MediaTek is at crossroads. The company that pioneered the “Shanzhai” model for smartphones by providing small OEMs and ODMs in China with starter kits and turnkey design solutions is now facing its first real test after years of runaway success.
The Hsinchu, Taiwan–based supplier of mobile chipsets is increasingly threatened in its sweet spot in China where Qualcomm is now wooing smartphone makers with low-priced chipsets. At the same time, MediaTek is being attacked from below the mobile silicon food chain by underdogs like Spreadtrum.
And it doesn’t end here. Some of its customers are turning to in-house mobile chipsets just like Apple and Samsung. Take Xiaomi, one of MediaTek’s largest customers in China, which cobbled a strategic partnership with mobile SoC maker Leadcore earlier this year. Interestingly, Xiaomi has also announced a patent license agreement with Qualcomm that will allow the smartphone maker to develop mobile chips for the 3G and 4G markets.
MediaTek is under pressure from top and below
What happened? Apparently, the quest to master the super-complex LTE chipsets is taking the toll on MediaTek’s pocket and its ability to offer low-cost chips. Second, the move to smaller nodes like 16nm for its Helio chips is also adding to the cost and hindering the ability to innovate on other fronts like smaller modems.
Third, the slowing smartphone market in China—growth dropping to 10.4 percent in 2015 from 27.5 percent in 2014, according to IDC—has also led to a decline in MediaTek’s net profits that fell by 40 percent year-on-year during the first three-quarters of 2015.
Meanwhile, MediaTek’s archrival Qualcomm is winning a lot of media attention for its upcoming Snapdragon 820 chipset with features such as Kyro, the company’s first 64-bit custom CPU, and the powerful imaging coprocessor Adreno. And Snapdragon 820 mobile chipset is quad-core while MediaTek’s Helio X20 processor boasts 10 cores.
MediaTek in 2016
Not surprisingly, therefore, MediaTek’s chief financial officer David Ku sees a severe fight in 2016. There are industry reports that MediaTek might roll out a new version of Helio chipset using the 16nm FinFET process from TSMC. It’s worth mentioning here that Qualcomm is expected to launch it Snapdragon 820 processor on the latest 14nm FinFET technology.
MediaTek’s strategy in the hyper-competitive mobile chipsets markets seems two-fold. The company’s hopes are now most likely centered around the LTE takeoff and new smartphone growth markets like India.
David Ku: ‘We are in an LTE duopoly with Qualcomm’
The fact that MediaTek is moving up the mobile technology value chain is apparent from the latest sales figures that show LTE chipsets making up nearly 40 percent of the Taiwan chipmaker’s shipments. According to CFO Ku, the LTE technology gap between Qualcomm and MediaTek is gradually narrowing. The industry observers claim that Qualcomm was nearly a year ahead of MediaTek in terms of LTE technical sophistication back in 2014.
Now the battle between Snapdragon 820 and Helio X20 is imminent in 2016 at the top of smartphone value chain. There are other media reports that suggest that MediaTek might launch two to three new versions of Helio chipsets. For instance, Phone Arena has recently published leaked details about the upcoming Helio X12 mobile processor for the mid-range smartphones.
It’s going to be the follow-up chipset for the Helio X10 processor that has powered handsets such as HTC One M9 and Meizu XM5. The Helio X12 mobile SoC uses eight ARM Cortex-A53 CPU cores and GX6250 GPU from Imagination Technologies. It also boasts an LTE Cat. 6 World-Mode modem with VoLTE and Wi-Fi Calling support.
MediaTek’s dilemma can be summed up in its past: it’s a company that has traditionally prospered on a mature technology. Now the future entails a transformation of sorts after it claims the LTE technology leadership in order to compete with Qualcomm. Truly a crossroads! Isn’t it?
Majeed Ahmad is author of books Smartphone: Mobile Revolution at the Crossroads of Communications, Computing and Consumer Electronicsand The Next Web of 50 Billion Devices: Mobile Internet’s Past, Present and Future.