Demand for NAND flash application to eMMC, SSDs and USB 3.0 devices is expected to take off in 2012, according to chairman Khein Seng Pua for IC design house Phison Electronics at an interview with Digitimes.
Q: High-tech industries saw relatively large fluctuations in 2011. How did Phison manage to generate net EPS of over NT$14?
A: NAND flash prices hiked in March 2011 immediately after the large earthquake hitting northeastern Japan, with Phison's gross margin climbing to 17% in that month. But NAND flash prices began to drop in the second quarter of 2011.
While the fourth quarter is traditionally an off-season period, Phison hit record revenues and net operating profit in the fourth quarter of 2011 due to upgrading manufacturing process of controller ICs for SD and microSD cards to 55nm to reduce production cost in August-September as well as increased shipments of more profitable controller ICs in the quarter.
Q: What is your viewpoint of the NAND flash price drops in early 2012?
A: Two major brand-name memory card suppliers cut their prices in early 2012 and many others followed suit, causing pressure of price drops in the first quarter.
If demand from vendors of smartphones and tablet PCs increases, the pressure on NAND flash prices can be lessened in the second quarter.
There is expected to be large increases in demand for NAND flash in the second half of 2012 due to launch of many ultrabook models, replacement of smartphones and tablet PCs with new models as well as replacement of USB 2.0 with USB 3.0.
Q: How is Phison progressing in 55nm upgrade?
A: Phison completed upgrade to 55nm process for controller ICs for SD and microSD cards in the third quarter of 2011 and is in preparation for the same upgrade for SD 4.0 cards. Phison aims to upgrade production of USB 3.0, SSD and eMMC controller ICs to 55nm technology in the second and third quarters of 2012.
Q: Fast growing demand for eMMC is expected to undermine demand for NAND flash cards and pen dives. What do you think about the outlook of this market?
A: The market of flash cards and pen drives has actually reached maturity and Phison aims to increase market share through technological upgrade to 55nm to reduce not only prices but also power consumption. In addition, Phison has cooperated with vendors of handsets to secure orders for large shipments of its NAND flash controller ICs. Phison shipped 560 million flash controller ICs in 2011, rising by 12% from 2010.
Q: How do you view the growing eMMC demand spurred by smartphones, tablet PCs and ultrabooks?
A: eMMC clients, once having adopted a supplier's controller ICs, will not replace the supplier unless there are quality problems.
Phison was the only Taiwan-based supplier with large-volume shipments of eMMC controller ICs in 2011, with monthly shipments attaining 10 million units. Having obtained orders from three international clients, Phison expects to reach monthly shipments of 20 million eMMC controller ICs in the second quarter of 2012.
Phison will begin 55nm production of new eMMC controller ICs in May-June and a model with a high speed reaching a level comparable to SATA III SSD in the second half of 2012. In addition, Phison will start production of UFS (universal flash storage) controller ICs based on 55nm process in 2012. For eMMC controller ICs, Phison has gained the upper hand over Taiwan-based competitors.
Q: What are the business opportunities for SATA III SSDs?
A: PHY IP and firmware are two technologies key to SSDs, and Phison is faring well in adopting Renesas Electronics' 55nm-based solutions for PHY IP and has been developing firmware in-house.
Phison's SSD controller IC roadmap consists of applications to PATA SSDs for industrial use, as well as SATA II SSDs and SATA III SSDs, with 2012 R&D focusing on SATA III interface. Phison has developed two SATA III SSD controller ICs that will be made on Renesas' 55nm process. While SATA II SSD controller ICs have been adopted by vendors of ultrabook PCs, SSD and eMMC controller ICs are two product lines to drive growth in Phison's revenues in 2012.
Q: What are USB 3.0's business opportunities in 2012?
A: Phison lowered quotes for USB 3.0 pen drives at the end of 2011 to encourage shifting of orders from USB 2.0 pen drives to USB 3.0 models.
Phison's product strategies for USB 3.0 controller ICs are: to develop a model without adding a quartz crystal, which will save NT$4.5 (US$0.15) per IC for clients, with 55nm production to begin in April 2012; and to develop 1-channel, 2-channel, 4-channel and 8-channel models to meet varying demand. In addition, Phison hopes to license PHY IP regarding USB 3.0 controller ICs to fellow companies to expand demand for USB 3.0 pen drives.
Q: What is Phison's development of NFC (near field communication) solutions?
A: Some handset vendors have launched NFC-enabled handsets. Some mobile telecom carriers or banks are also promoting NFC functions built in handsets. For NFC solutions, Phison is inclined to cooperate with banks to build information encryption functions into microSD cards used in handsets, with the functions including pre-pay and credit payment.
Phison has cooperated with banks in Beijing, China, to develop such NFC-enabled microSD cards which are under testing and will be launched soon. In Taiwan, Phison has cooperated with Comos Bank and will cooperate with other banks in the second half of 2012.
Q: How is Phison tapping overseas markets?
A: Phison set up a subsidiary in Shenzhen, southern China, in early 2012. The subsidiary ships about three million controller ICs a month currently and aims to increase monthly shipments to five million units in May 2012.
Brazil is a market of potential. Due to Brazil's customs tariffs, Phison ships controller ICs packed together with PCBs, NAND flash chips, connectors and other components to Brazil for assembly there, with monthly shipments reaching 400,000 packs. To further tap the Brazil market, Phison plans to cooperate with local enterprises to set up joint ventures.
Q: What is Phison's business outlook in 2012?
A: Phison has been shifting operational focus to controller ICs based on 55nm technology, with eMMC, SSD and USB 3.0 controller ICs to be target product lines for 2012 operation.