MediaTek is riding high, how far can it go?

by: Simon HillApril 25, 2014

MediaTek MWC 2013 -1

One of the fastest growing companies on the mobile scene today is the Taiwanese chipmaker, MediaTek. It has a solid base in the Asia-Pacific region, it’s doing well in emerging markets, and it’s now looking to expand into developed markets across the world, including the U.S. and Europe. It’s growing faster than the competition, largely by undercutting them. It’s already bigger than Broadcom and Nvidia and it plans to challenge the dominance of Qualcomm.

This meteoric rise isn’t just about offering a low cost alternative, MediaTek developed a clever business model that enabled it to dominate the feature phone market and it’s applying that plan to smartphones. It appears to be working. Compared to 2012, MediaTek recorded a 36% increase in sales in 2013 worth $4.59 billion and became the 16th largest IC (integrated circuit) supplier in the world, according to IC Insights.

It recently unveiled the world’s first 4G LTE octa-core processor and set up shop in San Diego, Qualcomm’s Californian home. Big rebranding plans and major expansion are underway. Can MediaTek disrupt the market? Should Qualcomm be looking over its shoulder? Let’s take a look at how MediaTek reached this position and explore what might happen next.

From out of nowhere

UMC-Mediatek History

In 1997 MediaTek was spun out of the United Microelectronics Corporation’s R&D wing. UMC was Taiwan’s first semiconductor company, originally founded in 1980. The aim of the newly founded MediaTek was to design chipsets for the home entertainment market and initially that meant home stereos and optical drives for computers, but it soon expanded into digital televisions, set-top boxes, and Wi-Fi routers. It was listed on the Taiwan Stock Exchange in 2001.

Starting in 2004 MediaTek entered the mobile phone market and expertly rode the feature phone wave to become a dominant player. This was achieved by developing a new business model that set the company apart from the competition. Instead of just selling SoC (system on chip) solutions and basic software, MediaTek would create a complete package, or reference design, that would provide their customers with a clear blueprint to build a basic feature phone.

This enabled smaller companies to sell inexpensive cell phones under their own brands without needing a large engineering or software development team. It broke down some of the barriers to entry by cutting R&D costs for manufacturers and leaving them to focus on branding and product differentiation strategies. It also enabled them to bring new devices to the market more quickly. This led to MediaTek-powered phones flooding into China and other emerging markets in Brazil, Russia, India, and beyond.

Rinse and repeat

Feature phones peaked in 2012 and they were outsold by smartphones last year. MediaTek had already switched gears to serve the smartphone market, offering hardware for low-end and mid-range devices at comparatively low prices. Employing the same approach that worked so well with feature phones, MediaTek has helped to drive the rise of smartphone manufacturers like Huawei, ZTE, and Alcatel, as well as names like Acer, Lenovo, BLU, Oppo, Goophone and more.

This approach is working well in markets where carriers have less control and consumers generally purchase devices and service separately. Emerging markets are where it’s at right now as sales swell and buyers seek out affordable devices. It is also well-timed to serve a growing demand for SIM-free devices in developed markets.

Despite MediaTek’s huge success in China and other emerging markets there’s still something preventing Chinese phone manufacturers from breaking into Western markets and as yet the Taiwanese semiconductor giant has not struck deals with the dominant brands in the west. The cheap and poor quality perception is slowly beginning to shift as MediaTek produces increasingly powerful and impressive hardware that can compete with its biggest foe’s much more expensive offerings, but it won’t be easy to muscle in.

MediaTek vs Qualcomm

mediatek_chip_soc_app_processor_10 Kitguru

As MediaTek pushes into the U.S. Qualcomm is pushing into China. MediaTek’s recent drive into octa-core territory at the end of last year with the MT6592 processor, which it claimed was the world’s first true octa-core processor, raised a few eyebrows.

