On Air Now

Upcoming Shows

Program Schedule »

Listen

Listen Live Now » 1360 AM Northeast, WI 97.5 FM Green Bay, WI

Weather

Current Conditions(Green Bay,WI 54303)

More Weather »
52° Feels Like: 52°
Wind: WNW 8 mph Past 24 hrs - Precip: 0”
Current Radar for Zip

Today

Partly Cloudy 75°

Tonight

Partly Cloudy 56°

Tomorrow

PM Thunderstorms 77°

Alerts

Smartphone chipmakers cut customers' costs by finding phone components

By Michael Gold

TAIPEI (Reuters) - Suppliers of chips to smartphone makers are taking the unusual step of helping customers procure other phone components such as speakers and camera lenses in a bid to win more business in an increasingly competitive sector.

Demand for smartphone chips, needed to support capabilities ranging from voice recognition to flash photography, is growing in part due to a spurt in the low-end but feature-packed phone segment.

As phone makers rush to push out more budget handsets with features formerly reserved for premium models, they need to keep their costs in check as they incorporate more chips into their lower-tier models.

The spotlight on costs has ramped up competition among chipmakers like Qualcomm Inc and MediaTek Inc. Besides cutting prices, they are also saving phone makers the expense of finding and testing, for instance, the speakers and camera lenses that get the most out of their audio and photography chips.

"In the past, Qualcomm would just offer the chips and the manufacturer would do the whole device," David Tokunaga, a senior director in product management at Qualcomm, told Reuters. "Now we offer a whole hardware ecosystem that makes it very easy for customers to just plug and play what they want."

Offering chips, hardware and even the phone design helped Taiwan's MediaTek capture half of the Chinese market for smartphone chips, according to one analyst. In that market, handsets priced under $150 accounted for almost 70 percent of all smartphones sold in the first quarter of this year, said researcher IDC.

"MediaTek gets all the components ready for the client, so all the manufacturer has to do is put the phone together," said analyst Sherman Shang at SinoPac Securities.

Qualcomm, the world's No. 1 smartphone chipmaker, has had a more difficult time in China, which accounts for the sale of one in every three smartphones globally.

The high-end chipmaker recently posted its smallest quarterly revenue rise in four years, in part because of the shift of smartphone growth to the lower end of the market in emerging economies.

The company has since stepped up its game by mimicking high-end features. It has developed audio technology one Qualcomm executive dubbed the "poor man's Dolby", to sidestep the cost of licensing a pricey equivalent from sound specialist Dolby Laboratories Inc.

"Today's high-performance phone will quickly become tomorrow's standard model," MediaTek Chief Executive M.K. Tsai said in a recent interview, noting the shift in demand growth to cheap but feature-rich phones.

Global shipments of smartphones priced below $150 are likely to grow 17 percent each year though 2018, said Chief Executive Simon Segars of ARM Holdings, which designs chips found in almost all smartphones.

By comparison, phones priced $150 to $300 will grow 14 percent, and those over $300 just 4 percent, he said.

    

TRICKLE-DOWN EFFECT

As the sales and specifications of low-end phones rise in tandem, pricey phones such as Apple Inc's iPhone will begin to lose their technological advantage over offerings from such cut-rate smartphone makers as China's Xiaomi Inc.

"The smartphone market is turning into the TV market," said Jeffrey Ju, MediaTek's senior vice president of smartphones. "If you hide the logo on a TV you really can't tell the difference. The smartphone market is getting similar."

But not every feature is destined to trickle down. Some functions, like fingerprint sensing, not only have technological constraints keeping prices high for the foreseeable future, but also face a skeptical and fast-changing consumer base.

"You have to look at who will be buying these entry-level phones, and it's largely customers in developing countries," said ARM's Segars. "The tastes of these consumers - for cultural or other reasons - is bound to be different."

(Corrects date in dateline)

(Editing by Christopher Cushing)

Comments