Monday, November 10, 2014

China smartphone SoC market share: MediaTek leads, but Qualcomm likely to gain in the near-term

In a recent report, DigiTimes Research has given detailed figures for smartphone application processor shipments and market share for the Chinese market in Q3 2014. It shows that unit shipments increased 11.7% over Q2 2014, with relatively minor shifts in market share between the different smartphone SoC suppliers.

MediaTek still holds majority share in China with strong 3G shipments

MediaTek remained the largest player with 52.1% market share, followed by Qualcomm with 23.5%. Chinese company Spreadtrum, which concentrates on the low end, had a market share of 11.7%. HiSilicon (the chip division of Huawei, which mostly produces higher-performance SoCs for use in Huawei smartphones) is reported as having a market share of 5.2%, and Leadcore Technology places fifth.

Most of MediaTek's shipments consisted of its established cost-effective 3G solutions, while a significant portion of Qualcomm's shipments consisted of its recent MSM8916 (Snapdragon 410) with integrated 4G, a SoC clocked at 1.2 GHz that uses an early-revision Cortex-A53 CPU core that appears to be limited to ARMv7 compatibility mode, rather than fully supporting the performance improvements associated with ARMv8.

When compared to market share figures provided by DigiTimes Research for Q2 2014, MediaTek's share remained virtually the same, while Qualcomm recorded slight growth (21.4% to 23.5%), and Spreadtrum also grew (9.7% to 11.7%). Among the smaller players, Marvell has dropped out of the top 5, with Leadcore taking its place.

MediaTek likely to lose some market share in the near term

For Q4 2014, DigiTimes research forecasts sequential growth of 9.5% when compared to Q3 2014. This estimate is incompatible with other articles published by DigiTimes that talk about widespread inventory issues in the Chinese smartphone supply chain.

MediaTek has forecast smartphone SoC unit shipments to remain approximately the same in Q4 when compared to Q3 with overall company revenues decreasing slighty. The flat growth for MediaTek, combined with likely increased export market shipments to countries such as India, probably implies lower unit shipments in China for MediaTek even as the market is expected to grow, with a declining market share in terms of units, while its overall product mix will temporarily have a higher proportion of low-cost solutions such as its dual-core chips that are popular in the export market (although offset by the initial ramp of mid-range integrated 4G solutions). This is also compatible with MediaTek's projection of a small decline in revenues in Q4 2014 while maintaining its level of unit shipments for smartphone chips.

Sales projections and continuing transition to 4G suggest market share gain for Qualcomm in China in Q4

Qualcomm is forecasting sequential growth in chip shipments in Q4, although it continues to put an emphasis on issues in China regarding royalty collection related to the Chinese regulatory probe into monopolistic practices, and is not clear about its short-term growth prospects in China

Although most of Qualcomm's revenues and shipments are derived from international brand-name manufacturers such as Samsung, LG, HTC and Sony, it is likely that Qualcomm will gain market share in China in the short term, based on its leadership position with SoCs with integrated 4G baseband, which have been adopted by the largest Chinese manufacturers. There are simply few alternatives for cost-effective 4G smartphones. Samsung's increased use of internally produced Exynos SoCs in its smartphones also makes it likely that Qualcomm's sequential growth is concentrated in other segments, such as China.

While MediaTek will soon increase shipments of mid-range SoCs with integrated 4G that will significantly raise the bar for performance of affordable smartphones, MediaTek does not yet have a low-cost 4G solution for the highest-volume entry-level 4G segment, while Qualcomm is better able to address this market, first with versions of its Snapdragon 400/410 platforms (of which the new Snapdragon 410 already shows indications of cost reduction), and soon with the cost-reduced Snapdragon 210 platform. The gap in MediaTek's product line will only be filled when the cost-reduced MT6735 (low-end SoC with integrated 4G) ships in 2015.

Sources: DigiTimes (DigiTimes Research smartphone AP shipments in China in Q3 2014), Qualcomm Q3 2014 Financial Results

Updated December 1, 2014.

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