The typical cellphone user doesn’t care who makes the insides of that cool new handset, but it’s a major selling point for manufacturers and resellers. For several years, it was a badge of quality to claim a Qualcomm processor as the heartbeat of the device.
Now the San Diego-based chipmaker is facing growing competition from the other side of the world.
MediaTek, headquartered in Taiwan, has quietly risen to number three in the world, with 2016 revenue of around US$8.6-billion. That’s still less than half of Qualcomm’s $23.5-billion, and some way behind number two, Broadcom Limited, at $13.2-billion. But, for a brand that has been primarily known as a chip supplier for cheap feature phones, its rise should send warning signals to the market leaders.
It also powers some of the best-selling entry-level smartphones in the world, and is beginning to rise up the value chain.
“We consider ourselves number one in the world in feature phones, so that’s still a very strong focus of the business,” says Dominique Friedl. “In smartphones, our biggest strength exists in the entry smartphones, from the Vodacom Smart Kicka, and other 3.5-inch display smartphones, pushing all the way up into the mid-tier smartphones, like the Sony Xperia XA, Samsung Galaxy Grand Prime Plus, and brands like TECNO, Infinix and Itel.”
The latter three are all owned by Transsion Holdings, which has become one of the most successful smartphone businesses in West and East Africa, and is slowly entering the South African market.
“Each of its brands is positioned to serve a particular segment of the market, with Infinix at the top, TECNO in the middle, and Itel as the entry-level brand,” says Friedl. “All use MediaTek.”
He points out that South Africa is very different to the rest of Sub-Saharan Africa, where retailers dominate cellphone sales, whereas this country’s market is driven by operators. That makes it more difficult for new brands to enter the market, unless they are able to build a good relationship with operators.
Nevertheless, home-grown brands Mint and Mobicel, Latin American entrant Azumi, and Transsion are all making inroads into the South African market.
“It’s quite a rainbow nation of brands that MediaTek supports. Our strength was traditionally in the Chinese market, and then supporting regional brands.”
In South Africa, it is already a dominant player. With some estimates putting annual smartphone sales as high as 16-million, MediaTek has a market share of
about 45%, or just under 8-million. For the entire Sub-Saharan Africa, it is forecasting 120-million smartphones, and 100-million feature phones.
“South Africa and Nigeria remain the two biggest markets,” says Friedl. “Growing rapidly behind them, we see the East Africa countries, Kenya, Tanzania, Uganda, and now also Ethiopia. That’s a unique market because it has one mobile network, which drives the market in a specific direction.”
The ability to address the opportunities as well as the complexities of global markets has grown MediaTek to 15 000 people globally, and more than 30 global offices. It has grown turnover between 20 and 30 percent a year for the past few years, almost doubling revenue in three years.
Yet, this may be just the beginning. As more and more consumers decide that mid-range phones meet their needs just as well as expensive flagship devices, a new category is emerging, says Friedl.
“We’re starting to see the New Premium. You saw a decline in flagship phone sales in 2016 as people started questioning the diminishing returns of upgrades. The result is the trend towards the New Premium tier.
“It’s really by demand from customers and what their expectations are of phones. They want quality technology, performance, and power, all the things that were flagship features, but they want them now in mid-tier devices. That’s where the exciting stuff will happen in the next two years.”
The result is that the features that are currently associated with top-of-the-range smartphones, like dual cameras, edge to edge display, and fingerprint and biometric sensing, will arrive in mid-tier phones in the next year or so.
“You can equate it to Formula 1 racing, where advanced technology is developed in Formula 1 cars and then finds its way into commercial vehicles down the line. That’s the trend in 2017 and 2018 in smartphones.”