[News] CSPs’ ASIC Push Sparks Competition Among IC Designers, Margins Under Pressure

With AI compute demand surging, cloud giants are turning to in-house ASICs to reduce their reliance on NVIDIA and AMD. According to Commercial Times, Taiwan-based firms GUC and Alchip are taking the lead as design partners, while established IC design houses like MediaTek are also moving aggressively into the field. The report, citing industry sources, notes that as more IC design firms enter the ASIC sector, profit margins for design service providers are declining, and competition is shifting beyond simple layout design toward a broader battleground integrating advanced packaging and system-level performance.

As IC Design Houses Move In, ASIC Service Firms Face New Pressures

As the report notes, developing in-house chips requires extensive high-performance IP and specialized design services, making companies such as GUC and Alchip indispensable partners in the custom chip ecosystem. However, the report also points out that, given the vast market potential, IC design houses previously focused on standard chip products are now entering the field. For instance, MediaTek has reportedly secured Google’s TPU v7e project, with mass production expected to begin by late 2026. The company expects its AI accelerator ASIC chips to generate billions of dollars in revenue by 2027, according to its chief executive, Reuters notes.

Commercial Times notes that the current boom among cloud service providers (CSPs) is expected to continue through 2027. However, ASIC service providers revealed that as more IC design firms enter the market, industry profit margins are trending downward. The report adds that CSP clients may also gradually build in-house teams, potentially reducing their reliance on outsourcing in the long run.

TSMC Ties Strengthen Taiwanese Firms in the ASIC Ecosystem

Still, according to Commercial Times, sources also indicate that because of high labor costs in the U.S., U.S. companies are expected to focus primarily on front-end RTL design, while back-end physical design and advanced packaging will likely continue to be outsourced to ASIC service providers. The report also highlights that Taiwanese firms, closely aligned with leading foundry TSMC, hold a stronger competitive advantage in this area.

According to TrendForce, North America’s four leading cloud service providers (CSPs) are increasing their investments in AI ASICs to enhance autonomy and manage costs for large-scale AI and LLM workloads. TrendForce predicts that Google’s TPU shipments will remain the highest among CSPs, growing by more than 40% year over year in 2026.

Read more

• [News] Broadcom Reportedly Boosts 2026 CoWoS Orders with Foundries on Strong ASIC Demand
• CSP CapEx to Soar Past US$520 Billion in 2026, Driven by GPU Procurement and ASIC Development, Says TrendForce
• ASIC Set to Outpace GPU? NVIDIA’s Scale-Up and Beyond

(Photo credit: MediaTek)