghai, Shenzhen, and Hangzhou to secure a foothold. On top of that, it plans to build a 20-storey R&D centre near Qinghua University to accommodate its 2,000 researchers. Currently it has only 1,600 worldwide employees. "The mainland is a strategic market for us. Sales here should account for one third of our total revenue within years," Jeng says. The company projects to double its revenue this year.
Face-off
In fact, what VIA has excelled in, both globally and within the Chinese mainland, is chipsets rather than CPU. Both are key components on a motherboard, the brain of a computer. Figures from investment banking firm UBS Warburg, Taipei, put VIA's global share of chipsets at 40-45 per cent, similar to Intel's share.
It's a late-comer-turned-leader story. Founded in 1987, VIA nearly had run itself into bankruptcy by 1992 by trying to produce expensive chipsets for high-end workstations. Then came a timely corporate shift to low-cost, low-end chipset products. Though by 1998, Intel had cornered about three quarters of the global market for chipsets, and VIA lagged distantly behind with only a 10 per cent share, the latter was wise enough to quickly adopt a new industry standard in 1999 which gradually loosened Intel's iron grip on PC architecture.
VIA's presence in the Chinese mainland market is in reality quite strong. Jeng believes that after making an entry here 4 years ago, VIA has already taken 45-50 per cent of the chipset market, a slightly larger share than Intel's. Last year 7.5 million PCs were sold here. With every chipset selling at US$21, that adds up to US$79 million for VIA. The largest purchaser, Legend, alone buys about 60 per cent of all the chipsets it needs, or 200,000 per month. Jeng sees no slowdown in VIA's push on chipsets. He expects the company's overall market share to rise to 60 per cent this year.
Duel continues
What it needs is to prove itself in the CPU market.
In 1999, VIA paid US$167 million and US$51 million respectively to acquire two US-based CPU producers. Chipsets, after all, make up only a small fraction of Intel's US$30 billion annual sales. VIA is now placed to be a big CPU maker competing against Intel and US-based Advanced Micro Devices (AMD).
With Intel and AMD slugging it out at the high end of the market, VIA targets the value end. "We are optimistic about the mid and low-end market. It has great growth potential," said Jeng.
It seems to be working. An unnamed Legend official told 21st Century Business Herald that Legend has always been thinking about more cooperation with VIA. At one time Legend was preparing to install its one product line only with VIA made CPUs, but was forced to put off because of pressure from Intel. "VIA's CPUs are quite cheap, and its performance is as good as Intel's Celeron (Intel's low-end product). Generally speaking [VIA chips] are more a bargain in terms of performance and price, and more suitable for low-price commercial computers." Legend reportedly gets a supply of 30,000 CPUs from VIA. Other domestic PC makers like Great Wall, Founder, and Qinghua Tongfang are all following suit.
Jeng views the mainland market as an excellent battlefield for VIA's CPU rise. While worldwide PC sales are predicted a growth of 13 per cent this year and 11 per cent next year by IDC, in the Chinese mainland it's projected at around 25-30 per cent over the next 2 years, with a big part concentrated in the mid and low-end market. Jeng is planning a US$5-6 million promotion in the mainland this year, four times more than last year.
Despite limitations set by Taiwan authorities on Taipei-listed companies - VIA by far enjoys the highest market capitalization in the Taiwan Stock Exchange - more investments are planned by VIA. "In the future, what we have here is VIA Group, rather than a single division," says Jeng.
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