Strategy Analytics has published its yearly report detailing global smartphone application processor market share in 2014. The total market had sales of about $21 billion with robust growth of 21%. The report shows that Qualcomm continued to lead the market in terms of revenue share with 52%, followed by Apple with 18% and MediaTek with 14%. The Apple number most likely reflects an estimate because Apple does not sell its chips to third parties. In fourth and fifth place were Speadtrum and Samsung LSI. The report mentions that HiSilicon, Intel and MediaTek had bigger growth than Qualcomm in 2014.

Qualcomm's strength based on Snapdragon 800 series wins in higher-tier phones

According to the report, Qualcomm's leadership was largely based on design wins for its Snapdragon 801 and Snapdragon 805 SoCs in the higher-tier market. Examples of this include the Samsung Galaxy S5 and LG G3. However, as I have previously reported Samsung has increased its use of in-house application processors starting from the second half of 2014, culminating in the exclusive use of Exynos 7420 in the Galaxy S6 in 2015, putting pressure on Qualcomm.

Baseband share in 2014

Strategy Analytics has also published a report with details about baseband (modem) market share in smartphones. According to the report, LTE (4G) basebands accounted for 50% of cellular baseband share in 2014, and the figure is likely to increase significantly in 2015. Qualcomm led in LTE basebands, but HiSilicon, Intel, Marvell, MediaTek and Samsung also increased LTE baseband shipments.

In terms of revenues in the overall baseband market, Qualcomm, MediaTek, Speadtrum, Marvell and Intel had the top positions in 2104. Qualcomm had 66% revenue share, followed by MediaTek with 17% and Speadtrum with 5% sare. Given the product lines of the respective companies in 2014, Qualcomm's revenues are based on both integrated SoC and separate modems, while Intel's sales were mostly separate modem chips, while the other players mostly shipped a mix of integrated SoCs and modem chips.

Comparison with 2013

Comparing with the reports that Strategy Analytics issued for 2013, Qualcomm saws it baseband revenue share remain relatively stable at 66% compared to 64% in 2013. MediaTek saw its AP market share increase from 10% in 2013 to 14% in 2014, and its baseband share increased.

Tablet processor market in 2014

According to another report issued by Strategy Analytics, the market for tablet processors grew 18% in 2014 to $4.2 billion. The top-five revenue share positions were occupied by Apple, Intel, Qualcomm, MediaTek and Samsung LSI. Apple led with 27% share (which must be an estimate), followed by Intel with 17% and Qualcomm with 16% share.

Notable is the absence among the top five of traditional leaders in the Chinese white-box market such as Rockchip and Allwinner. This most likely reflects in increase in brand name tablet shipments at the expense of the white-box tablet market, the low selling prices of white-box tablet processor and the encroachment of MediaTek and Intel into that segment.

Source: Strategy Analytics (Smartphone AP market share), Strategy Analytics (cellular baseband market share), Strategy Analytics (Tablet processor market share)

DigiTimes Research recently posted a report about smartphone AP (application processor) shipments in China in Q1 2015, indicating that Chinese fabless semiconductor company Spreadtrum gained market share in Q1, mainly based on strength for low-end 3G solutions. According to the report, Spreadtrum's market share reached 17.4% in Q1 2015, while MediaTek continues to lead the Chinese market with 46.8% share, followed by Qualcomm, which increased its share to 23.6%.

In terms of overall shipments, according to DigiTimes unit sales of smartphones by Chinese manufacturers declined significantly by about 30% in Q1 2015 compared to Q4 2014, with manufacturers focusing on export sales suffering the largest declines. Huawei, which is moving towards a strategy of using mainly in-house chip solutions from its HiSilicon division, was relatively unaffected and took market share in the quarter.

Spreadtrum's product line

Spreadtrum's increase in 3G smartphone solution shipments most likely reflects the 28 nm SoC it announced in June 2014, the SC883XG. This SoC features a quad-core Cortex-A7 CPU running up to 1.4 GHz, an ARM Mali-400 MP2 GPU, modem support for TD-SCDMA/HSPA(+) and GSM/GPRS/EDGE with dual-SIM capability, and integration of Spreadtrum's Wi-Fi/Bluetooth/GPS/FM chip technology.

The features of the SoC are extremely similar to MediaTek's successful MT6582 platform, which has been on the market for more than one and a half years. The combination of quad-core Cortex-A7 CPU, Mali-400 MP2 GPU and a high level of integration of other functionality on a 28 nm process appears to deliver good performance and very good power efficiency for cost-sensitive devices.

Spreadtrum also recently announced volume shipments of the SC7731G with 3G modem and the SC9830A with LTE modem. Rather than using Cortex-A53 CPU cores, the new chips continue to use efficient Cortex-A7 cores with Mali-400 MP2 GPU with support for Android 5.

MediaTek's 3G market share impacted by Spreadtrum

The DigiTimes report attributes MediaTek's loss of market share in China in Q1 2015 mainly to Spreadtrum's gains for 3G smartphone SoCs, where MediaTek has had a strong position. However, Qualcomm is likely to be a significant factor as well, with indications from new model announcement by companies such as TCL (Alcatel), ZTE, Lenovo/Motorola and others that MediaTek's late introduction of low-cost 4G solution has hurt the company. The resolution of the Chinese monopoly investigation into Qualcomm is also likely to be a factor.

Additionally, a trend has been noticed whereby second and third-tier Chinese smartphone manufacturers have lost share to the largest first-tier manufacturers in China. Since MediaTek's share among second and third-tier manufacturers has been the strongest, this has hurt MediaTek's shipments.

Projections for Q2 2015

For Q2 2015, DigiTimes expects overall AP shipments in China to increase 17.6% sequentially from the low base set in Q1 2015, although that still amounts to an increase of 18% over the same quarter last year (Q2 2014). DigiTimes expects MediaTek to recover some share to reach 48.4%, with Qualcomm seeing a small decline to 21.3% and Spreadtrum's share declining to 15.2%. DigiTimes attributes Spreadtrum's loss of momentum to pressure from MediaTek's 3G solutions, which probably reflects price reductions implemented by MediaTek after it saw shipments decrease and inventories build.

Sources: DigiTimes Research (smartphone AP shipments in China in Q1 2015), (DigiTimes Research (Chinese smartphone shipments in Q1 2015), Spreadtrum (2014 smartphone chip announcement), Spreadtrum (2015 smartphone chips announcement)

Recently, details surfaced about MediaTek's upcoming Helio-X20 SoC, a high performance offering in the series of Helio-branded SoCs, of which the MT6795 (Helio-X10) is the first member. The deca-core Helio-X20, which has the model number MT6797, has a total of ten CPU cores and is the first mobile SoC with a hierarchy of three clusters of progressively less performance-oriented CPU cores: two ARM-Cortex-A72 cores, four high clocked ARM-Cortex-A53 cores and four lower clocked ARM-Cortex-A53 cores.

Three-cluster hierarchy extends the big.LITTLE principle

Execution issues at Qualcomm may help MediaTek's chances of success in high-end

Execution issues at Qualcomm regarding their high-end product roadmap may increase the chances of success of MediaTek's high-end product line. Qualcomm's Snapdragon 810 has some performance issues and has not been a great success, giving MediaTek the opportunity to capture more of the performance-oriented, premium level segment. MediaTek already has Helio-X10 (MT6795) in the market, which has gained design wins, but for which some key characteristics such as power efficiency are still unknown.

Meanwhile, MediaTek has come under pressure in the cost-sensitive smartphone SoC market, previously the bread-and-butter of the company, on which Qualcomm is encroaching by gaining market share for low-end devices in China. This is mainly the result of MediaTek's delayed introduction of cost-sensitive 4G SoC solutions.

MediaTek's sales performance under pressure

On 12 May, MediaTek officially announced Helio-X20. Most of the previously known details are confirmed in the announcement. The chip utilizes MediaTek's new CorePilot 3.0 heterogeneous computing scheduling algorithm, with together with the tri-cluster architecture should provide up to 30% reduction in power consumption. The chip has advanced camera features and has an ARM Cortex-M4-based sensor hub processor for better battery efficiency.

According to AnandTech, quoting MediaTek, the GPU used is not the Mali-T880 but an as yet unannounced Mali-T8xx series GPU, similar to Mali-T880. Compared to Helio-X10's PowerVR G6200, MediaTek sees a 40% performance improvement with a 40% drop in power.

Sources: CNXSoftware (Helio-X20 article), DigiTimes (MediaTek Q2 sales projection), DigiTimes (MediaTek Q2 2015 quarterly results), Gizchina.com (Comparison of MT6797 with Snapdragon 810), MediaTek (Helio-X20 announcement), AnandTech (Helio-X20 article)

Updated 21 May 2015.

Mediatek has reported revenues for the month of February 2015 that show a steep decline, both sequentially and year-over-year.  Revenues came in at only NT$9.671 billion, a decline of 45% from January 2015 and a year-over-year decline of 39%. Since the merger with MStar became effective in February 2014, the year-over-year decline is factual and reflects a steep actual decline in the sales level of the combined businesses.

Although MediaTek has attributed the sales decline to a transition to new products in the smartphone segment, seasonal factors and fewer working days due to Chinese New Year, the main reason is likely to be a dramatic loss of market share in the entry-level segment of the Chinese smartphone market due to changes in the competitive landscape and a lack of a low-cost 4G solutions in MediaTek's product line.

