MediaTek sets sights on challenging suppliers

Taiwan’s MediaTek, the biggest supplier of chips used in low-priced mobile phones in China, is aiming to challenge bigger US rivals Broadcom and Qualcomm by supplying chips to some of the world’s top mobile phone brands.

MediaTek, which is also the world’s biggest supplier of chips for DVD players and high-definition televisions, is one of the few companies that have thrived in the current downturn.

Sales in the first half of this year were up 25 per cent from a year ago and Yu Ming-to, chief financial officer, told the Financial Times that he expects this year’s profit margins to improve from last year thanks to more stringent cost controls.

Taiwan’s biggest chip design house has grown rapidly in recent years on the back of China’s expanding mobile phone market to become the world’s fourth-largest fabless chip design company by revenue at the end of the first quarter this year, according to the Global Semiconductor Alliance. Fabless chip makers do not own their own factories or production facilities.

While MediaTek’s success in the handset market was built largely on it selling chips to large, but predominantly domestic, Chinese phone makers such as ZTE or Tianyu, Mr Yu said his company’s “biggest target” in the future was to become supplier to global handset makers such as Nokia. MediaTek already supplies chips to South Korea’s LG.

Mr Yu said MediaTek hoped to compete for such supply contracts “not only on price” but on its ability to provide mobile chips that can incorporate a large variety of functions. But he added it was not something that could be easily achieved in the short term.

“For tier one brands to choose a new supplier, it will require some time for them to feel comfortable with MediaTek,” he said. But he remained optimistic due to MediaTek’s experience in the DVD chip market. The company began by selling chips to little-known Chinese brands, but was approached by larger brands such as Sony and Philips for custom-made chips.

Mr Yu said MediaTek hoped to build on its 18 per cent global market share in handset chips by launching chips for those using 3G technology in the second half of this year. He added that while the majority of MediaTek’s overseas sales were in China, it was Chinese mobile phone exports to markets such as India, Russia and Africa that had boosted its performance.

Nearly 40 per cent of Chinese-made phones are exported, according to analysts.