Chipset Supplier Looks to Regain Mid-Tier Strength
MediaTek recently introduced two new chipsets, the Helio P23 and P30. These aren’t high-end solutions, but they boast decent, if not world-beating specifications.
In all likelihood, the launches will go under the radar of all except those closely tracking MediaTek or mobile chipsets generally. However, this belies the fact that these are hugely important products for the Taiwanese fabless semiconductor company, which has had a challenging 18 months. In the second quarter of 2017, revenue fell 14 percent year-on-year in US dollars, with operating profit slumping by 64 percent year-on-year.
MediaTek has grown to become a formidable and innovative competitor, but its core smartphone chipset business has faced mounting pressure. Once the force that disrupted the landscape for smartphone system-on-chips by reducing average selling prices and squeezing profit margins, it’s now the victim in a hypercompetitive market that has moved keenly to target MediaTek’s mostly heavily Chinese customer base.
In short, MediaTek has been squeezed. Spreadtrum is increasingly pursuing the mid-to-low tier with highly competitive LTE solutions. In parallel, Qualcomm has targeted MediaTek’s mid-tier heartland with renewed vigor as Chinese customer requirements become more sophisticated and they eye global expansion. For Qualcomm, selling a chipset from its Snapdragon 400 series at a punchy price gives it an entry point for its higher-margin 600 and 800 series platforms.
MediaTek’s problems were exacerbated by the launch of its Helio X30 processor. Although it was hailed as a flagship solution for the high end that could boost average selling prices and margins, the chipset maker faced the stark reality that its specifications were inferior to those offered by the chief high-end incumbent in Qualcomm. Subsequently, the X30 failed to gain any major design wins.
At the same time, Qualcomm’s investment in the mid-tier illuminated MediaTek’s relative weakness in connectivity. While MediaTek was focusing on CPU core-count, the US company was accelerating the cascade of major features such as carrier aggregation and LTE category 7. Its most recent 600 series platform, the Snapdragon 660, adds its Hexagon digital signal processor, Spectra image signal processor and Kryo CPU in addition to a category 12 and category 13 modem with 256 QAM and 3x carrier aggregation. By contrast, MediaTek’s portfolio was largely restricted to category 4 and category 6 chipsets, just as Chinese customers increasingly sought “world mode” solutions allowing phones to work across carrier networks globally.
This is the backdrop for MediaTek’s P23 and P30 chipsets. The company has wisely chosen to focus on its mid-range territory rather than trying to compete with Qualcomm in the high tier, at least in the near-term. Its new chipsets introduce LTE category 7 in the downlink, 2x carrier aggregation and a comprehensive set of air interface configurations to enable positioning for worldwide connectivity. This should also help strengthen the company’s standing with US carriers.
MediaTek also plans to launch a new LTE category 7 modem architecture in the second half of 2017, which will be extended to new chipsets in 2018. This should improve the cost base and lift margins as it seeks to heighten its position against a highly ambitious Spreadtrum armed with the support of the Chinese government.
This is a crucial time for MediaTek. It must efficiently execute with the arrival of new products and reassert itself in a smartphone mid-tier that it played a major role in enabling. The Taiwanese company is diversifying and has important design wins in strategic segments such as “voice assistant devices”, where it’s targeting shipments of 20 million to 30 million units in 2017 in products including the Amazon Echo and Google Home smart speakers. However, to speed up that diversification, reduce its reliance on smartphones and prepare for substantial 5G investment and complexity, it needs to energise its core business. If it can do so, competition stands to intensify in an already cutthroat mid-tier smartphone market.
A version of this article was first published by FierceWireless on 6 September 2017 and can be viewed here.
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