Qualcomm's agreement with regulatory authorities in China has hurt MediaTek

On February 9, Qualcomm announced the resolution of the investigation by Chinese regulatory authorities into alleged monopolistic practices by Qualcomm because of the high royalty rates it imposes on all 3G and 4G-connected devices and its ability to combine royalty agreements with chip sales, effectively shutting out competitors. As part of the resolution, Qualcomm agreed to pay almost US$1 billion and agreed to a lower royalty rate of 65% in China.

However, the agreement may have increased Qualcomm's ability to enforce patent royalties and enhanced its bargaining position with Chinese smartphone manufacturers, leading to a larger proportion of Qualcomm chips being used, mainly at the expense of MediaTek's solutions. Previously, a large number of smartphones, most with MediaTek chips, were produced and sold in a grey market that avoided payment of royalties to Qualcomm. This grey market may quickly have become much smaller, contributing to the decline in MediaTek's shipments.

Additionally,  being a Taiwanese company, MediaTek is a foreign company within China, while policies in China tend to favour Chinese companies. As such, the agreement with Qualcomm and related policies may have been designed to favour upcoming Chinese chip designers such as Huawei's HiSilicon technology and the smartphone manufacturers themselves, rather than supporting MediaTek, which is not fully in the Chinese government's interest.

Lack of entry-level 4G SoC has left gap in MediaTek's product line

Because the MT6732, which is the lowest cost 4G solution that MediaTek currently has in the market, is too costly for the entry-level 4G smartphone segment, MediaTek currently has no cost-effective product offering for this segment. As entry-level smartphones transition to 4G, Qualcomm is taking market share with with its 4G-enabled Snapdragon 400, 410 and 210 SoCs, which are already in production targeting the entry-level market. This comes mainly at the expense of MediaTek's existing 3G solution shipments which previously occupied entry-level models in the product lines of most Chinese manufacturers.

Even for existing 3G models, MediaTek may be seeing market share loss as Qualcomm's cost-reduced 3G SoCs may be favoured by certain manufacturers given the changed environment regarding patent royalties.

MediaTek's loss of market share is evident among the current and new product line ups of smartphone manufacturers that previously used a lot of MediaTek solutions, such as TCL (including the Alcatel brand), ZTE, and Xiaomi, as well as other manufacturers.

However, MediaTek is close to bringing the MT6735 to market, which is a lower-cost 4G solution with a WorldMode modem with which it intends to target the entry-level 4G segment. A cost-reduced octa-core smartphone SoC, the MT6753, has also been introduced. It remains to be seen to what extent and when MediaTek will be able to recover market share in the entry level segment. Although its smartphone product line will soon be in good order and complete, it may be affected by factors beyond its control.

Many companies shipping Snapdragon 615 despite technological superiority of MT6752

Adoption of Qualcomm's mid-range Snapdragon 615 SoC by Chinese manufacturers has been strong, even as MediaTek's MT6752 SoC has ramped into production. According to most reports, the MT6752 SoC has a superior cost structure as well as delivering higher performance when compared to Qualcomm's solution, which also dominates new mid-range models from brand-name smartphone manufacturer outside of China. For the reasons explained in the previous section, Chinese smartphone manufacturers may have a strong impetus to ship models with a Qualcomm SoC in order to better deal with patent royalties, despite the technological superiority of MediaTek's chip.

Previous delay of MediaTek's MT6795/Helios X10

MediaTek's main product for the performance segment of the smartphone market, MT6795 (rebranded to Helios X10 last week at MWC), was originally announced in July 2014 with availablity to end users expected before the end of 2014. However, the chip was delayed and it is likely to come to market in the near future, several months after the planned introduction. This has also hurt MediaTek, although given the patent royalty environment it remains to be seen to what extent MediaTek will be able to gain traction with a high-end product, since patent royalties claimed by Qualcomm are significant for high-end devices with a high selling price.

Update (11 March 2015)

On 10 March, DigTimes reported that industry sources expect MediaTek's sales to rebound significantly in March to a revenue level of about NT$20 billion due a pick-up in demand from Chinese manufacturers. The sources attributed the previous decline in MediaTek's smartphone chip shipments to an inventory correction among Chinese manufacturers. According to the sources, there are signs of a pick-up in demand as vendors gear up for the launch of 4G devices in Q2 2015.

However, it is likely some orders from February 2015 where shifted into March. For the months of February and March combined, MediaTek is still likely to be seeing a disappointing year-over-year decline in revenues. Because of the competitive pressures mentioned above, it remains to be seen at what level MediaTek will be able to maintain revenues in the second quarter of 2015.

MediaTek's 4G smartphone chip product line is becoming more complete as the low-end MT6735 (especially) and MT6753 and the high-end MT6795 reach the market. Additionally, some details have surfaced about the new entry-level MT6570 and MT6580 SoCs, which appears to be developments of the popular MT6572 (dual-core Cortex-A7) and MT6582 (quad-core Cortex-A7) platforms with added support for 4G, comparable to Qualcomm's Snapdragon 210 platform, targeting the entry-level 4G segment. Given these new chips, MediaTek's smartphone performance has potential to improve.

Sources: DigiTimes (MediaTek February 2015 sales)

Updated 23 March 2015 (Mention MT6570 and MT6580).

According to a recent article published by DigiTimes Research, tablet applications processor unit shipments to Chinese manufacturers grew by 4.7% in Q4 2014 to reach 34.7 million units. However, shipments are estimated to decline by 24% in Q1 2015 when compared to Q4 2104. Year-over-year, shipments are expected to drop by about 8%, which marks the first time quarterly tablet processor shipments in China experience a year-over-year decline. Excess inventory from Q4 2014 is given as a cause for the decline in shipments.

MediaTek leads Chinese tablet market in Q1 2015

Based on information published by DigiTimes Research, MediaTek, Rockchip, Allwinner and Intel were the top four providers of tablet processors in China, in that order, in Q4 2014. For Q1 2015, MediaTek is estimated to expand it market share by about 1% to reach 28.5%, although absolute shipments will decline significantly due to the overall market decline.

Rockchip, who was the market share leader for most of 2014, is estimated to see its market share remain stable in Q1 2015, registering a 0.6% increase according to DigiTimes Research, who did not supply a market share figure for Rockchip, although it is probably in the region of 25%. DigiTimes mentioned that Rockchip's new chips launched at the end of 2014 (which includes the Cortex-A7-based RK3126 and RK3128) have not yet reached strong shipments.

Meanwhile, Allwinner continues the trend of a steady decline a market share, being expected to have a share of 15.6% compared to 17.6% in Q4 2014. This allows it to be passed by Intel in terms of market share, with Intel's market share estimated to rise from 15% to 16.3% in Q1 2015.

Intel's global market share has increased and is significant, especially revenue share

It should be noted that in terms of global market share, Intel has a stronger position than what would be inferred just from the Chinese market due to a strong position at brand-name tablet manufacturers outside of China, such as Asus and Acer. The other chip players in the Chinese tablet processor market, especially Rockchip and Allwinner, have a weak position outside of China. Due to the higher-end nature of Intel's product mix, Intel also has a higher revenue share, whereas the sales of companies such as Allwinner are mostly concentrated in low-end processors. It has been reported that Intel is abandoning its "contra-revenue" strategy of subsidizing tablet processor sales, which it probably can afford to do because its chip solutions are fairly competitive on their own.

Global brand names gain share, use different chip suppliers

In the global tablet marker, brand name manufacturers are gaining share and dominate the dollar value of the market, also for semiconductor content. Apple and Samsung, who lead the global tablet market, use a lot of in-house chip solutions (100% in the case of Apple). Samsung also uses suppliers like Qualcomm and Marvell, who otherwise do not have a strong position in the Chinese tablet market.

MediaTek used to have strong market share among Taiwanese tablet manufacturers such as Asus and Acer. However, its market share their seems to have been eroded significantly by strong adoption of Intel's Atom SoCs at these manufacturers (who have strong ties with Intel through PC manufacturing).

Popular tablet SoCs as of Q1 2015

By analyzing the tablet models offered on Chinese e-commerce portals, one can get some idea of what SoCs are currently used the most in tablets from China. I took a look at the tablet offerings on Banggood.com.

Rockchip's RK3188 (which probably means the RK3188T variant in most cases) is still widely used. Originally a mid-range performance segment SoC, there are indications that Rockchip built a significant inventory of this SoC (which is not particularly cheap in terms of manufactuing cost) last year, and the chip has been used in cheaper models as well. Rockchip's RK3126, which is more cost-effective than RK3188, is slowly starting to appear in new tablet models.

Meanwhile, Rockchip's high-end RK3288 is used in several models from Pipo, Teclast and FNF, and these seem to be reasonably popular for a high-end product. I have some concerns about power consumption and battery life regarding these products due to the processor cores used in the SoC.

The most popular MediaTek chips used in tablets are SoCs with 3G connectivity such as the low-end dual-core MT8312 and quad-core MT8382 (the equivalent of the MT6572 and MT6582 smartphone SoCs), as well as the more performance oriented octa-core MT6592/MT8392, which provides good performance and battery-life and has moved down to lower-priced tablet models. Additionally, the new 64-bit MT8752 with 4G (equivalent to the MT6752 smartphone SoC) is starting to appear in new models (Cube, Teclast). For WiFi-only tablets, the MT8127 (which has a relatively powerful GPU for a cheap SoC) is used in some low-to-mid-range tablets.

Allwinner's A31s, which was released in 2013 but perhaps its last successful product introduction, appears to be still used for production. Low-end tablets are available with the A23 and A33 SoCs, although the A33 does not seem to have been very successful and has been affected by weakness in the low-end segment of the tablet market.

