Mediatek to outsource chip production to local fab units

Taiwanese fabless chip maker Mediatek is willing to outsource chip production to Indian fab companies as and when they are set up to meet the demand for the domestic market.

Mediatek, which designs chips and gets them manufactured in fabs for the mobile device market, competes with Us-based Qualcomm, in India as well as globally. According to IDC estimates for Q4CY21, Mediatek has a 42 per cent share of the global smartphone market based on shipments, and over 50 per cent share of the android phone market.

Speaking to Business Standard, Finbarr Moynihan, vice-president, corporate marketing of Mediatek based in the US, said: “We are obviously interested in watching the developments in chip production in India. Once that happens, we will surely engage with these companies which offer these capabilities. It makes sense for our products and business. And it is certainly logical to have production closer to where the customer is making their phones or electronic devices, not only for the domestic market, but also for exports.”

He also says that it is asking its India team to take up more and more design capability in advanced technology, including 5G.

But why should the company shift from its home base which has the largest fab plants in the world?

Moynihan says that in Taiwan chip producers are now working on leding edgeprocess technology for semiconductor manufacturing, which requires huge amounts of investments in research and development and a large capex. And globally, various countries such as the US, Japan, countries in Europe and even India, are offering various incentives to bring these factories to their countries.

Elaborating on India’s prospects in the semiconductor sweepstakes, Moynihan says: “There are many other process technologies that are more mature and it is not that they are not critical and necessary. And the semiconductor shortage has shown that a lot of crunch came from some of these mature nodes as there was not enough available. For instance, the growth of EVS is putting a huge demand on the need for power management silicon and that does not have to be manufactured in the most advance process technology. Then there are others like interface products, car management, simple IOT devices… They will require a lot of investments, and technology has to be moved from somewhere else, but with incentives there is no reason why they cannot be made in other locations.”

The assurance from Mediatek is significant as there have been concerns

raised in the industry that fabless players that have direct access to their buyers (mobile device makers) might not shift capacity to India as they prefer to consolidate global volumes which can fetch them a better price from, say, the large Taiwanese fab plants. As a result, despite growing demand for chips, Indian fab plants may not get many orders.

The government, which has announced a $10-billion incentive package for the semiconductor industry, has already got three proposals to set up a chip plant in the country. These are under discussion, and the companies concerned have said that they can start production in two years. As in other countries, India has offered to provide 50 per cent of the cost of the plant as an incentive.

Moynihan agrees that the prices of 5G handsets should come down to ~10,000 in India. But he says that “it will take a little bit of time after the issues of capacity shortage gets resolved. We are working on entry-level 5G devices as the high-end market has already converted to 5G devices. The next wave of growth will happen in the entry and midrange devices by the end of this year or next year.”

However, Moynihan acknowledges that 5G will always have a premium over 4G and that will not be resolved easily.

Mediatek is also open to partnerships with Indian companies and even investing in them. On the apprehension amongst telcos that there might not be any use case for 5G in the country, Moynihan says fixed wireless access has taken off in both Europe and the US despite the fact that both countries have a fairly broad deployment of fibre.

“But fibre cannot go everywhere and it is not practical to bring fibre everywhere. Greenfield deployments of 5G in rural areas is a good alternative”.