One important head start that Qualcomm has is in LTE, but MediaTek didn’t take long to announce the 4G LTE octa-core MT6595 processor, unveiling it a couple of months ago. It still has a lot of catching up to do, as Qualcomm saw the shift to LTE early and has a very strong position. Strategy Analytics revealed that the lion’s share of revenue in the cellular baseband processor market in Q3 2013 went to Qualcomm on 66%, with MediaTek claiming second place on 12%, and Intel in third with 7%.

MediaTek vs Qualcomm-3

Qualcomm is not content to dominate the U.S. and other developed markets. It is already well-placed to capitalize on the biggest Chinese carrier, China Mobile, pushing out LTE and it is building bridges in the East. It’s interesting to note that the OnePlus One has a 2.5GHz Qualcomm Snapdragon 801 CPU in it and other Chinese manufacturers like ZTE and Xiaomi are not averse to using Qualcomm hardware in their devices. There’s a perception that this might help them break into Western markets.

If MediaTek wants to strike back in the West then it could really do with signing a deal to supply a manufacturer with good U.S. carrier relations. If it can help drive down prices for a decent-sized player and prove the hardware can deliver the same level of performance as Qualcomm at a lower cost, then it can definitely make inroads. The idea of a MediaTek chipset in a Nexus device is very interesting. Lenovo’s acquisition of Motorola Mobility is another big opportunity for MediaTek that could prove important.

War is coming

It’s no accident that MediaTek is setting up new offices near Qualcomm’s headquarters. If the company is daunted by the dominance of Qualcomm it certainly isn’t showing it.

“We need to redefine that we really are at this point serving the entire globe and not just small pockets of the world,” Kristin Taylor, MediaTek’s vice president of U.S. corporate marketing, told Reuters a couple of months back. She worked at Qualcomm for more than 15 years.

As the companies powering the smartphone revolution go head-to-head we all stand to benefit. The drive to faster, better quality hardware, at decreasing prices can only be a good thing. Even if you aren’t a fan of MediaTek, you have to appreciate the impact it is having.

  • MasterMuffin

    How can it come to western market if it’s breaking GPL?

    • jackabood

      i always hear that how is it breaking GPL?

      • MasterMuffin

        It’s not releasing the necessary sources

      • Mike Reid

        Patent infringement is one issue.

        Copyright/GPL infringement is another.

        I’m sure there are more issues; including Chinese PLA backdoors (instead of the usual NSA or KGB/FSB backdoors.)

        I’ll take more notice of MediaTek when large western (non Chinese) OEMs like Samsung, Apple, MS/Nokia, etc start using their chips in large numbers.

        Until then, Mediatek are crappy chips with crappy ROM support.

    • Shark Bait

      I also remember they have been avoiding western markets for fear of patent infringement. Apparently they have just flat out copied Qualcomm, which they can get away with in china, but would struggle in the west

      • MasterMuffin

        I can believe that!

  • Max

    Crappy hardware and no open source. That’s MediaTek for you.

  • asdf

    MediaTek to Qualcomm for mobile is just going to end up being like AMD to Intel for computers

    • Shark Bait

      So mediatek allways being a year behind, and never quite as good ?

      • MasterMuffin

        But cheaper!

        • Shark Bait

          Yeah! Hes spot on

      • A year behind? Are you kidding me right now?

        • crackinthewall

          Mediatek’s flagship SoCs has never really matched the performance of flagship SoCs from Qualcomm, Tegra and Exynos that were released at the same time. Just look at the difference between Snapdragon 600 (Q1 2013) and Mediatek’s MT6592 (Q4 2013) in terms of performance. Even when both are clocked at 1.7Ghz and the MT6592 has more cores, the older Snapdragon 600 was still able to outperform Mediatek’s flagship SoC.

    • Frostbite

      No, AMD and Intel is almost equal in term of quality, there are things where AMD do better, although in most case Intel is still preferred. Long term investment on AMD hardware is still as good as Intel one.

      You can’t say the same with Mediatek, either performance-wise or quality-wise, Mediatek is always worse than Qualcomm. Long term investment better go with Qualcomm, you’ll never know how long Mediatek hardware can stay functional.

