HSINCHU, Taiwan -- Faraday Technology Corp. and two other Taiwanese chip-design houses are planning to establish offices in Japan to garner business from the world's second-largest semiconductor manufacturing market.

Faraday, which provides ASIC and intellectual-property design services, is slated to open a sales office in Tokyo in the fourth quarter.

"The market is significant," said Frankwell Lin, a vice president at Faraday, Hsinchu, Taiwan. "Our target customers include all of the big names like Toshiba, NEC (stock: NIPNY), you name it." Faraday is about 20 percent owned by semiconductor-wafer foundry United Micro Electronics Corp. (UMC).

Faraday and two smaller chip-design houses, Elan Microelectronics Corp. and Integration Circuit Solution Inc., both based in Hsinchu, Taiwan, are eager to tap into increasing Japanese demand, analysts said. The country will buy $1.74 billion worth of semiconductor products from Taiwan this year according to Taiwan's Industrial Technology Research Institute.

Faraday is expecting its overseas business to constitute 50 percent of total sales in coming years, increasing from a forecast of 40 percent this year, Lin said. The company has raised its sales target by 16 percent, to $70 million, reflecting better-than-expected demand.

Elan and analog and mixed-signal designer Integration Circuit are scheduled to open their offices in Japan next year.

Although no Japanese companies have specifically indicated plans to turn to Taiwan for chip-design services, analysts say it's just a matter of time. Japanese semiconductor makers can benefit from Taiwan's cheaper costs and the solid foundry support offered by UMC and Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), the world's top two pure-play foundries, said Eric Wang, head of regional semiconductor research at ABN AMRO in Taipei.

Taiwan has increasingly become a high-tech outsourcing center for Japan. TSMC (stock: TSM), a manufacturer for Fujitsu, NEC, and other Japanese companies, said about 7 percent of its second-quarter sales were generated in Japan, up from about 5 percent in the first quarter.

UMC said its orders from Hitachi (stock: HIT) are increasing, while the two companies early this year agreed to build a joint 12-in.-wafer fab in Japan. Meanwhile, Toshiba is outsourcing its DRAM production to Winbond Electronics Corp., Hsinchu, Taiwan. Mitsubishi has a similar arrangement with Powerchip Semiconductor Corp., Hsinchu, Taiwan.

Consumer electronic products, such as DVD players and digital cameras, are likely to be among those that Taiwan's design houses will be targeting, said Alfred Yin, a vice president at Primasia Securities Co. in Taipei.

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