U.S. Chip Makers Sacrifice Profit to Boost Sales

An increasing number of chip manufacturers in the United States are beginning to partner with Chinese smartphone companies in an effort to boost sales. While profits are sacrificed, many U.S. chip manufacturers feel this move is necessary as China represents the second largest mobile phone market in the world. Additionally, demand for chips is beginning to level off in developed nations, meaning it is more important than ever for chip manufacturers to place more of a focus on emerging markets.

Semiconductor Manufacturing Company, Chip ManufacturerAlthough manufacture of chips to China reduces gross profit margins to approximately 45 percent, down from 50 percent in more developed markets, the large volume of chips demanded by Chinese cellphone companies more than makes up for this dip. Two U.S. companies that have experienced this success in China are Qualcomm and Synaptics. Both companies realized that the developed markets were becoming saturated, so they pulled away from these markets early on, focusing instead on emerging markets. This strategy has paid off as each company experiences substantial rates of growth with each passing year.

Much of this success experienced by U.S. chip manufacturers can be attributed to the Chinese demand for lower range smartphones, creating a market valued at $80 billion. By 2017, the value is expected to increase even further to $120 billion. This is a huge opportunity for chip manufacturers in the United States as this means that there will be approximately 460 million smartphones from companies, such as Android, Lenovo Group and Xiamoi Tech, which require chips, pellicles technology and other components from a semiconductor manufacturing company.

As a semiconductor manufacturing company, it is important to remember that Asian smartphone makers will offer you much less in royalties for your technologies and will likely opt for the cheapest possible components. The phones they are producing have lower levels of functionality as compared to the U.S., and only require older generations of cheap chips, reducing your profit margin. However, do not be alarmed as the volume growth will actually lead to profits.

If you have not yet entered the Chinese smartphone market, you still have the opportunity to do so. Now is the time. The market is able to support additional chip manufacturers as the adoption of smartphones is still growing rather slowly. Additionally, Chinese phone producers are shipping low end phones to other areas of Asia as well as Latin America, meaning there is even more opportunity for American chip manufacturers.

If you are interested in expanding to emerging markets, and need to increase your production, trust in Shin-Etsu MicroSi to provide you with the semiconductor materials necessary to complete the job quickly and efficiently. To learn more about the products and services our semiconductor manufacturing company offers, such as pellicles technology and lithography, call Shin-Etsu MicroSi at (480) 893-8898 or contact us online.