Allwinner's new octa-core A83T has started to appear in a few new models, and is probably replacing the high-end A80 Octa which is likely to have had low profit margins.

Finally, Intel's Z3735F, Z3735G and Z3736F Atom SoCs are widely used in tablets, although most prominently in higher-prices models that come equipped with Microsoft Windows.

Update (15 March): 3G smartphone chip inventory unloaded onto Chinese tablet market

In an article published on 13 March 2015, DigiTimes Research reported that due to a high inventory level of 3G smartphone solutions in China, such chips will be unloaded onto the Chinese tablet market by players such as MediaTek, Qualcomm and Spreadtrum.

3G-enabled chip solutions for tablets are usually very similar to similar solutions for smartphones. For example, MediaTek's smartphone solutions have commonly been used in tablets, while MediaTek's official 3G-enabled tablet solutions most likely consist of a chip virtually identical to the smartphone version, with the main difference being a different model number (e.g. MT6582 vs MT8382). That MediaTek would target any excess inventory of 3G smartphone chipsets at the tablet market is not surprising.

However, I am little sceptical about the volume that may be involved. The Chinese tablet market is clearly contracting in the near term, and the volumes in the tablet market are considerably smaller than the smartphone market, even the declining 3G part of the smartphone SoC market. To put things into perspective, MediaTek's quarterly 3G smartphone chip shipments were on the order of 70 million in Q4 2014, while its 3G tablet chip shipments were probably in the range of 5 to 10 million.

The article also mentions Qualcomm, which in the past has not been a major player in the Chinese white-box tablet market. It mentions rumours that Qualcomm may form a partnership with Allwinner (which has been consistently losing market share) to penetrate the tablet market in China. The article also states that while Intel has introduced 3G tablet solutions, Intel's solutions are unlikely to be widely adopted until Intel introduces the 4G version of its Atom x3 (formerly SoFIA) platform.

Sources: DigiTimes (Q1 2015 China tablet AP market article),  DigiTimes Research (smartphone chips inventory unloaded to tablet market)

Updated 15 March 2015.

Both Qualcomm and MediaTek recently reported financial results for the fourth quarter of Q4 2014 and made projections for future periods. Both companies are seeing challenges that are already affecting their revenues and market share now or later in 2015.

Qualcomm lowers forecast for 2015 due to weakness at major customer

In their financial report for Q4 2014, Qualcomm lowered their outlook for 2015, citing as one of the reasons reduced demand from a major customer as that customer has not selected the Snapdragon 810 processor for an upcoming flagship product. This is widely believed to refer to Samsung's upcoming Galaxy S6. In fact the trend of increasing use of in-house Exynos processors already started last year, as models such as Galaxy Alpha, Galaxy S5 Mini and Galaxy Note 4 already saw increasing use of Samsung's own Exynos processors, including modem technology in some cases.

Qualcomm also mentions a share shift among major OEMs that will result in relatively more modem chips as opposed to SoCs (clearly referring to Apple, which only uses Qualcom's modem chips), as well as heightened competition in China. Recently, Qualcomm also recently announced a resolution of the anti-trust investigation by authorities in China, which amounts to a reduction in the patent royalty rate it charges to customers in China.

Qualcomm's total market share currently still strong

At the moment, Qualcomm's market share for smartphone SoCs is still strong as shown by unit shipments and revenues for Q4 2014 and Qualcomm's estimates for Q1 2015, although its product mix has shifted to lower-end products. In comparison to competitor MediaTek, Qualcomm is doing much better in terms of maintaining or growing unit shipments (with Qualcomm in fact seeing a 14% increase in unit shipments in Q4 2014), suggesting that Qualcomm is taking market share from MediaTek as products such as Snapdragon 410 and the new Snapdragon 210 take over large parts of the low-end cost-sensitive market (especially in China) where MediaTek's 3G solutions where previously dominant.

MediaTek losing market share despite successful new products

Meanwhile, although MediaTek has seen widespread adoption of its new MT6752 and MT6732 SoCs with integrated LTE modem for the cost-sensitive mid-range market, the company saw lower unit shipments in Q4 2014 and predicts a 10 to 18% revenue decline for Q1 2015, suggesting its smartphone SoC shipments are under pressure. Given the fact that the new 4G chips have higher selling prices than existing 3G chips, the revenue decline probably reflects a relatively dramatic decline in shipments of existing 3G solutions, with resulting loss of total market share, although price reductions may also play a role. MediaTek has been affected especially by the late introduction of integrated 4G solutions and the lack of a low-end 4G solution and to a lesser extend the delayed introduction of the high-end MT6795.

Captive mobile SoC use becoming more important

Within the total smartphone SoC market (and also in the tablet maket), captive supply (whereby a smartphone manufacturer uses its own SoCs in its smartphone models) is becoming more important, which affects the market opportunity for companies such as Qualcomm and MediaTek. I already mentioned Samsung's increasing use of Exynos processors, which has a significant impact as Samsung is one of the two largest smartphone manufacturers. A major Chinese manufacturr, Huawei, is also increasingly using SoCs from its own HiSilicon division, also extending to lower end models. Apple's gains in market share also has an effect (especially on the high-end market) since it uses proprietary SoCs.

In the tablet market, the low-end and Chinese white-box market is seeing a sharp reduction in shipments in Q1 2015, with market share shifting to brand names (where captive solutions are more important, such as at Samsung) as total shipments are estimated to decline dramatically. This greatly affects traditional players in the tablet SoC market such as Rockchip, Allwinner and MediaTek. Intel's strategy of subsidizing tablet SoCs has also had an impact. According to DigiTimes, the total tablet market will decline 30% sequentially in Q1 2015, with estimates of a decline of 12% for the whole year 2015.


Sources: DigiTimes (tablet market article), DigiTimes (MediaTek results), Qualcomm, MediaTek

Recently, DigiTimes published an article that forecasts smartphone application processor shipments in the China market for Q1 2015. Overall shipments are expected to decline by 10% sequentially when compared to Q4 2014.

The article states that Qualcomm and Spreadtrum will see the biggest declines, with Spreadtrum shipments declining almost 20% because of a lack of LTE solutions and weakness in emerging market demand.

Qualcomm sees declining shipments, but comes off a strong base

The article mentions that Qualcomm's Snapdragon 400 and Snapdragon 600 series are facing a strong challenge from comparable parts from MediaTek, with the cost structure of presumably Snapdragon 615 being less competitive than that of (presumably) MediaTek's MT6752. In earlier posts, I already compared these SoCs in some detail, and there are reasons to expect that such a cost-structure advantage for MediaTek does exist.

However, any decline for Qualcomm will come off a strong base in Q4 2014, which saw its dominance of the integrated LTE SoC market translate into market share gains (mainly at the expense of MediaTek), also in China. For the cost-sensitive part of the LTE market (covered, for example, by Snapdragon 410 and the upcoming Snapdragon 210), it does not yet face a challenge.

MediaTek struggling to reverse trend of market share decline, but product mix improves

MediaTek's market share has been negatively affected in the last part of 2014 because it was relatively late with its integrated LTE solutions, especially for the cost-sensitive part of the market (indeed, the MT6735, intended to cover the cost-sensitive segment, will only ship in Q2 2015). The article says MediaTek's shipments will decline about 15%, which suggests further market share loss in China for MediaTek after what looks like a weak Q4 2014. However, MediaTek's product mix is changing dramatically as a strong ramp of higher-end LTE SoCs such as MT6752 is offsetting declining shipments of MediaTek's existing 3G solutions which have dominated the Chinese smartphone processor market for some time.

The competitiveness of MediaTek's LTE solutions such as MT6752 gives some reason for optimism for its prospects for the rest of 2015 as these new chips ramp. However, another key product, the high-end MT6795, has been reported to have had production issues that seem to have delayed its introduction. Contrary to my original expectations, reports based on a leaked MediaTek roadmap suggest the MT6795 contains Cortex-A57 and Cortex-A53 cores in a big.LITTLE configuration, rather than a high-clocked octa-core Cortex-A53 CPU configuration, putting it squarely in the high-end segment and reducing the potential for MediaTek's chip to be significantly more cost-competitive than competitor's high-end solutions. However, no official information about the exact CPU configuration of MT6795 as well as up-to-date information about its production schedule has yet been given by MediaTek.

MediaTek's revenues for January 2015 came in at NT$17.5 billion, a level similar to the previous month. Although a year-over-year increase of 36% is apparent, the January 2014 revenue figure does not include MStar revenues. MediaTek has merged with MStar and started recognizing revenues from it in February 2014, so the year over year comparison is not very meaningful. According to DigiTimes, market watchers expected MediaTek's Q1 2015 revenues to decline no more than 10% over Q4 2014 with a strong ramp of new 4G smartphone SoCs. However, this turned out to be too optimistic.

HiSilicon gains as Huawei increasingly adopts in-house chips

Given the mentioned declines in shipments, there must be gainers to make up the balance. The article mentions strong shipments by Huawei's HiSilicon division for Huawei smartphone models. This probably reflects a trend more utilization of its own (HiSilicon) SoCs, also for more cost-senstive segments (for example, the recently announced Kirin 620 is likely to come into play).

Sources: DigiTimes Research (China smartphone AP shipment forecast for Q1 2015), DigiTimes Research (article on delay of Snapdragon 810 and MT6795)

Updated February 17, 2015.

