MediaTek, for decades Qualcomm’s fiercest competitor in the smartphone silicon business, claims to have reached the pinnacle this year.
“We are now the largest smartphone SoC maker globally,” CEO Rick Tsai said during a recent investor conference in Taiwan. “We continue to gain share across all regions of the world.”
The company may be breaking free of its decades-long dependence on sales to Chinese customers. The company’s Android smartphone market share in North America will exceed 35 percent in 2021, according to Tsai.
The company that sells chips to every smartphone maker save Apple now offers its Dimensity line of processors for the high-end “flagship” segment of the sector. MediaTek’s strong entry into 5G represents a switch from generations ago when Taiwan’s largest chip designer was content to be a fast follower in the phone business.
Mobile phones accounted for 56 percent of MediaTek’s third-quarter 2021 revenue, soaring72 percent from last year and driven by 5G migration and market share gains.
Tsai expressed confidence in MediaTek’s ability to grow in the 5G segment, citing proprietary design architecture, low-power design expertise and 4-nm process technologyfrom Taiwan Semiconductor Manufacturing Co. (TSMC).
The sweet spot for entering the 5G market may be now, with penetration rates in the high 30-percent range this year and expected to exceed 50 percent next year, according to the company. MediaTek asserted its sub-6 Ghz and mmWave solutions would provide it a competitive advantage.
Like Apple, the top ten customers of TSMC including MediaTek are enduring silicon shortages, but business remains brisk. “If everyone wants to have all the capacity they want, I think that will take about a year, or somewhat longer,” Tsai says. “We’re looking at sometime in 2023.”
Add rising prices to supply constraints.
“We do have new pricing kicking in, starting from late fourth quarter,” added MediaTek CFO David Ku. Those cost increases for MediaTek range from foundry to backend and materials. “That’s the industry norm for everyone,” Ku added.
Meantime, MediaTek forecasts solid growth and healthy profitability in 2022 while managing supply shortages. “From the supply point of view… I wouldn’t say a softening of the supply constraints, but we see supply to be uneven with some products. A good example may be Wi-Fi,” Tsai noted.
Indeed, the company has been unable to meet demand for its Wi-Fi chips.
While business prospects for MediaTek remain bright, some analysts raised concerns about slowing demand. “There’s been a lot of concerns recently about demand weakness in China, especially for overall consumption, including technology products and smartphones,” said Gokul Hariharan, managing director at JP Morgan Chase.
China’s smartphone sales have slowed, Tsai agreed. China’s 5G penetration, at about 80percent is “very high,” he added.
Tsai remains optimistic about overall demand. “We also look very carefully at 5G demand outside of China,” including emerging markets like India. “We see really a robust growth for those markets, and our chips are really well suited for those markets also.
MediaTek still faces competition from friends that are sometimes enemies.
Some analysts suggest MediaTek could lose business to customers that have formed in-house chip design units, including Google and Oppo of China. Oppo is world’s third largest smartphone maker by market share.
“We’ve seen Oppo more recently build a sizable semiconductor team, with a lot of ex-MediaTek guys,” noted Brett Simpson, senior analyst at Arete Research. “We’ve also seen Google launch their own application processor in the Google Pixel 6.”
Tsai said the trend is a wash for MediaTek. “We also work with many of them to supply our IP and our design expertise. So that becomes another business opportunity for us. We are actually actively engaging in that kind of business already.”
Tsai said he was also enthusiastic about company plans for “5G adjacency,” or the ability to migrate 5G technology into new markets. “The 5G modem capability is one of the rarerassets in the market and will become even more so going forward. If you look at the modem applications up to now mostly in a smartphone or high-speed applications, there are other applications, the low latency part, the massively-connected device part of the 5G technology.” That market remains untapped, according to Tsai.
“We are developing modem IPs extending into different operating regimes, so that we can capture the applications.”
Meanwhile, MediaTek has been working with major customer premise equipment vendors in what Tsai describes as “just the beginning of our endeavor.”