Low-priced CPUs are popular, MediaTek once again challenges Qualcomm

The Nihon Keizai Shimbun reported on November 6 that in the market for CPU (central processing unit), the core component of smartphones, Taiwan semiconductor company MediaTek is rapidly expanding its market share, driven by low-priced smartphones. The company's products are superior in performance and affordable, and smartphone manufacturers in mainland China are buying them. The financial report for the July-September 2013 period released on November 1 also showed strong performance, and the market share of Qualcomm, the world's largest CPU manufacturer, began to be threatened.

　　The rapid growth of smartphones in the emerging economies of the mainland constitutes support - MediaTek General Manager Xie Qingjiang was somewhat excited in the telephone earnings conference on the 1st. MediaTek's consolidated sales for the July-September period increased by 32% year-on-year to NT$39 billion, a record high, and its net profit also increased by 71% year-on-year to NT$8.4 billion, which was particularly strong.

　　The CPUs produced by MediaTek are mainly used in low-priced smartphones. In mainland China, "thousand-yuan smartphones" are very popular. Including exports, manufacturers such as Huawei Technology and Xiaomi Technology have strengthened production. Most unbranded and knockoff products also use MediaTek CPUs.

　　Since MediaTek does not have its own factory, its production cost is relatively low. In addition, by adopting cheap circuit design drawings from British ARM several generations ago, MediaTek's products are 30-50% cheaper than Qualcomm's CPU. Although not the most advanced product, it is functional enough for low-cost smartphones.

　　MediaTek officially entered the smartphone CPU market in 2012. Xie Qingjiang said at a press conference on the 1st that the supply volume in 2013 is expected to increase by about 80% year-on-year to more than 200 million units.

　　MediaTek once grew rapidly with its cheap CPUs for non-smartphones. Later, market saturation led to price declines. Net profit in fiscal 2011 was NT$15.7 billion, down 5.7% from its peak in fiscal 2009. However, thanks to the emergence of the new market of low-priced smartphones, MediaTek has regained its strength.

　　One of the reasons for the sharp increase in the share of CPUs for non-smartphones was that MediaTek provided customers with a "reference design" model that made it easy to make terminals. This business model is now being used in smartphones and is very popular among mainland manufacturers who lack technology.

　　Japanese electronic component manufacturers have also begun to actively build relationships with MediaTek.

　　Murata Manufacturing has adopted a "full-scale diplomacy" strategy of doing business with as many manufacturers as possible, regardless of size, and has had a cooperative relationship with MediaTek for 10 years. Murata's products have also been adopted as reference design models and have been installed in components such as filters since the 2G and 3G non-smartphone era.

　　The manager of another large Japanese electronic parts manufacturer also said: "In order to expand sales in the smartphone market in mainland China, it is very important to deepen the relationship with MediaTek." The company is sending a large number of after-sales specialists and technicians to the vicinity of MediaTek's development base in Taiwan.

　　In addition to low-priced products, MediaTek will also release an 8-core high-performance CPU in December to meet the demand for some high-priced smartphones. In addition, the supply of CPUs for tablet terminals is also increasing, and it is expected to supply 15 million to 20 million units in 2013.

　　Qualcomm has also begun to take countermeasures. Through the combination of its own CPU and recommended components, Qualcomm provides customers with a reference design model for making a "$100 smartphone", hoping to exert influence in the low-cost smartphone market.

　　With the emergence of competitors such as Spreadtrum Communications, a mainland semiconductor company that produces low-priced smartphone CPUs, price competition is expected to become increasingly fierce in the future. However, MediaTek is expected to continue to grow against the backdrop of growing demand for low-priced mobile terminals.

　　MediaTek is a "factory-less" company that has no production equipment and focuses on the development and design of semiconductors. The production work is outsourced to foundry manufacturers such as Taiwan Semiconductor Manufacturing Company (TSMC) and United Microelectronics Corporation. Chairman Tsai Ming-kai, who once worked at United Microelectronics Corporation, and others founded MediaTek in Hsinchu City, Taiwan in 1997. It started with products for digital home appliances and officially entered the non-smartphone market around 2005.