SiS made a lot of efforts in order to expand its chipset market share in 2002 and greatly succeeded in it. The company now supplies its core-logic products to a lot of computer components manufacturers all around the world and especially for those, who distribute their products in Asia. Tremendous rise of SiS’ core-logic business was conditioned by increasing popularity of Intel Pentium 4 platform and SiS’ ability to legally manufacture and sell its Quad Pumped Bus supporting North Bridges. There were two main problems for SiS in this business: they had to pay licensing fees for every singe North Bridge with Quad Pumped Bus they sold and they also faced fierce competition from Intel. In order to sell more chipsets to expand market share SiS had to offer its partners low prices, while their own profits seemed to be eroded by licensing fees (this news-story contains examples of such dumping policy).

It is estimated that SiS lost about $97 million on sales of approximately $450~460 million in 2002. Even though the revenues are nearly 50% higher compared to $286 million in 2001, the loss appears to be much wider than $17.5 million a year before*.

We reported back in April 2002 that SiS sells its chipsets for Intel Pentium 4 platform with very low or even negative profitability. Given that lion’s share of products that are sold by SiS’ are intended for not expensive computers, there are no surprises that SiS can lose money due to low gross margins. So, in order to return to profitability this year SiS will either have to dramatically decrease their manufacturing costs or start selling a lot of higher-end products. The cost of making chipsets at UMC does not seem to be low simply because there were concerns about yields of chipsets (see this news-story). On the other hand, the situation with licensing the 800MHz Quad Pumped Bus which will be used for Intel’s expensive processors this year is not clear for SiS (see this news-story).

*We estimate using current currency rates because SiS reports their results in Taiwanese Dollars, while we operate in US Dollars or in Euros.