Upstream processor chip manufacturers have not fared well in the mobile phone market growth is slowing down the case, the mobile phone business development chip makers also suffered ceiling.

According to Qualcomm announced 2016 Q2 earnings view, Qualcomm revenue fell 19% in the second quarter of the total MSM chip shipments of 189 million, compared with 233 million the same period last year decreased by 19% compared with the previous quarter the 242 million decreased by 22%.

Coincidentally, one of the largest competitor MediaTek Qualcomm company reported Q1 earnings report also showed that the first quarter of 2016, MediaTek revenue of 55.91 billion Taiwan dollars (about 11.14 billion yuan), down 9.4 percent from the fourth quarter of 2015, gross margin and net profit fell, the overall performance is lower than previously expected.

“This year the smart phone industry is the most competitive period, the overall situation has shown a gross profit margin and net profit both fell, and is a normal phenomenon.” For the first quarter earnings performance, MediaTek executive vice president of science and technology cum Chief Operating Officer Zhu Shangzu this interpretation, and he said that the third quarter of this year may still fell minor, but then will gradually rise.

Solid traditional business profitability

More than half of business from smartphones, even in the face downward pressure on the industry, both traditional and solid profitability remains the primary strategy processor chip manufacturers. MediaTek first quarter operating profit rose 17.5 percent, an increase from the cellular phone business, including the low-end and mid-range phone, but the chip MediaTek also now in short supply.

From growing part of the reason the arrival of Chinese mobile phone market replacement times, consumers seek better equipped cell phone, rather than simply cheap to OPPO, music considered to represent strong sales of cost-effective models, also led chip manufacturers shipments.

While in Southeast Asia, India and other developing countries, 4G is slowly replacing the 3G market, strong demand for 4G chip in these areas, coupled with other Chinese brands Oppo and Vivo accelerated sea, the layout is the development of developing countries in Asia market, smart phones processing market is also showing growth.

Zhu Shangzu According to reports, the first half of 2016, the overall stock market in Southeast Asia with the Indian intelligence unit increased by 10%, which accounted for 4G phones from 10% to 30%. Developing adaptability and high integration, lower power consumption chip become the only option for the Red Sea competition in the mobile phone business stable. In Zhu Shangzu opinion, the next phase of the smartphone is a greater need for computing power rather than skill, and therefore the power consumption of the chip down is the next generation product development focus.

It is reported to be available by the end of the 10 core processor Helio X30, using 10nm manufacturing process can be reduced by 20% -30% of energy consumption. At the same time, the new graphics processor X30 can also be equipped with better support for VR applications, not only to support the VR internet phone boxes and the like, can also provide technical support for the VR machine.

Develop a new product line

Traditional solid profitability at the same time, to maintain growth, the more urgent task is to develop new product lines, new areas of layout and investment to undertake the mobile phone business, and cultivate new growth points.

Recent MediaTek announced plans for the next five years to invest $ 6.18 billion, including the development of things, 5G, AR / VR, artificial intelligence, industry 4.0, vehicle networking, chip development Software & Internet Service seven new areas, the end of the phone chip rely too serious problem.

Zhu Shangzu believe in these seven areas, networking and VR or will be the first to MediaTek bring growth opportunities, and vehicle networking, 5G, industrial development opportunities in areas such as 4.0 Some will later appear.

According to Gartner, by 2016 investment in new networking hardware, more than 2.5 million yuan per minute, and by 2021, there will be 1 million units per hour networking equipment is purchased and installed, the potential market value of MediaTek does not sit naturally management.

MediaTek introduced networking chip platform MT2503, integrated 2G baseband and global satellite navigation system, mainly used in automotive products and wearable equipment, and the recent cooperation with the shift things the company, to provide networking chip platform and technical support to assist in the introduction of a variety of end products, to accelerate efforts to expand things.

While international standards 5G has not been determined, but as the commanding heights of the new generation of mobile communications technology, you want to not be controlled by others, 5G offers the opportunity of overtaking around the curve.

Recently, Qualcomm side said, Qualcomm 5G commercial chips are expected by the end of 2018 or early 2019 launch, the current prototype has also been prepared. According to industry sources, another competitor MediaTek Spreadtrum also hopes to launch experimental 5G chips in 2018.

According to Zhu Shangzu revealed MediaTek is now also the core team is doing initial research 5G, further joint European and Japanese mobile operators and other development and test 5G wireless technology, recently joined China Mobile 5G joint innovation center, to promote technology research 5G, testing and business innovation. But in his opinion 5G research takes a long time, “2018 commercialized probably have some difficulty.”

Telematics is the same problem, from product design to verification often takes three to five years, after the cooperation with NavInfo, it is learned MediaTek already owned cars for sale by the electronics sector to NavInfo and strategic stake in the four-dimensional FIG its new focus on autopilot, car networking sectors. In addition to MediaTek himself set up a team conducting research in the field of automatic pilot.

With the acquisition of investment access to new technologies, the rapid increase value-added products, new channels over the more challenges outside the product. How has occupied a lot of resources, and have a certain size and product positioning business sector restructuring and reorganization, this is a problem include MediaTek, including business transformation required to face.

“Especially in the era of things, companies need to be in the original cultural transformation strategy, the adjustment of product design and manufacturing methods, modify product design and development methods, and even update the supply chain, companies will take the lead might get more return on investment. “PwC partner in charge of China TMT industry high Jianbin representation.

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