Strategy Analytics has published its yearly report detailing global smartphone application processor market share in 2014. The total market had sales of about $21 billion with robust growth of 21%. The report shows that Qualcomm continued to lead the market in terms of revenue share with 52%, followed by Apple with 18% and MediaTek with 14%. The Apple number most likely reflects an estimate because Apple does not sell its chips to third parties. In fourth and fifth place were Speadtrum and Samsung LSI. The report mentions that HiSilicon, Intel and MediaTek had bigger growth than Qualcomm in 2014.

Qualcomm's strength based on Snapdragon 800 series wins in higher-tier phones

According to the report, Qualcomm's leadership was largely based on design wins for its Snapdragon 801 and Snapdragon 805 SoCs in the higher-tier market. Examples of this include the Samsung Galaxy S5 and LG G3. However, as I have previously reported Samsung has increased its use of in-house application processors starting from the second half of 2014, culminating in the exclusive use of Exynos 7420 in the Galaxy S6 in 2015, putting pressure on Qualcomm.

Baseband share in 2014

Strategy Analytics has also published a report with details about baseband (modem) market share in smartphones. According to the report, LTE (4G) basebands accounted for 50% of cellular baseband share in 2014, and the figure is likely to increase significantly in 2015. Qualcomm led in LTE basebands, but HiSilicon, Intel, Marvell, MediaTek and Samsung also increased LTE baseband shipments.

In terms of revenues in the overall baseband market, Qualcomm, MediaTek, Speadtrum, Marvell and Intel had the top positions in 2104. Qualcomm had 66% revenue share, followed by MediaTek with 17% and Speadtrum with 5% sare. Given the product lines of the respective companies in 2014, Qualcomm's revenues are based on both integrated SoC and separate modems, while Intel's sales were mostly separate modem chips, while the other players mostly shipped a mix of integrated SoCs and modem chips.

Comparison with 2013

Comparing with the reports that Strategy Analytics issued for 2013, Qualcomm saws it baseband revenue share remain relatively stable at 66% compared to 64% in 2013. MediaTek saw its AP market share increase from 10% in 2013 to 14% in 2014, and its baseband share increased.

Tablet processor market in 2014

According to another report issued by Strategy Analytics, the market for tablet processors grew 18% in 2014 to $4.2 billion. The top-five revenue share positions were occupied by Apple, Intel, Qualcomm, MediaTek and Samsung LSI. Apple led with 27% share (which must be an estimate), followed by Intel with 17% and Qualcomm with 16% share.

Notable is the absence among the top five of traditional leaders in the Chinese white-box market such as Rockchip and Allwinner. This most likely reflects in increase in brand name tablet shipments at the expense of the white-box tablet market, the low selling prices of white-box tablet processor and the encroachment of MediaTek and Intel into that segment.

Source: Strategy Analytics (Smartphone AP market share), Strategy Analytics (cellular baseband market share), Strategy Analytics (Tablet processor market share)

DigiTimes Research recently posted a report about smartphone AP (application processor) shipments in China in Q1 2015, indicating that Chinese fabless semiconductor company Spreadtrum gained market share in Q1, mainly based on strength for low-end 3G solutions. According to the report, Spreadtrum's market share reached 17.4% in Q1 2015, while MediaTek continues to lead the Chinese market with 46.8% share, followed by Qualcomm, which increased its share to 23.6%.

In terms of overall shipments, according to DigiTimes unit sales of smartphones by Chinese manufacturers declined significantly by about 30% in Q1 2015 compared to Q4 2014, with manufacturers focusing on export sales suffering the largest declines. Huawei, which is moving towards a strategy of using mainly in-house chip solutions from its HiSilicon division, was relatively unaffected and took market share in the quarter.

Spreadtrum's product line

Spreadtrum's increase in 3G smartphone solution shipments most likely reflects the 28 nm SoC it announced in June 2014, the SC883XG. This SoC features a quad-core Cortex-A7 CPU running up to 1.4 GHz, an ARM Mali-400 MP2 GPU, modem support for TD-SCDMA/HSPA(+) and GSM/GPRS/EDGE with dual-SIM capability, and integration of Spreadtrum's Wi-Fi/Bluetooth/GPS/FM chip technology.

The features of the SoC are extremely similar to MediaTek's successful MT6582 platform, which has been on the market for more than one and a half years. The combination of quad-core Cortex-A7 CPU, Mali-400 MP2 GPU and a high level of integration of other functionality on a 28 nm process appears to deliver good performance and very good power efficiency for cost-sensitive devices.

Spreadtrum also recently announced volume shipments of the SC7731G with 3G modem and the SC9830A with LTE modem. Rather than using Cortex-A53 CPU cores, the new chips continue to use efficient Cortex-A7 cores with Mali-400 MP2 GPU with support for Android 5.

MediaTek's 3G market share impacted by Spreadtrum

The DigiTimes report attributes MediaTek's loss of market share in China in Q1 2015 mainly to Spreadtrum's gains for 3G smartphone SoCs, where MediaTek has had a strong position. However, Qualcomm is likely to be a significant factor as well, with indications from new model announcement by companies such as TCL (Alcatel), ZTE, Lenovo/Motorola and others that MediaTek's late introduction of low-cost 4G solution has hurt the company. The resolution of the Chinese monopoly investigation into Qualcomm is also likely to be a factor.

Additionally, a trend has been noticed whereby second and third-tier Chinese smartphone manufacturers have lost share to the largest first-tier manufacturers in China. Since MediaTek's share among second and third-tier manufacturers has been the strongest, this has hurt MediaTek's shipments.

Projections for Q2 2015

For Q2 2015, DigiTimes expects overall AP shipments in China to increase 17.6% sequentially from the low base set in Q1 2015, although that still amounts to an increase of 18% over the same quarter last year (Q2 2014). DigiTimes expects MediaTek to recover some share to reach 48.4%, with Qualcomm seeing a small decline to 21.3% and Spreadtrum's share declining to 15.2%. DigiTimes attributes Spreadtrum's loss of momentum to pressure from MediaTek's 3G solutions, which probably reflects price reductions implemented by MediaTek after it saw shipments decrease and inventories build.

Sources: DigiTimes Research (smartphone AP shipments in China in Q1 2015), (DigiTimes Research (Chinese smartphone shipments in Q1 2015), Spreadtrum (2014 smartphone chip announcement), Spreadtrum (2015 smartphone chips announcement)

Recently, details surfaced about MediaTek's upcoming Helio-X20 SoC, a high performance offering in the series of Helio-branded SoCs, of which the MT6795 (Helio-X10) is the first member. The deca-core Helio-X20, which has the model number MT6797, has a total of ten CPU cores and is the first mobile SoC with a hierarchy of three clusters of progressively less performance-oriented CPU cores: two ARM-Cortex-A72 cores, four high clocked ARM-Cortex-A53 cores and four lower clocked ARM-Cortex-A53 cores.

Three-cluster hierarchy extends the big.LITTLE principle

Execution issues at Qualcomm may help MediaTek's chances of success in high-end

Execution issues at Qualcomm regarding their high-end product roadmap may increase the chances of success of MediaTek's high-end product line. Qualcomm's Snapdragon 810 has some performance issues and has not been a great success, giving MediaTek the opportunity to capture more of the performance-oriented, premium level segment. MediaTek already has Helio-X10 (MT6795) in the market, which has gained design wins, but for which some key characteristics such as power efficiency are still unknown.

Meanwhile, MediaTek has come under pressure in the cost-sensitive smartphone SoC market, previously the bread-and-butter of the company, on which Qualcomm is encroaching by gaining market share for low-end devices in China. This is mainly the result of MediaTek's delayed introduction of cost-sensitive 4G SoC solutions.

MediaTek's sales performance under pressure

On 12 May, MediaTek officially announced Helio-X20. Most of the previously known details are confirmed in the announcement. The chip utilizes MediaTek's new CorePilot 3.0 heterogeneous computing scheduling algorithm, with together with the tri-cluster architecture should provide up to 30% reduction in power consumption. The chip has advanced camera features and has an ARM Cortex-M4-based sensor hub processor for better battery efficiency.

According to AnandTech, quoting MediaTek, the GPU used is not the Mali-T880 but an as yet unannounced Mali-T8xx series GPU, similar to Mali-T880. Compared to Helio-X10's PowerVR G6200, MediaTek sees a 40% performance improvement with a 40% drop in power.

Sources: CNXSoftware (Helio-X20 article), DigiTimes (MediaTek Q2 sales projection), DigiTimes (MediaTek Q2 2015 quarterly results), Gizchina.com (Comparison of MT6797 with Snapdragon 810), MediaTek (Helio-X20 announcement), AnandTech (Helio-X20 article)

Updated 21 May 2015.

Mediatek has reported revenues for the month of February 2015 that show a steep decline, both sequentially and year-over-year.  Revenues came in at only NT$9.671 billion, a decline of 45% from January 2015 and a year-over-year decline of 39%. Since the merger with MStar became effective in February 2014, the year-over-year decline is factual and reflects a steep actual decline in the sales level of the combined businesses.

Although MediaTek has attributed the sales decline to a transition to new products in the smartphone segment, seasonal factors and fewer working days due to Chinese New Year, the main reason is likely to be a dramatic loss of market share in the entry-level segment of the Chinese smartphone market due to changes in the competitive landscape and a lack of a low-cost 4G solutions in MediaTek's product line.

