China semiconductor growth putting the squeeze on MediaTek

Analysts see trouble for MediaTek due to price competition from growing China chipmakers and already-dominant US companies.

The near future of Taiwan semiconductor companies is uncertain, as projections from analysts remain dour on the prospects of MediaTek revenue growth due to increased pressure from pricing competition abroad.

Rivalry with fabless suppliers in the US and mainland China is specifically cited in a report from Deutsche Bank as one reason for the pessimistic view on MediaTek's growth next year. Shanghai-based Spreadtrum is singled out as a hard-line price-competitor operating on low margins in the 3G/4G market to grow market share. US companies are quoting aggressively to maintain the edge they already have in the 4G market.

This analysis comes in spite of the news that China investors might buy a stake in MediaTek. Concerns about Taiwan security make this a tough sell politically on the island, however. While some analysts see storm clouds ahead, MediaTek did boost earnings 25 percent in November compared with the same month in 2014, but sales fell 6 percent from October.

Another issue for MediaTek is that large China smartphone makers such as Xiaomi and Huawei are increasingly looking at options for insourcing chips. CN Beta reported in August that Xiaomi could have its own chips out by next year.

Meanwhile, Qualcomm had a major win in the China market recently by signing a patent-licensing deal with Xiaomi. A dominant player in the mobile chip market, especially in the 4G segment, Qualcomm ran into trouble in China in 2013 when it was investigated on anti-trust grounds. A settlement was reached in February. The company still faces anti-trust scrutiny in other markets, but rebuilding in China should help Qualcomm hang on to its dominant position in the 4G market.

See a comparison table of PCB assembly suppliers on GlobalSources.com