NEW YORK – In a year when most mobile chip vendors have seen a dramatic reduction of their customer base or declining market share, Taiwan-based MediaTek is sitting pretty and talking about a ten-fold increase in its smartphone chip shipments in 2012.
The Taiwanese company had only a small presence in the smartphone market during 2011. Since then, the spread of Android apps and Android phones, China Mobile’s growing TD-SCDMA footprint and the insatiable appetite for smartphones among consumers have contributed to a global smartphone surge.
The phenomenal success of Samsung’s Galaxy S3 and Apple’s iPhones have also inspired feature phone developers in China to move upstream and migrate into the entry-level smartphone market.
MediaTek has been riding the wave, bringing China’s feature phone vendors into the smartphone market.
MediaTek's "turnkey" solution, that is touted as ensuring both hardware and software work smoothly, has cleared the way for Chinese handset makers with virtually no smartphone experience to develop Android products.
It’s important to note that in early 2011 MediaTek trailed rivals like Spreadtrum of Shanghai and Taiwan’s Mstar. Both companies were undercutting MediaTek on pricing of chips that go inside China’s low-end mobile phones. This year, MediaTek has turned the tables by seizing the smartphone opportunity more aggressively than its rivals. In parallel, MediaTek also pursued a merger agreement with MStar over the summer.
In 2011, MediaTek sold 550 million feature phone chips, but shipped only 400 million units this year. It has increased smartphone chip shipments from 10 million units in 2011 to 110 million units this year.
Leading mobile chip vendors like ST-Ericsson or Marvell traditionally depend on fewer large handset OEMs. But as mobile phone vendors like Nokia and Research In Motion faltered in a cut-throat smartphone market, so did their chip suppliers.
MediaTek was fortunate to have many established customers in the feature phone market. As it pursued the low- to entry-level smartphone market, it brought that large base of feature phone companies along. "These vendors know how to work with us," said Finbarr Moynihan, MediaTek’s general manager for business development.
Just as much as the smartphone trend in 2012 defined MediaTek, Moynihan likes to say, "We are defining it."
Sure, MediaTek may have defined the entry-level smartphone market in 2012. But when Spreadtrum and others start catching up in 2013, just how long MediaTek can stay in the driver’s seat remains unclear.