Taiwan Tech Firm Aspeed Rides Out The Chip Shortage Storm

Despite a global chip shortage, Chris Lin is finding ways to keep moving forward with growth at his tech firm Aspeed.

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he global chip shortage has left fabless chip firms such as Taiwan-based Aspeed Technology in a quandary. As with other companies that require chips for their business, sales are being crimped by the lack of this crucial item. “Your revenue depends on your supplies, not on your clients,” says Aspeed founder and chairman Chris Lin, 60. “It’s a strange phenomenon.”

Like other fabless chip makers, Aspeed depends on foundries such as Taiwan Semiconductor (TSMC) to produce the chips that it designs. It’s a strategy that has—so far—paid off. An unbroken run of top- and bottom-line growth put the company on Forbes Asia’s Best Under A Billion list of Asia’s best performing companies for seven straight years up until 2020—the only company on the list with this unbroken track record.

Last year, revenue climbed 23% to NT$3.1 billion ($111 million) and net profit rose 21% to NT$1 billion; since 2014 revenue and profit have increased threefold. That success pushed up shares 410% over the past five years (and up over 50% year to date). Lin’s 14% stake in the company is worth NT$10.2 billion. “We’re in our 17th year and we’ve never slid back,” he says. “The momentum has never stopped.”

Aspeed’s success today is largely due to its dominant position as the world’s largest producer of an obscure but critical chip known as a baseboard management controller (BMC). Last year, Aspeed had a 64% share of the global market for these chips, according to Taipei-based researcher Counterpoint Research. BMCs sit inside the motherboards of everything from servers to storage devices, and help IT administrators monitor their machines and networks for overheating and other issues. 

Yet 2021 has proved a challenge. “The situation is quite dire,” says Lin. The capacity constraints have weighed on Aspeed’s client orders. In the first quarter, top-line growth slowed to 2.5% compared with 33% a year earlier. Still, Aspeed posted its second-highest-ever quarterly revenue, NT$751 million, at the end of March.

“Our needs and capacity have all been readjusted with the customers in advance,” says a company spokesperson in an email. “The short-term impact hasn’t been too big.” Taiwan’s early success in containing the pandemic also helped Aspeed keep its offices open and focused on timely delivery of customer orders.

Aspeed should weather the shortage through its “long-term cooperation” with suppliers including TSMC, the spokesperson says. “Wafer production capacity gets booked with suppliers early,” so Aspeed worked closely with its customers, and upstream and downstream supply chains, to make early preparations when it saw a shortage looming.

Another saving grace has been that Lin focused the company on chips for servers. Lins says these chips have higher margins than those for more mass-market gear such as smartphones, which helps protect profits even if sales dwindle. 

This focus also helped Aspeed keep its clients, says Lin, adding the bulk of company revenue comes from customers based in Taiwan and the U.S. While Aspeed declines to disclose any names, Counterpoint Research analyst Brady Wang in Taipei says key customers include Taiwan tech firm Quanta Computer.

Niche chip design, however, isn’t without risks. Server-focused companies such as Aspeed could eventually lose out to competitors that specialize in low-power processors for multiple device types, says Sean Su, an independent technology consultant in Taiwan. The company’s niche for hardware for data centers and servers, he concedes, does allow it to stand out in the market. 

“Sometimes, if you get onto the tip of a wave, you can ride it. You can enjoy the momentum.”

Raised in rural Taichung, Lin credits his seventh-grade math teacher with laying the foundation for his future in engineering. “She had an open office, and you could chat with her,” he says. “She was my key influencer. She cared about us.” He then got an electrical engineering degree from Taiwan’s National Tsing Hua University and a master’s in the same field from top-ranked National Taiwan University. His EMBA came from Taiwan’s National Chiao Tung University. 

He then held managerial roles at Taiwan chip designer Silicon Integrated Systems and its spinoff, XGI Technology, from 1993 to 2003. Founding Aspeed in 2004 with NT$45 million in capital, Lin’s original eight-person team included former Silicon Integrated Systems coworker Luke Chen, currently vice president of sales. With early backers such as Intel Capital, Aspeed went public in 2012. 

One advantage of Aspeed, Lin says, is its ability to attract and retain talent and maintain a niche focus. Aspeed ranked No. 14 last year in terms of compensation among listed companies, according to the Taiwan Stock Exchange. A lean workforce, mostly handpicked with help from recruiters, keep regular working hours in an industry where overtime is rampant, says Lin, adding that only 25 employees have left the company since it was founded. 

A flat corporate structure and an open office—echoing the setup favored by his math teacher—also helps keep people, he says. A sprawling open-plan setting on a single floor of rented premises eschews hierarchy and engineers can report directly to the four vice presidents. “The number of staffers isn’t high, so we can give them good compensation,” he says. “With less than 100 employees, you don’t need to have meetings that are so formal.” A loyal workforce has enabled the company to prosper by tapping the latest niche trends in technology by quickly designing chips its customers need. 

While Lin acknowledges the risks of being too narrowly focused, he expects more demand for equipment that supports cloud computing and AI-based hardware. He also plans to leverage the boom in edge computing—computing that is done near the source of data to improve response time and protect user privacy—but didn’t disclose details.

For now, chips for videoconferencing are on his radar. With Zoom booming, Lin says Aspeed is well-suited to cater to this hot segment because the technology is an extension of what it is already designing. “Sometimes, if you get onto the tip of a wave, you can ride it,” Lin says. “You can enjoy the momentum.”