Qualcomm's agreement with regulatory authorities in China has hurt MediaTek

On February 9, Qualcomm announced the resolution of the investigation by Chinese regulatory authorities into alleged monopolistic practices by Qualcomm because of the high royalty rates it imposes on all 3G and 4G-connected devices and its ability to combine royalty agreements with chip sales, effectively shutting out competitors. As part of the resolution, Qualcomm agreed to pay almost US$1 billion and agreed to a lower royalty rate of 65% in China.

However, the agreement may have increased Qualcomm's ability to enforce patent royalties and enhanced its bargaining position with Chinese smartphone manufacturers, leading to a larger proportion of Qualcomm chips being used, mainly at the expense of MediaTek's solutions. Previously, a large number of smartphones, most with MediaTek chips, were produced and sold in a grey market that avoided payment of royalties to Qualcomm. This grey market may quickly have become much smaller, contributing to the decline in MediaTek's shipments.

Additionally,  being a Taiwanese company, MediaTek is a foreign company within China, while policies in China tend to favour Chinese companies. As such, the agreement with Qualcomm and related policies may have been designed to favour upcoming Chinese chip designers such as Huawei's HiSilicon technology and the smartphone manufacturers themselves, rather than supporting MediaTek, which is not fully in the Chinese government's interest.

Lack of entry-level 4G SoC has left gap in MediaTek's product line

Because the MT6732, which is the lowest cost 4G solution that MediaTek currently has in the market, is too costly for the entry-level 4G smartphone segment, MediaTek currently has no cost-effective product offering for this segment. As entry-level smartphones transition to 4G, Qualcomm is taking market share with with its 4G-enabled Snapdragon 400, 410 and 210 SoCs, which are already in production targeting the entry-level market. This comes mainly at the expense of MediaTek's existing 3G solution shipments which previously occupied entry-level models in the product lines of most Chinese manufacturers.

Even for existing 3G models, MediaTek may be seeing market share loss as Qualcomm's cost-reduced 3G SoCs may be favoured by certain manufacturers given the changed environment regarding patent royalties.

MediaTek's loss of market share is evident among the current and new product line ups of smartphone manufacturers that previously used a lot of MediaTek solutions, such as TCL (including the Alcatel brand), ZTE, and Xiaomi, as well as other manufacturers.

However, MediaTek is close to bringing the MT6735 to market, which is a lower-cost 4G solution with a WorldMode modem with which it intends to target the entry-level 4G segment. A cost-reduced octa-core smartphone SoC, the MT6753, has also been introduced. It remains to be seen to what extent and when MediaTek will be able to recover market share in the entry level segment. Although its smartphone product line will soon be in good order and complete, it may be affected by factors beyond its control.

Many companies shipping Snapdragon 615 despite technological superiority of MT6752

Adoption of Qualcomm's mid-range Snapdragon 615 SoC by Chinese manufacturers has been strong, even as MediaTek's MT6752 SoC has ramped into production. According to most reports, the MT6752 SoC has a superior cost structure as well as delivering higher performance when compared to Qualcomm's solution, which also dominates new mid-range models from brand-name smartphone manufacturer outside of China. For the reasons explained in the previous section, Chinese smartphone manufacturers may have a strong impetus to ship models with a Qualcomm SoC in order to better deal with patent royalties, despite the technological superiority of MediaTek's chip.

Previous delay of MediaTek's MT6795/Helios X10

MediaTek's main product for the performance segment of the smartphone market, MT6795 (rebranded to Helios X10 last week at MWC), was originally announced in July 2014 with availablity to end users expected before the end of 2014. However, the chip was delayed and it is likely to come to market in the near future, several months after the planned introduction. This has also hurt MediaTek, although given the patent royalty environment it remains to be seen to what extent MediaTek will be able to gain traction with a high-end product, since patent royalties claimed by Qualcomm are significant for high-end devices with a high selling price.

Update (11 March 2015)

On 10 March, DigTimes reported that industry sources expect MediaTek's sales to rebound significantly in March to a revenue level of about NT$20 billion due a pick-up in demand from Chinese manufacturers. The sources attributed the previous decline in MediaTek's smartphone chip shipments to an inventory correction among Chinese manufacturers. According to the sources, there are signs of a pick-up in demand as vendors gear up for the launch of 4G devices in Q2 2015.

However, it is likely some orders from February 2015 where shifted into March. For the months of February and March combined, MediaTek is still likely to be seeing a disappointing year-over-year decline in revenues. Because of the competitive pressures mentioned above, it remains to be seen at what level MediaTek will be able to maintain revenues in the second quarter of 2015.

MediaTek's 4G smartphone chip product line is becoming more complete as the low-end MT6735 (especially) and MT6753 and the high-end MT6795 reach the market. Additionally, some details have surfaced about the new entry-level MT6570 and MT6580 SoCs, which appears to be developments of the popular MT6572 (dual-core Cortex-A7) and MT6582 (quad-core Cortex-A7) platforms with added support for 4G, comparable to Qualcomm's Snapdragon 210 platform, targeting the entry-level 4G segment. Given these new chips, MediaTek's smartphone performance has potential to improve.

Sources: DigiTimes (MediaTek February 2015 sales)

Updated 23 March 2015 (Mention MT6570 and MT6580).

According to a recent article published by DigiTimes Research, tablet applications processor unit shipments to Chinese manufacturers grew by 4.7% in Q4 2014 to reach 34.7 million units. However, shipments are estimated to decline by 24% in Q1 2015 when compared to Q4 2104. Year-over-year, shipments are expected to drop by about 8%, which marks the first time quarterly tablet processor shipments in China experience a year-over-year decline. Excess inventory from Q4 2014 is given as a cause for the decline in shipments.

MediaTek leads Chinese tablet market in Q1 2015

Based on information published by DigiTimes Research, MediaTek, Rockchip, Allwinner and Intel were the top four providers of tablet processors in China, in that order, in Q4 2014. For Q1 2015, MediaTek is estimated to expand it market share by about 1% to reach 28.5%, although absolute shipments will decline significantly due to the overall market decline.

Rockchip, who was the market share leader for most of 2014, is estimated to see its market share remain stable in Q1 2015, registering a 0.6% increase according to DigiTimes Research, who did not supply a market share figure for Rockchip, although it is probably in the region of 25%. DigiTimes mentioned that Rockchip's new chips launched at the end of 2014 (which includes the Cortex-A7-based RK3126 and RK3128) have not yet reached strong shipments.

Meanwhile, Allwinner continues the trend of a steady decline a market share, being expected to have a share of 15.6% compared to 17.6% in Q4 2014. This allows it to be passed by Intel in terms of market share, with Intel's market share estimated to rise from 15% to 16.3% in Q1 2015.

Intel's global market share has increased and is significant, especially revenue share

It should be noted that in terms of global market share, Intel has a stronger position than what would be inferred just from the Chinese market due to a strong position at brand-name tablet manufacturers outside of China, such as Asus and Acer. The other chip players in the Chinese tablet processor market, especially Rockchip and Allwinner, have a weak position outside of China. Due to the higher-end nature of Intel's product mix, Intel also has a higher revenue share, whereas the sales of companies such as Allwinner are mostly concentrated in low-end processors. It has been reported that Intel is abandoning its "contra-revenue" strategy of subsidizing tablet processor sales, which it probably can afford to do because its chip solutions are fairly competitive on their own.

Global brand names gain share, use different chip suppliers

In the global tablet marker, brand name manufacturers are gaining share and dominate the dollar value of the market, also for semiconductor content. Apple and Samsung, who lead the global tablet market, use a lot of in-house chip solutions (100% in the case of Apple). Samsung also uses suppliers like Qualcomm and Marvell, who otherwise do not have a strong position in the Chinese tablet market.

MediaTek used to have strong market share among Taiwanese tablet manufacturers such as Asus and Acer. However, its market share their seems to have been eroded significantly by strong adoption of Intel's Atom SoCs at these manufacturers (who have strong ties with Intel through PC manufacturing).

Popular tablet SoCs as of Q1 2015

By analyzing the tablet models offered on Chinese e-commerce portals, one can get some idea of what SoCs are currently used the most in tablets from China. I took a look at the tablet offerings on Banggood.com.

Rockchip's RK3188 (which probably means the RK3188T variant in most cases) is still widely used. Originally a mid-range performance segment SoC, there are indications that Rockchip built a significant inventory of this SoC (which is not particularly cheap in terms of manufactuing cost) last year, and the chip has been used in cheaper models as well. Rockchip's RK3126, which is more cost-effective than RK3188, is slowly starting to appear in new tablet models.

Meanwhile, Rockchip's high-end RK3288 is used in several models from Pipo, Teclast and FNF, and these seem to be reasonably popular for a high-end product. I have some concerns about power consumption and battery life regarding these products due to the processor cores used in the SoC.

The most popular MediaTek chips used in tablets are SoCs with 3G connectivity such as the low-end dual-core MT8312 and quad-core MT8382 (the equivalent of the MT6572 and MT6582 smartphone SoCs), as well as the more performance oriented octa-core MT6592/MT8392, which provides good performance and battery-life and has moved down to lower-priced tablet models. Additionally, the new 64-bit MT8752 with 4G (equivalent to the MT6752 smartphone SoC) is starting to appear in new models (Cube, Teclast). For WiFi-only tablets, the MT8127 (which has a relatively powerful GPU for a cheap SoC) is used in some low-to-mid-range tablets.

Allwinner's A31s, which was released in 2013 but perhaps its last successful product introduction, appears to be still used for production. Low-end tablets are available with the A23 and A33 SoCs, although the A33 does not seem to have been very successful and has been affected by weakness in the low-end segment of the tablet market.

