Why is MediaTek the IC star of 2009? Here's a wireless IC company which has never sold a 3G chip-set, which isn't leading-edge in terms of power-efficiency or performance, but which grew 21% last year.
Of the world's top 20 IC suppliers, only two grew last year - Mediatek and Samsung - and Mediatek's 21.7% growth made Samsung's 1.3% growth look puny.
Meanwhile, MediaTek's better technologically endowed competitors in the wireless game, had zero growth like Qualcomm, or declines like TI, ST and Infineon.
So why were MediaTek's results so damn good?
Simple answer: MediaTek supplies the mainland
So they want cheap chips and MediaTek provides them.
But that's not the whole answer. ST, Qualcomm, Infineon and TI can supply the Chinese handset makers with cheap chips.
After all their chips are manufactured in
And all their years of experience in the wireless IC game must allow Qualcomm, TI, ST and Infineon to make very highly integrated ICs. These guys can do cheap.
Maybe MediaTek enjoys some kind of advantage in mainland
It makes you wonder why the Qualcomms, TIs, Infineons and STs don't, apparently, make tiny, single-chip, ICs for handsets and enjoy the same kind of growth MediaTek is finding in the high volume cheapo handset IC market of mainland
It may be that the Western IC companies don't want to offend their big handset customers by supplying Chinese handset manufacturers which have been known to make clones of the designs of the Big Five handset manufacturers.
Could that be the reason?
Somehow one thinks that the prospect of 21% growth - in a year like 2009 - would have persuaded them to overcome their scruples.
David,
I sense a note of condescension in your post!
I could tell you many of the reasons why MTK is a great company but you first have to accept that they are a great company, otherwise any explanation will sound very hollow.
phrases like:
"So they want cheap chips and MediaTek provides them."
This patronizing attitude is what sunk TI's GSM chipset business. Ti's Locosto chips were made for the Chinese market, they were cheaper and equally or better spec'ed "as phones" than MTK's product.
BUT there were two big problems with the strategy
- Locosto was targeted at a simple cell phone only market (not the product that China wants)
- Executed in TI's typically "toss it over the wall" business style. Here's a chip with a half done reference design, and some half finished documentation but no support. Just employ 200 -300 engineers and you can probably make a product out of it, (it shouldn't take you more than a year). ST and Infineon were only a little better.
What I find more interesting is that there are a couple of companies taking sockets from MTK, so these are the guys to really watch, especially when these new guys are very profitable.
Having seen MTK at close quarters, methinks there are a number of factors behind the success of MTK.
Firstly, they have a clear understanding of "value". For MTK, "value" is how their customers define it. Although this sounds obvious, check with the western companies and you will hear something else. ("We the chip companies are experts, our customers are morons - what do they know about this high-tech industry"?)
Secondly, MTK is customer-focused. Again, sounds obvious, but MTK really knows what customer focus is. A field application engineer of MTK is not a bimbo - (s)he is versatile, adept at hacking any part of the system (literally overnight) to delight customers. No long technical discussions, no commercial intervention, no project rescheduling, no complex organization behind the engineer -- plain simple "just do it" mantra at work.
Thirdly, the work-ethic. Engineers are not obliged to follow (seemingly western) "engineering rules" - no documents to be made, no "permissions" to be taken from senior architects or technology managers, no lofty ideals to abide to. Then there is no excuse for not slogging. Only results matter - and by results, they mean "business" - not a research paper, not a technology demo, but "customer contracts" or "orders".
MTK is (to a large extent) a one-stop shop. Making chips alone doesn't satisfy them. They offer a higher value-proposition, by bundling turnkey software offering along with the chips. They don't shirk away from this responsibility by pointing towards third-party software vendors. When they do work with ISVs, they manage the ISVs themselves, thus keeping a single point of contact for their customers.
To summarize, MTK is to a large extent, a "no bullshit" company, where bullshit is anything that doesn't directly generate money for them, here and now. Dilbert, for one, is likely to feel "fish out of water" there.
So, is all pink and rosy at MTK? Even if one ignores the work-ethic aspect, the seemingly narrow focus of "milking established technologies" and no more, does invite some criticism. MTK will be challenged, on the one side, by it's clones (think MStar) and on the other, by innovators. Wonder if Dilbert will feel differently at MTK in a few years :-)
Thanks Cheese that's a brilliant explanation. I shall be much more respectful of MTK from now on.
Thanks Robert. After what you and Cheese have told me, I stand corrected on MTK. I'll watch them with with more understanding and respect from now on.
I agree with Cheese, if your in the chip business competing with either of the M&M's, you'd better bring your best game, cause they'll roll you.
In most cases they'll get a complete working system, (chip, software, hardware, middleware everything) in the customers hands before you even finish the project kick-off power-point slides.
Those are some very nice comments Cheese and Robert - I've seen MediaTek as a company that "gets it" for some time, and I'm happy to see there are even more reasons than I thought.
One thing that's especially amazing about MediaTek is that their gross margins are excellent, especially in wireless (although under a bit of pressure). This is quite amazing for a value supplier with no clear technological advantage in a competitive market, and proves that their great reference designs and field application engineers are more than just about grabbing design wins for the sake of market share. It's also very successful at making an awful lot of money.
David,
The attached reminder will point out how opportunistic MediaTek is in the China market:
WIRELESS NEWS-January 16, 2008-Analog Devices Completes Sale of Cellular Handset Radio and Baseband Chipset Operations to MediaTek (C)2008 10Meters - http://www.10meters.com
Analog Devices announced that it has completed the sale of its cellular handset radio and baseband chipset operations to MediaTek, Inc.
On September 10, 2007, ADI announced that it signed a definitive agreement to sell this business to MediaTek. For a total cash consideration of approximately $350M ...
Regards
Edward
Thanks Edward, the inference, I take it, is that a proportion of the $628 million in increased sales by MediaTek in 2009 over 2008 came from the acquisition of ADI's handset IC business which was completed in January 2008 and, presumably first showed up in MediaTek's figures in 2009. The latest figure I can find for ADI's handset IC sales is the $230 million recorded for FY 2006, and there's no breakdown to say how much came from China. But, obviously, the ADI acquisition explains a lot - so very many thanks for pointing it out.