Tech with a chip on its shoulder
PROCESSING: BRAVE NEW WORLD AS MID-TIER PHONES ARE TO BE MADE WITH TOP-OF-THE-RANGE FEATURES
It seems that every new high-end mobile phone is powered by a Qualcomm chip, but there’s a new name in town.
The typical cellphone user doesn’t care who makes the insides of that cool new handset but it’s a major selling point for manufacturers and resellers.
For years, it was a badge of quality to claim a Qualcomm processor as the heartbeat of the device.
Now, the San Diego-based chip maker is facing competition from the other side of the world.
MediaTek, headquartered in Taiwan, has quietly risen to number three in the world, with 2016 revenue of $8.6 billion (R116.5 billion). That’s still less than half of Qualcomm’s $23.5 billion and some way behind number two, Broadcom, at $13.2 billion.
For a brand that has been primarily known as a chip supplier for cheap feature phones, its rise should send warning signals to the market leaders. It also powers some of the best-selling entry-level smartphones in the world and is rising up the value chain.
“We consider ourselves number one in feature phones, so that’s still a very strong focus of the business,” says Dominique Friedl, the local business development director for Qualcomm.
“In smartphones, our strength exists in the entry smartphones, from the Vodacom Smart Kicka and other 3.5-inch display smartphones, pushing all the way up into mid-tier smartphones like the Sony Xperia XA, Samsung Galaxy Grand Prime Plus, and brands like TECNO, Infinix and Itel.”
The latter three are all owned by Transsion Holdings, which has become one of the most successful smartphone businesses in West and East Africa and is slowly entering the South African market.
“Each of its brands is positioned to serve a particular segment of the market, with Infinix at the top, TECNO in the middle and Itel as the entry-level brand,” says Friedl. “All use MediaTek.”
He says SA is different to the rest of sub-Saharan Africa, where retailers dominate sales. SA’s market is driven by operators, which makes it more difficult for new
South Africa and Nigeria remain the two biggest markets. Growing rapidly behind them, we see the East Africa countries, Kenya, Tanzania, Uganda and now, also Ethiopia. That’s a unique market because it has one mobile network, which drives the market in a specific direction.
Dominique Friedl
Local business development director for Qualcomm
brands to enter the market unless they are able to build a good relationship with operators.
Nevertheless, home-grown brands Mint and Mobicel, Latin American entrant Azumi and Transsion are all making inroads.
“It’s quite a rainbow nation of brands that MediaTek supports. Our strength was traditionally in the Chinese market and then supporting regional brands.”
It is already a dominant player in SA. With some estimates putting annual smartphone sales as high as 16 million, MediaTek has a market share of about 45%, or just under 8 million. For the entire sub-Saharan Africa, it is forecasting 120 million smartphones and 100 million feature phones.
“South Africa and Nigeria remain the two biggest markets,” says Friedl. “Growing rapidly behind them, we see the East Africa countries, Kenya, Tanzania, Uganda and now, also Ethiopia. That’s a unique market because it has one mobile network, which drives the market in a specific direction.”
The ability to address the opportunities as well as the complexities of global markets has grown MediaTek to 15 000 people globally, with more than 30 global offices. It has grown turnover between 20 and 30% a year, almost doubling revenue in three years.
Yet, this may be just the beginning. As more and more consumers decide that mid-range phones meet their needs just as well as expensive flagship devices, a new category is emerging, says Friedl.
“We’re starting to see the New Premium. You saw a decline in flagship phone sales in 2016 as people started questioning the diminishing returns of upgrades. The result is the trend towards the New Premium tier.
“It’s really by demand from customers. They want quality technology, performance and power, all the things that were flagship features, but they want them now in mid-tier devices. The result is that features associated with top-ofthe-range smartphones, like dual cameras, edge-to-edge display and fingerprint and biometric sensing, will arrive in mid-tier phones in the next year or so. “You can equate it to Formula 1 racing, where advanced technology is developed and then finds its way into commercial vehicles down the line,” he says.
We’re starting to see the New Premium.