Allwinner's new octa-core A83T has started to appear in a few new models, and is probably replacing the high-end A80 Octa which is likely to have had low profit margins.

Finally, Intel's Z3735F, Z3735G and Z3736F Atom SoCs are widely used in tablets, although most prominently in higher-prices models that come equipped with Microsoft Windows.

Update (15 March): 3G smartphone chip inventory unloaded onto Chinese tablet market

In an article published on 13 March 2015, DigiTimes Research reported that due to a high inventory level of 3G smartphone solutions in China, such chips will be unloaded onto the Chinese tablet market by players such as MediaTek, Qualcomm and Spreadtrum.

3G-enabled chip solutions for tablets are usually very similar to similar solutions for smartphones. For example, MediaTek's smartphone solutions have commonly been used in tablets, while MediaTek's official 3G-enabled tablet solutions most likely consist of a chip virtually identical to the smartphone version, with the main difference being a different model number (e.g. MT6582 vs MT8382). That MediaTek would target any excess inventory of 3G smartphone chipsets at the tablet market is not surprising.

However, I am little sceptical about the volume that may be involved. The Chinese tablet market is clearly contracting in the near term, and the volumes in the tablet market are considerably smaller than the smartphone market, even the declining 3G part of the smartphone SoC market. To put things into perspective, MediaTek's quarterly 3G smartphone chip shipments were on the order of 70 million in Q4 2014, while its 3G tablet chip shipments were probably in the range of 5 to 10 million.

The article also mentions Qualcomm, which in the past has not been a major player in the Chinese white-box tablet market. It mentions rumours that Qualcomm may form a partnership with Allwinner (which has been consistently losing market share) to penetrate the tablet market in China. The article also states that while Intel has introduced 3G tablet solutions, Intel's solutions are unlikely to be widely adopted until Intel introduces the 4G version of its Atom x3 (formerly SoFIA) platform.

Sources: DigiTimes (Q1 2015 China tablet AP market article),  DigiTimes Research (smartphone chips inventory unloaded to tablet market)

Updated 15 March 2015.

Both Qualcomm and MediaTek recently reported financial results for the fourth quarter of Q4 2014 and made projections for future periods. Both companies are seeing challenges that are already affecting their revenues and market share now or later in 2015.

Qualcomm lowers forecast for 2015 due to weakness at major customer

In their financial report for Q4 2014, Qualcomm lowered their outlook for 2015, citing as one of the reasons reduced demand from a major customer as that customer has not selected the Snapdragon 810 processor for an upcoming flagship product. This is widely believed to refer to Samsung's upcoming Galaxy S6. In fact the trend of increasing use of in-house Exynos processors already started last year, as models such as Galaxy Alpha, Galaxy S5 Mini and Galaxy Note 4 already saw increasing use of Samsung's own Exynos processors, including modem technology in some cases.

Qualcomm also mentions a share shift among major OEMs that will result in relatively more modem chips as opposed to SoCs (clearly referring to Apple, which only uses Qualcom's modem chips), as well as heightened competition in China. Recently, Qualcomm also recently announced a resolution of the anti-trust investigation by authorities in China, which amounts to a reduction in the patent royalty rate it charges to customers in China.

Qualcomm's total market share currently still strong

At the moment, Qualcomm's market share for smartphone SoCs is still strong as shown by unit shipments and revenues for Q4 2014 and Qualcomm's estimates for Q1 2015, although its product mix has shifted to lower-end products. In comparison to competitor MediaTek, Qualcomm is doing much better in terms of maintaining or growing unit shipments (with Qualcomm in fact seeing a 14% increase in unit shipments in Q4 2014), suggesting that Qualcomm is taking market share from MediaTek as products such as Snapdragon 410 and the new Snapdragon 210 take over large parts of the low-end cost-sensitive market (especially in China) where MediaTek's 3G solutions where previously dominant.

MediaTek losing market share despite successful new products

Meanwhile, although MediaTek has seen widespread adoption of its new MT6752 and MT6732 SoCs with integrated LTE modem for the cost-sensitive mid-range market, the company saw lower unit shipments in Q4 2014 and predicts a 10 to 18% revenue decline for Q1 2015, suggesting its smartphone SoC shipments are under pressure. Given the fact that the new 4G chips have higher selling prices than existing 3G chips, the revenue decline probably reflects a relatively dramatic decline in shipments of existing 3G solutions, with resulting loss of total market share, although price reductions may also play a role. MediaTek has been affected especially by the late introduction of integrated 4G solutions and the lack of a low-end 4G solution and to a lesser extend the delayed introduction of the high-end MT6795.

Captive mobile SoC use becoming more important

Within the total smartphone SoC market (and also in the tablet maket), captive supply (whereby a smartphone manufacturer uses its own SoCs in its smartphone models) is becoming more important, which affects the market opportunity for companies such as Qualcomm and MediaTek. I already mentioned Samsung's increasing use of Exynos processors, which has a significant impact as Samsung is one of the two largest smartphone manufacturers. A major Chinese manufacturr, Huawei, is also increasingly using SoCs from its own HiSilicon division, also extending to lower end models. Apple's gains in market share also has an effect (especially on the high-end market) since it uses proprietary SoCs.

In the tablet market, the low-end and Chinese white-box market is seeing a sharp reduction in shipments in Q1 2015, with market share shifting to brand names (where captive solutions are more important, such as at Samsung) as total shipments are estimated to decline dramatically. This greatly affects traditional players in the tablet SoC market such as Rockchip, Allwinner and MediaTek. Intel's strategy of subsidizing tablet SoCs has also had an impact. According to DigiTimes, the total tablet market will decline 30% sequentially in Q1 2015, with estimates of a decline of 12% for the whole year 2015.


Sources: DigiTimes (tablet market article), DigiTimes (MediaTek results), Qualcomm, MediaTek

Recently, DigiTimes published an article that forecasts smartphone application processor shipments in the China market for Q1 2015. Overall shipments are expected to decline by 10% sequentially when compared to Q4 2014.

The article states that Qualcomm and Spreadtrum will see the biggest declines, with Spreadtrum shipments declining almost 20% because of a lack of LTE solutions and weakness in emerging market demand.

Qualcomm sees declining shipments, but comes off a strong base

The article mentions that Qualcomm's Snapdragon 400 and Snapdragon 600 series are facing a strong challenge from comparable parts from MediaTek, with the cost structure of presumably Snapdragon 615 being less competitive than that of (presumably) MediaTek's MT6752. In earlier posts, I already compared these SoCs in some detail, and there are reasons to expect that such a cost-structure advantage for MediaTek does exist.

However, any decline for Qualcomm will come off a strong base in Q4 2014, which saw its dominance of the integrated LTE SoC market translate into market share gains (mainly at the expense of MediaTek), also in China. For the cost-sensitive part of the LTE market (covered, for example, by Snapdragon 410 and the upcoming Snapdragon 210), it does not yet face a challenge.

MediaTek struggling to reverse trend of market share decline, but product mix improves

MediaTek's market share has been negatively affected in the last part of 2014 because it was relatively late with its integrated LTE solutions, especially for the cost-sensitive part of the market (indeed, the MT6735, intended to cover the cost-sensitive segment, will only ship in Q2 2015). The article says MediaTek's shipments will decline about 15%, which suggests further market share loss in China for MediaTek after what looks like a weak Q4 2014. However, MediaTek's product mix is changing dramatically as a strong ramp of higher-end LTE SoCs such as MT6752 is offsetting declining shipments of MediaTek's existing 3G solutions which have dominated the Chinese smartphone processor market for some time.

The competitiveness of MediaTek's LTE solutions such as MT6752 gives some reason for optimism for its prospects for the rest of 2015 as these new chips ramp. However, another key product, the high-end MT6795, has been reported to have had production issues that seem to have delayed its introduction. Contrary to my original expectations, reports based on a leaked MediaTek roadmap suggest the MT6795 contains Cortex-A57 and Cortex-A53 cores in a big.LITTLE configuration, rather than a high-clocked octa-core Cortex-A53 CPU configuration, putting it squarely in the high-end segment and reducing the potential for MediaTek's chip to be significantly more cost-competitive than competitor's high-end solutions. However, no official information about the exact CPU configuration of MT6795 as well as up-to-date information about its production schedule has yet been given by MediaTek.

MediaTek's revenues for January 2015 came in at NT$17.5 billion, a level similar to the previous month. Although a year-over-year increase of 36% is apparent, the January 2014 revenue figure does not include MStar revenues. MediaTek has merged with MStar and started recognizing revenues from it in February 2014, so the year over year comparison is not very meaningful. According to DigiTimes, market watchers expected MediaTek's Q1 2015 revenues to decline no more than 10% over Q4 2014 with a strong ramp of new 4G smartphone SoCs. However, this turned out to be too optimistic.

HiSilicon gains as Huawei increasingly adopts in-house chips

Given the mentioned declines in shipments, there must be gainers to make up the balance. The article mentions strong shipments by Huawei's HiSilicon division for Huawei smartphone models. This probably reflects a trend more utilization of its own (HiSilicon) SoCs, also for more cost-senstive segments (for example, the recently announced Kirin 620 is likely to come into play).

Sources: DigiTimes Research (China smartphone AP shipment forecast for Q1 2015), DigiTimes Research (article on delay of Snapdragon 810 and MT6795)

Updated February 17, 2015.

