MediaTek aims to give a tough time to Qualcomm.
MediaTek, the leading chip supplier for Chinese cellular phones, has stated that it intends to reverse the recent decline in profits by capturing Qualcomm’s share in handheld gadget market. Counterpoint Research has claimed that in recent times, the Hsinchu-based chip manufacturer has enjoyed higher levels of growth by delivering inexpensive chips to the growing phone manufacturing sector of China, which now contributes to 9 of the topmost 12 smartphone companies in the world as far as sales are concerned.
The stock price and profit of MediaTek have declined sharply in 2015, as the Chinese smartphone market slows and Qualcomm compete with inexpensive gadgets. However, CFO David Ku has claimed that technological improvements would allow the organization to increase sales, even in an established smartphone market, by attracting clients from the American chip market.
Qualcomm news exclaimed that Mr. Ku stated, “Our revenue from smartphones is only about $4bn, whereas Qualcomm has about $17 billion, so there’s plenty of room to grow, MediaTek can have very, very healthy growth, outpacing the industry.” His optimistic statements contradict with a series of downgrades done by analysts in 2015, as the net profit of the Taiwanese organization declined by 40% in the first three quarters yearly.
Credit Suisse’s analyst, Randy Abrams, stated that the decrease was a result of the enterprise’s efforts to “defend share at the expense of margin”. According to Gartner, rivalry has improved sharply at a time when sales of Chinese smartphones have slumped, resulting in the first yearly sales decline in the second quarter.
According to Mr. Ku, at the lower end of the market – delivering chips for 3G data connectivity but not the advance LTE gadgets – MediaTek is being pressurized by Spreadtrum, which is governed by China’s government and battles “on pricing not performance.”
At the higher end, for now, both organizations’ margins have been cut down by price rivalry between them – with Qualcomm’s move for the stepping up of new business after its semi-conductors were removed from the South Korean multinational giant’s latest leading phone.
Qualcomm news today affirmed that MediaTek has actively entered the market of LTE chips for highly advanced phones to the degree that it now contributes 40% of its sales volume while building a “duopoly” with the western chip-manufacturing organization.
Nevertheless, the entrance into the new technology market has proved to be economically painful for MediaTek due to its failure to live up to the technical standards of the North American chip manufacturer.