The Rise of MediaTek
Have you ever heard of the company MediaTek? No? I can’t say that I can blame you. The company is a relative unknown here in the United States. They are a processor manufacturer that here in the US has been relegated to lower end Android phones, tablets, and a couple of Lenovo Chromebooks as well. But the company has come up in the news a bit more in recent weeks as it is looking to increase its exposure in the West and challenge Qualcomm in the mobile space. This is the result of a few factors coming together at the right time: MediaTek slowly rising from the low end to the midrange and soon the high end coupled with the 5G price hike that Qualcomm has instituted on the high end have created an opportunity. MediaTek is in a position to shake up an industry in mobile processors that has been an outright monopoly here in the US.
The Dominance of Qualcomm
Qualcomm’s SnapDragon line of processors has taken something rather dull and made it into a brand name here in the US. The company basically makes processors for every phone of note that is sold in carrier stores and national retail. In the Android space, there is a borderline monopoly with the company as it dominates the low, mid, and high end ranges of the market. Qualcomm has been able to do this through a variety of patents that the company owns and using that power to leverage name recognition in the mobile space over other companies.
In the grand scheme of things, Qualcomm realistically has 4 main competitors in the mobile space: Samsung’s Exynos line, Huawei’s Kirin line, MediaTek, and Apple’s A series that it uses in iPhones and iPads. On the surface this seems like a healthy market of competition, but in the United States it really isn’t. Kirin chips are only on Huawei phones which cannot be sold in the US due to conflicts with the US government. Samsung’s Exynos line only shows up in the US on some mid range Samsung devices and are known to be multiple levels behind what Qualcomm offers. That leaves Apple’s A series, which actually are superior in many ways to the Qualcomm offering but are exclusive to Apple hardware. This leaves MediaTek as the only viable option left to be able to compete with Qualcomm in the Android space here in the US.
This level of dominance has led Qualcomm to operate with the sort of cavalier mentality in the States. The company owns over 140,000 patents relative to mobile radio tech and has used this to leverage its iron fist over the industry. This dominance has been leveraged into the way that the company markets their chips. A traditionally boring product to talk about, Qualcomm has marketed it as the engine to power everything that we do on our smartphones. By doing this, the company has created something of a name brand with the SnapDragon brand and made all other competitors seem foreign by comparison. If we were to create an analogy of brands, Qualcomm made SnapDragon into the iPhone whereas everything else is looked at as a Blu phone, unfamiliar and lower quality.
This leverage of name value has given Qualcomm a license to up charge for their processors, which in turn can lead to very high phone prices. The company merely needed an opportunity to justify raising these prices so that companies would not accuse them of merely price gouging. And that opportunity has fully presented itself in 2020: the introduction of 5G. Qualcomm has gone all in on 5G this year on the high end with their SnapDragon 865 processor, as the chip only supports 5G radios and not 4G LTE, which is why phones using this also need to add on the company’s X55 platform to support 4G radios. By going all in on 5G and requiring this extra component, Qualcomm has forced a price increase in models in the flagship tier. We see this evidenced from the price hike from Samsung’s S10 series to the pricing on the S20 series and the price hike on the new OnePlus 8 Pro. Additionally, this cost has forced companies like LG and Google to consider using the SnapDragon 765 chip for their new phones as a reasonable cost alternative. The tech media now finds itself highly critical of Qualcomm and their tactics, and there has never been a better chance in recent history for a company like MediaTek to come in and make an impact in the mobile processor industry.
MediaTek’s Opportunity
There are often tales of companies and products eventually failing due to a “too big to fail” complex. We have seen it with BlackBerry and Microsoft in the smartphone space, and with companies like Blockbuster and Circuit City in the retail space. There is a certain arrogance that comes with copious amounts of success. What we may be seeing in this era of Qualcomm’s 5G obsession is their stage of arrogance. Meanwhile, MediaTek has slowly been making gains in the lower end of the market with their Helio series of processors in East Asia and India on brands that are unfamiliar to the US market such as Oppo, Realme, and Redmi. This is a smart move by the company as the Indian market is one that continues to see growth in this very mature industry. But now there has been an opportunity created by Qualcomm that will allow MediaTek to be more important here in the US market.
The rumored upcoming OnePlus Z is reported to be using a MediaTek processor and will be an alternative for OnePlus fans not too keen on the recent price increase on the OnePlus 8 series. OnePlus, as a Chinese OEM, seems to value the Western markets of the United States and Europe a bit more than their local competition in Xiaomi and Vivo. By having a phone that will be marketed heavily in the States running a MediaTek processor, the company gains immediate respectability from a company that has a positive consumer satisfaction rating. This allows for a foot in the door of the US market as a viable lower cost option to Qualcomm.
In many respects, the path of MediaTek is very similar to that of AMD on the laptop and desktop side of computing. Intel has been the de facto dominant force in the field and only recently has it seen push back from AMD as a second option of note. AMD achieved this by innovating at a high rate and undercutting Intel on price. This can be a similar strategy for MediaTek as it takes on Qualcomm in the smartphone space. MediaTek already has a full array of smartphone processors that it can offer to companies and even has 5G ready processors.
Where this could be an advantage for a company like MediaTek is to offer a competitive solution to the smaller OEMs in the smartphone market in the United States. Companies like Google, LG, Sony, and Motorola that are struggling to keep up with the onslaught of Samsung and Apple. An option from MediaTek would reduce the cost of manufacturing and in turn allow these companies to compete on price with Samsung and Apple. The trouble with a company like LG using the SnapDragon 765 on their upcoming Velvet smartphone is that immediately it is deemed inferior to the 865 despite being capable of most everything that most people will use the phone for. Using a MediaTek chip that is comparable in price to the 765 but offers 865 level performance is a more appealing proposition.
There are many facets of the US smartphone market that are in desperate need of more competition and a wider portfolio. None are more dire than the processor portion of the market as Qualcomm has run rampant as a monopoly unopposed for quite a few years at this point. All this has resulted in is slower innovation and higher price points for gadgets that we love and rely on everyday. There has never been a better time for a player like MediaTek to shake up the industry. It is time now for a disruptor to the sludge of Qualcomm’s monopoly. Here’s hoping that MediaTek is successful with this opportunity.
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