Strategy Analytics has published its yearly report detailing global smartphone application processor market share in 2014. The total market had sales of about $21 billion with robust growth of 21%. The report shows that Qualcomm continued to lead the market in terms of revenue share with 52%, followed by Apple with 18% and MediaTek with 14%. The Apple number most likely reflects an estimate because Apple does not sell its chips to third parties. In fourth and fifth place were Speadtrum and Samsung LSI. The report mentions that HiSilicon, Intel and MediaTek had bigger growth than Qualcomm in 2014.

Qualcomm's strength based on Snapdragon 800 series wins in higher-tier phones

According to the report, Qualcomm's leadership was largely based on design wins for its Snapdragon 801 and Snapdragon 805 SoCs in the higher-tier market. Examples of this include the Samsung Galaxy S5 and LG G3. However, as I have previously reported Samsung has increased its use of in-house application processors starting from the second half of 2014, culminating in the exclusive use of Exynos 7420 in the Galaxy S6 in 2015, putting pressure on Qualcomm.

Baseband share in 2014

Strategy Analytics has also published a report with details about baseband (modem) market share in smartphones. According to the report, LTE (4G) basebands accounted for 50% of cellular baseband share in 2014, and the figure is likely to increase significantly in 2015. Qualcomm led in LTE basebands, but HiSilicon, Intel, Marvell, MediaTek and Samsung also increased LTE baseband shipments.

In terms of revenues in the overall baseband market, Qualcomm, MediaTek, Speadtrum, Marvell and Intel had the top positions in 2104. Qualcomm had 66% revenue share, followed by MediaTek with 17% and Speadtrum with 5% sare. Given the product lines of the respective companies in 2014, Qualcomm's revenues are based on both integrated SoC and separate modems, while Intel's sales were mostly separate modem chips, while the other players mostly shipped a mix of integrated SoCs and modem chips.

Comparison with 2013

Comparing with the reports that Strategy Analytics issued for 2013, Qualcomm saws it baseband revenue share remain relatively stable at 66% compared to 64% in 2013. MediaTek saw its AP market share increase from 10% in 2013 to 14% in 2014, and its baseband share increased.

Tablet processor market in 2014

According to another report issued by Strategy Analytics, the market for tablet processors grew 18% in 2014 to $4.2 billion. The top-five revenue share positions were occupied by Apple, Intel, Qualcomm, MediaTek and Samsung LSI. Apple led with 27% share (which must be an estimate), followed by Intel with 17% and Qualcomm with 16% share.

Notable is the absence among the top five of traditional leaders in the Chinese white-box market such as Rockchip and Allwinner. This most likely reflects in increase in brand name tablet shipments at the expense of the white-box tablet market, the low selling prices of white-box tablet processor and the encroachment of MediaTek and Intel into that segment.

Source: Strategy Analytics (Smartphone AP market share), Strategy Analytics (cellular baseband market share), Strategy Analytics (Tablet processor market share)

DigiTimes Research recently posted a report about smartphone AP (application processor) shipments in China in Q1 2015, indicating that Chinese fabless semiconductor company Spreadtrum gained market share in Q1, mainly based on strength for low-end 3G solutions. According to the report, Spreadtrum's market share reached 17.4% in Q1 2015, while MediaTek continues to lead the Chinese market with 46.8% share, followed by Qualcomm, which increased its share to 23.6%.

In terms of overall shipments, according to DigiTimes unit sales of smartphones by Chinese manufacturers declined significantly by about 30% in Q1 2015 compared to Q4 2014, with manufacturers focusing on export sales suffering the largest declines. Huawei, which is moving towards a strategy of using mainly in-house chip solutions from its HiSilicon division, was relatively unaffected and took market share in the quarter.

Spreadtrum's product line

Spreadtrum's increase in 3G smartphone solution shipments most likely reflects the 28 nm SoC it announced in June 2014, the SC883XG. This SoC features a quad-core Cortex-A7 CPU running up to 1.4 GHz, an ARM Mali-400 MP2 GPU, modem support for TD-SCDMA/HSPA(+) and GSM/GPRS/EDGE with dual-SIM capability, and integration of Spreadtrum's Wi-Fi/Bluetooth/GPS/FM chip technology.

The features of the SoC are extremely similar to MediaTek's successful MT6582 platform, which has been on the market for more than one and a half years. The combination of quad-core Cortex-A7 CPU, Mali-400 MP2 GPU and a high level of integration of other functionality on a 28 nm process appears to deliver good performance and very good power efficiency for cost-sensitive devices.

Spreadtrum also recently announced volume shipments of the SC7731G with 3G modem and the SC9830A with LTE modem. Rather than using Cortex-A53 CPU cores, the new chips continue to use efficient Cortex-A7 cores with Mali-400 MP2 GPU with support for Android 5.

MediaTek's 3G market share impacted by Spreadtrum

The DigiTimes report attributes MediaTek's loss of market share in China in Q1 2015 mainly to Spreadtrum's gains for 3G smartphone SoCs, where MediaTek has had a strong position. However, Qualcomm is likely to be a significant factor as well, with indications from new model announcement by companies such as TCL (Alcatel), ZTE, Lenovo/Motorola and others that MediaTek's late introduction of low-cost 4G solution has hurt the company. The resolution of the Chinese monopoly investigation into Qualcomm is also likely to be a factor.

Additionally, a trend has been noticed whereby second and third-tier Chinese smartphone manufacturers have lost share to the largest first-tier manufacturers in China. Since MediaTek's share among second and third-tier manufacturers has been the strongest, this has hurt MediaTek's shipments.

Projections for Q2 2015

For Q2 2015, DigiTimes expects overall AP shipments in China to increase 17.6% sequentially from the low base set in Q1 2015, although that still amounts to an increase of 18% over the same quarter last year (Q2 2014). DigiTimes expects MediaTek to recover some share to reach 48.4%, with Qualcomm seeing a small decline to 21.3% and Spreadtrum's share declining to 15.2%. DigiTimes attributes Spreadtrum's loss of momentum to pressure from MediaTek's 3G solutions, which probably reflects price reductions implemented by MediaTek after it saw shipments decrease and inventories build.

Sources: DigiTimes Research (smartphone AP shipments in China in Q1 2015), (DigiTimes Research (Chinese smartphone shipments in Q1 2015), Spreadtrum (2014 smartphone chip announcement), Spreadtrum (2015 smartphone chips announcement)

Recently, details surfaced about MediaTek's upcoming Helio-X20 SoC, a high performance offering in the series of Helio-branded SoCs, of which the MT6795 (Helio-X10) is the first member. The deca-core Helio-X20, which has the model number MT6797, has a total of ten CPU cores and is the first mobile SoC with a hierarchy of three clusters of progressively less performance-oriented CPU cores: two ARM-Cortex-A72 cores, four high clocked ARM-Cortex-A53 cores and four lower clocked ARM-Cortex-A53 cores.

Three-cluster hierarchy extends the big.LITTLE principle

Execution issues at Qualcomm may help MediaTek's chances of success in high-end

Execution issues at Qualcomm regarding their high-end product roadmap may increase the chances of success of MediaTek's high-end product line. Qualcomm's Snapdragon 810 has some performance issues and has not been a great success, giving MediaTek the opportunity to capture more of the performance-oriented, premium level segment. MediaTek already has Helio-X10 (MT6795) in the market, which has gained design wins, but for which some key characteristics such as power efficiency are still unknown.

Meanwhile, MediaTek has come under pressure in the cost-sensitive smartphone SoC market, previously the bread-and-butter of the company, on which Qualcomm is encroaching by gaining market share for low-end devices in China. This is mainly the result of MediaTek's delayed introduction of cost-sensitive 4G SoC solutions.

MediaTek's sales performance under pressure

On 12 May, MediaTek officially announced Helio-X20. Most of the previously known details are confirmed in the announcement. The chip utilizes MediaTek's new CorePilot 3.0 heterogeneous computing scheduling algorithm, with together with the tri-cluster architecture should provide up to 30% reduction in power consumption. The chip has advanced camera features and has an ARM Cortex-M4-based sensor hub processor for better battery efficiency.

According to AnandTech, quoting MediaTek, the GPU used is not the Mali-T880 but an as yet unannounced Mali-T8xx series GPU, similar to Mali-T880. Compared to Helio-X10's PowerVR G6200, MediaTek sees a 40% performance improvement with a 40% drop in power.

Sources: CNXSoftware (Helio-X20 article), DigiTimes (MediaTek Q2 sales projection), DigiTimes (MediaTek Q2 2015 quarterly results), Gizchina.com (Comparison of MT6797 with Snapdragon 810), MediaTek (Helio-X20 announcement), AnandTech (Helio-X20 article)

Updated 21 May 2015.

Mediatek has reported revenues for the month of February 2015 that show a steep decline, both sequentially and year-over-year.  Revenues came in at only NT$9.671 billion, a decline of 45% from January 2015 and a year-over-year decline of 39%. Since the merger with MStar became effective in February 2014, the year-over-year decline is factual and reflects a steep actual decline in the sales level of the combined businesses.

Although MediaTek has attributed the sales decline to a transition to new products in the smartphone segment, seasonal factors and fewer working days due to Chinese New Year, the main reason is likely to be a dramatic loss of market share in the entry-level segment of the Chinese smartphone market due to changes in the competitive landscape and a lack of a low-cost 4G solutions in MediaTek's product line.

Qualcomm's agreement with regulatory authorities in China has hurt MediaTek

On February 9, Qualcomm announced the resolution of the investigation by Chinese regulatory authorities into alleged monopolistic practices by Qualcomm because of the high royalty rates it imposes on all 3G and 4G-connected devices and its ability to combine royalty agreements with chip sales, effectively shutting out competitors. As part of the resolution, Qualcomm agreed to pay almost US$1 billion and agreed to a lower royalty rate of 65% in China.