  • Guest123

    This is the great thing about ARM’s SoC — competition that we never saw with the WinTel monopoly. Now that more competitors are getting LTE in their chips we should start seeing some real competition and prices on devices dropping considerably over the next couple years.

    • Mur

      Wintel is awesome though!

      • Shark Bait

        I hope that’s sarcasm

        • Mur

          Why? Windows+Intel machines are the best IMO. For the haters there’s OSX, linux, and AMD.

          • Shark Bait

            Well it’s been a 99% monopoly so its kind of like saying their the best because their the only ones that do it. Its impossible to say for sure, but think, their could have been much more progress is their was some actual competition. Personal computing could be year ahead of what it is now if it wasn’t for the wintel monopoly.

            Not to mention price. Whist windows costs £100’s for oem’s, android is free because of a more competitive market. This is good for the consumer. Its taken until 2014 to break this monopoly down…… And look what’s happened, windows is now free! (For some)

            See competition is good for the end user. Wintel could have held back the PC market for years, think it we’ll never know what could have happened

          • Jivester

            The competition to the monopoly is good too, not just because of the hardware but also because MS has had to get their butts in gear too. They are moving much more quickly now and that results in more innovative features for the consumer (touchscreen OS, Office for the iPad etc…)

          • Benny X

            “..Personal computing could be years ahead of what it is now if it wasn’t for the wintel monopoly.”

            Untrue. At one time there was plenty of competition in the PC market, but once the x86 clones gained critical mass and prices plummeted, most of the competition who refused to ‘standardize’ died off. Apple did itself absolutely no favors with its insistence on a closed architecture all those years. It alone is to blame for its miniscule desktop market share. Also, by the time Linux came around in the early 90’s and started becoming popular with the nerds, MS was already entrenched and Apple was on its downward spiral to oblivion, so realistically the only healthy PC alternative was the Intel/MS duopoly. Linux never stood a chance at beating MS for desktop dominance then, and it still doesn’t now, and for the same reasons. But that’s OK.. Linux dominates ‘behind the scenes’ these days anyhow, so ruling the desktop really doesn’t matter anymore.

            and sure, Android is ‘free’, but that’s not due to a ‘competitive market’.. Always keep in mind, Google is not altruistic. You’re the product, Android is just one trick in a bagful of many that is used to generate revenue for Google.

    • Shark Bait

      Completely agree! ARM’s model allows much more competitive market . which is great for us

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  • StraightEdgeNexus

    Snapdragon FTW always. Mediatek is crap chipset. Even that octa core lags horribly and heating issues are terrible. For me Only snapdragon from now on. No nvidia, no crapxynos, no mediatek.

  • tankko

    Using my MTK6589 based smartphone for almost 9 months already. No slow down and never hang. And it cost 1/3 the price of your flagship and my phone battery last 3 days! What’s crappy about it? Not much.

    • My name is….

      Same here, my Jiayu G3S is just plain awesome for the price.

      I know, MTK dont release no source code, but i can live without it, i got a phone at half the price.

    • +10000000

  • Andrew White

    Competition is healthy and will push the envelope further and faster. Prices will also be kept in check.

  • luminelx64

    I’m typing this on a MediaTek MT6577 powered phone.
    I’ve been stuck on Android 4.0.4 due to MediaTek’s refusal to release their sources, thereby breaking GPL license.

    I’m gonna steer clear of MediaTek

    • :C

    • Even if you did get source it would probably look like they tossed it in a blender first. We got source for our device and it was mixed up, incomplete and would not compile.

  • Bilal Mahmood

    I prefer nvidia and exnynos chips hate qualqomm and mediatek

  • Andrew T Roach

    Krait is dated as hell and their new line is stock ARM cores because Apple destroyed their custom SoC dreams by making 64bit a must have in next gen offerings. Mediatek will also be using stock ARM cores. Android is so far within the capabilities of new hardware that cost is going to be much more important than extremely marginal gains from the best hardware available.