MediaTek (Part 4): In The Smartphone Era
By guest author Nalini Kumar Muppala
Smartphones are selling hot even in this market slump, and handset vendors are moving heaven and earth to get a bigger share of this burgeoning market segment. But the price of a smartphone is still beyond the reach of many price-conscious consumers. Thanks to the recently announced Gphone Nexus One, the idea of paying in full for a phone (instead of getting a subsidy in return for locking oneself into a service agreement with the carrier) might gain greater momentum. The idea is not new: users in most markets find this to be the only way to buy a phone, and Nokia has been pushing this idea for a while in the United States. It remains to be seen if the force of Google will add momentum to this idea. More people now realize the true, unsubsidized cost of a smartphone.
Some even predict that the term “smartphone” will lose significance, since most phones will become capable of performing functions that today’s smartphones boast. While it might be a stretch, it is true that all phone designs are evolving to emulate smartphone features. Handset makers and, in turn, handset semiconductor providers, now face increased pressure to deliver more value at cheaper prices. MediaTek has big plans to tap into this market sentiment. Having mastered low-cost play, it is uniquely placed to do so. The company let the public in on its plan to bring down the mid-range smartphone cost to $200 from the current level of around $400.
A slew of products announced recently show that MediaTek wants to be a serious contender in the smartphone market. It recently announced the MT6516 for low-cost smartphones; MT6253, the company’s first GSM/GPRS smartphone chip; and MT6268, its first 3G processor. A lot is riding on the success of MT6253 – MediaTek hopes to ship 100 million of them this year.
If MediaTek has big plans for application processors, it has kept them secret. It is disappointing to see that the company does not appear to have a promising roadmap for an application processor. This is especially true given that it had access to ADI’s Blackfin DSP architecture. MediaTek has taken the integrated approach by putting an application processor alongside the baseband in some of its powerful chipsets; this makes sense for the low-cost pioneer. It remains to be seen if the company does not lose some designs for lack of powerful application processor capabilities.
Multimedia capabilities are a defining characteristic of MediaTek chipsets. Part of this can be attributed to the company’s legacy. To extend this advantage into the smartphone market, MediaTek recently licensed ARM’s Mali graphics processor core.
Conspicuously absent from the portfolio and roadmap is an 802.11n solution. It is not clear whether the company is betting against 802.11n taking off in mobile phones. Of course, one can use a solution from other vendors, but that would go against MediaTek’s current model of being a one-stop solution for mobile phones. It might have to lose that tag as it moves up to serve top-brand handset makers.
MediaTek has captured 20% of the DTV chipset market. While the target device requirements are quite different from those of handsets, MediaTek should leverage its DTV know-how to provide a credible alternative to Qualcomm’s FLO TV, which has seen a good uptake recently.
MediaTek realizes that it does not have everything it needs to address the smartphone market and has made some strategic alliances to overcome this handicap. In the concluding post, we will delve into this aspect.
Nalini, An excellent article! Do you think another factor that helped Mediatek was the fact that it probably gets an advantage on its input costs from its key investor – namely UMC – a chip fab? This factor certainly would have helped Mediatek in its price war in its earlier battle in DVD business – was it important in the mobile handset business? – Hemant
Hemant,
Thanks.
Might be. I have no insight into this aspect.
Nalini
Hemant & Nalini:
I personally don't have exact detailed numbers to show that Mediatek leverages their latest wafer production prices from foundries TSMC and UMC, both of which should compete directly with each other on manufacturing of 65nm-based Mediatek's integrated handset chips MT6253 and MT6258 in quantities. In the previous years before 2005 UMC was the sole wafer supplier for Mediatek's all chip products as there remained the long-term relationship since Mediatek was a spin-off from UMC's CD-ROM/CD-RW chip
business in 1996-1997 (not sure of the exact date of their separation with each other).
Yet the relationship over the success of Mediatek's being big in business and needed more wafer productions got worsen when Mediatek's demanded lower wafer prices might not be fully accepted by UMC starting 2004 or sometime close then, making Mediatek's CEO M. J.'s decision to adding TSMC as the 2nd wafer founbdry for them. The details of how wafer prodction splits on quantities (should be already in 90/65nm on 12-inch wafer productions of more than 10K on both foundries) and prices between TSMC and UMC remains to be seen as I don't have first-hand data to show now, yet I believe that Mediatek still leverages lower prices of productions as it can switch between the two on similar 90nm/65nm processes, as an example when older processes of 130nm or so may still be used now on Mediatek's other legacy chips like DVD or lower-end cell handset products.
In other words, there should be almost always the good wafer prices that Mediatek can get to boost their revenue and profits on annual and CAGR indexs supposedly., and I just hope that further analysis can prove my estimation can be generally correct althogh it's not easy to get their wafer prices and actual mainstrem 12-inch wafer quantities this moment.
by Jih-Kae Lu
email: jihkae_lu@yahoo.com (I am new to this forum website and nice to talk to you guys)
Disagree about the price