Original URL: http://www.theregister.co.uk/2012/06/12/mediatek_smartphones_feature_phone_development/

Mobile chip firms ditch feature phone biz for smartphones

R&D efforts focused on web-enabled devices

By Phil Muncaster

Posted in Mobile, 12th June 2012 00:59 GMT

One of the world’s largest mobile chip companies, MediaTek, is focusing its R&D efforts on smartphones at the expense of its feature phone business in another clear sign that the market for budget 3G handsets in countries like China and India is about to explode.

Industry sources told Digitimes that MediaTek and its MStar Semiconductor spin-off, were shifting their software and firmware engineers from the feature phone to smartphone units.

MediaTek is predicting a spike in sales of 14-20 per cent from the previous quarter and Q2 shipments of ‘smartphone solutions’ of 18-20 million, the report said.

IDC analyst Melissa Chau told The Reg that the semiconductor vendor has been looking to wind down its feature phone business for a while because of the low unit sales price of devices and market saturation.

Its previous business model had been to partner up with small local handset manufacturers – many of them producing shanzhai or counterfeit phones – and provide chipsets, testing, support and other extras which help to lower entry costs for these partners. It will look to do the same with smartphones, she said.

“We know [smartphones] have become a big focus for the industry not just from looking at MediaTek’s R&D but also because other firms, like Qualcomm, are trying to copy the same model,” said Chau.

“Companies like MediaTek are driving it but the local [handset] players see the writing is on the wall for feature phones too. Once we hit the $100 phone it will really drive up the smartphone market in general.”

Asian countries like India and China offer up some of the biggest opportunities for growth here, as many have a large installed base of feature phones but an increasingly affluent and web-savvy customer base and huge subscriber numbers.

Last week, the Chinese government was forced to revise down its estimates for the number of 3G users in the country by half to around 75 million after it realised that China Mobile had counted wireless landline phones in its figures.

Given there are over one billion mobile phone subscribers in the People’s Republic, the opportunities are obvious.

Nokia came out recently as the most popular handset maker in China, with ‘shanzhai’ second, although the actual top category with over a quarter of the market was ‘other’, indicating a long tail of local brands which MediaTek and others will be hoping to tap. ®