However, the agreement may have increased Qualcomm's ability to enforce patent royalties and enhanced its bargaining position with Chinese smartphone manufacturers, leading to a larger proportion of Qualcomm chips being used, mainly at the expense of MediaTek's solutions. Previously, a large number of smartphones, most with MediaTek chips, were produced and sold in a grey market that avoided payment of royalties to Qualcomm. This grey market may quickly have become much smaller, contributing to the decline in MediaTek's shipments.

Additionally,  being a Taiwanese company, MediaTek is a foreign company within China, while policies in China tend to favour Chinese companies. As such, the agreement with Qualcomm and related policies may have been designed to favour upcoming Chinese chip designers such as Huawei's HiSilicon technology and the smartphone manufacturers themselves, rather than supporting MediaTek, which is not fully in the Chinese government's interest.

Lack of entry-level 4G SoC has left gap in MediaTek's product line

Because the MT6732, which is the lowest cost 4G solution that MediaTek currently has in the market, is too costly for the entry-level 4G smartphone segment, MediaTek currently has no cost-effective product offering for this segment. As entry-level smartphones transition to 4G, Qualcomm is taking market share with with its 4G-enabled Snapdragon 400, 410 and 210 SoCs, which are already in production targeting the entry-level market. This comes mainly at the expense of MediaTek's existing 3G solution shipments which previously occupied entry-level models in the product lines of most Chinese manufacturers.

Even for existing 3G models, MediaTek may be seeing market share loss as Qualcomm's cost-reduced 3G SoCs may be favoured by certain manufacturers given the changed environment regarding patent royalties.

MediaTek's loss of market share is evident among the current and new product line ups of smartphone manufacturers that previously used a lot of MediaTek solutions, such as TCL (including the Alcatel brand), ZTE, and Xiaomi, as well as other manufacturers.

However, MediaTek is close to bringing the MT6735 to market, which is a lower-cost 4G solution with a WorldMode modem with which it intends to target the entry-level 4G segment. A cost-reduced octa-core smartphone SoC, the MT6753, has also been introduced. It remains to be seen to what extent and when MediaTek will be able to recover market share in the entry level segment. Although its smartphone product line will soon be in good order and complete, it may be affected by factors beyond its control.

Many companies shipping Snapdragon 615 despite technological superiority of MT6752

Adoption of Qualcomm's mid-range Snapdragon 615 SoC by Chinese manufacturers has been strong, even as MediaTek's MT6752 SoC has ramped into production. According to most reports, the MT6752 SoC has a superior cost structure as well as delivering higher performance when compared to Qualcomm's solution, which also dominates new mid-range models from brand-name smartphone manufacturer outside of China. For the reasons explained in the previous section, Chinese smartphone manufacturers may have a strong impetus to ship models with a Qualcomm SoC in order to better deal with patent royalties, despite the technological superiority of MediaTek's chip.

Previous delay of MediaTek's MT6795/Helios X10

MediaTek's main product for the performance segment of the smartphone market, MT6795 (rebranded to Helios X10 last week at MWC), was originally announced in July 2014 with availablity to end users expected before the end of 2014. However, the chip was delayed and it is likely to come to market in the near future, several months after the planned introduction. This has also hurt MediaTek, although given the patent royalty environment it remains to be seen to what extent MediaTek will be able to gain traction with a high-end product, since patent royalties claimed by Qualcomm are significant for high-end devices with a high selling price.

Update (11 March 2015)

On 10 March, DigTimes reported that industry sources expect MediaTek's sales to rebound significantly in March to a revenue level of about NT$20 billion due a pick-up in demand from Chinese manufacturers. The sources attributed the previous decline in MediaTek's smartphone chip shipments to an inventory correction among Chinese manufacturers. According to the sources, there are signs of a pick-up in demand as vendors gear up for the launch of 4G devices in Q2 2015.

However, it is likely some orders from February 2015 where shifted into March. For the months of February and March combined, MediaTek is still likely to be seeing a disappointing year-over-year decline in revenues. Because of the competitive pressures mentioned above, it remains to be seen at what level MediaTek will be able to maintain revenues in the second quarter of 2015.

MediaTek's 4G smartphone chip product line is becoming more complete as the low-end MT6735 (especially) and MT6753 and the high-end MT6795 reach the market. Additionally, some details have surfaced about the new entry-level MT6570 and MT6580 SoCs, which appears to be developments of the popular MT6572 (dual-core Cortex-A7) and MT6582 (quad-core Cortex-A7) platforms with added support for 4G, comparable to Qualcomm's Snapdragon 210 platform, targeting the entry-level 4G segment. Given these new chips, MediaTek's smartphone performance has potential to improve.

Sources: DigiTimes (MediaTek February 2015 sales)

Updated 23 March 2015 (Mention MT6570 and MT6580).

According to a recent article published by DigiTimes Research, tablet applications processor unit shipments to Chinese manufacturers grew by 4.7% in Q4 2014 to reach 34.7 million units. However, shipments are estimated to decline by 24% in Q1 2015 when compared to Q4 2104. Year-over-year, shipments are expected to drop by about 8%, which marks the first time quarterly tablet processor shipments in China experience a year-over-year decline. Excess inventory from Q4 2014 is given as a cause for the decline in shipments.

MediaTek leads Chinese tablet market in Q1 2015

Based on information published by DigiTimes Research, MediaTek, Rockchip, Allwinner and Intel were the top four providers of tablet processors in China, in that order, in Q4 2014. For Q1 2015, MediaTek is estimated to expand it market share by about 1% to reach 28.5%, although absolute shipments will decline significantly due to the overall market decline.

Rockchip, who was the market share leader for most of 2014, is estimated to see its market share remain stable in Q1 2015, registering a 0.6% increase according to DigiTimes Research, who did not supply a market share figure for Rockchip, although it is probably in the region of 25%. DigiTimes mentioned that Rockchip's new chips launched at the end of 2014 (which includes the Cortex-A7-based RK3126 and RK3128) have not yet reached strong shipments.

Meanwhile, Allwinner continues the trend of a steady decline a market share, being expected to have a share of 15.6% compared to 17.6% in Q4 2014. This allows it to be passed by Intel in terms of market share, with Intel's market share estimated to rise from 15% to 16.3% in Q1 2015.

Intel's global market share has increased and is significant, especially revenue share

It should be noted that in terms of global market share, Intel has a stronger position than what would be inferred just from the Chinese market due to a strong position at brand-name tablet manufacturers outside of China, such as Asus and Acer. The other chip players in the Chinese tablet processor market, especially Rockchip and Allwinner, have a weak position outside of China. Due to the higher-end nature of Intel's product mix, Intel also has a higher revenue share, whereas the sales of companies such as Allwinner are mostly concentrated in low-end processors. It has been reported that Intel is abandoning its "contra-revenue" strategy of subsidizing tablet processor sales, which it probably can afford to do because its chip solutions are fairly competitive on their own.

Global brand names gain share, use different chip suppliers

In the global tablet marker, brand name manufacturers are gaining share and dominate the dollar value of the market, also for semiconductor content. Apple and Samsung, who lead the global tablet market, use a lot of in-house chip solutions (100% in the case of Apple). Samsung also uses suppliers like Qualcomm and Marvell, who otherwise do not have a strong position in the Chinese tablet market.

MediaTek used to have strong market share among Taiwanese tablet manufacturers such as Asus and Acer. However, its market share their seems to have been eroded significantly by strong adoption of Intel's Atom SoCs at these manufacturers (who have strong ties with Intel through PC manufacturing).

Popular tablet SoCs as of Q1 2015

By analyzing the tablet models offered on Chinese e-commerce portals, one can get some idea of what SoCs are currently used the most in tablets from China. I took a look at the tablet offerings on Banggood.com.

Rockchip's RK3188 (which probably means the RK3188T variant in most cases) is still widely used. Originally a mid-range performance segment SoC, there are indications that Rockchip built a significant inventory of this SoC (which is not particularly cheap in terms of manufactuing cost) last year, and the chip has been used in cheaper models as well. Rockchip's RK3126, which is more cost-effective than RK3188, is slowly starting to appear in new tablet models.

Meanwhile, Rockchip's high-end RK3288 is used in several models from Pipo, Teclast and FNF, and these seem to be reasonably popular for a high-end product. I have some concerns about power consumption and battery life regarding these products due to the processor cores used in the SoC.

The most popular MediaTek chips used in tablets are SoCs with 3G connectivity such as the low-end dual-core MT8312 and quad-core MT8382 (the equivalent of the MT6572 and MT6582 smartphone SoCs), as well as the more performance oriented octa-core MT6592/MT8392, which provides good performance and battery-life and has moved down to lower-priced tablet models. Additionally, the new 64-bit MT8752 with 4G (equivalent to the MT6752 smartphone SoC) is starting to appear in new models (Cube, Teclast). For WiFi-only tablets, the MT8127 (which has a relatively powerful GPU for a cheap SoC) is used in some low-to-mid-range tablets.

Allwinner's A31s, which was released in 2013 but perhaps its last successful product introduction, appears to be still used for production. Low-end tablets are available with the A23 and A33 SoCs, although the A33 does not seem to have been very successful and has been affected by weakness in the low-end segment of the tablet market.

Allwinner's new octa-core A83T has started to appear in a few new models, and is probably replacing the high-end A80 Octa which is likely to have had low profit margins.

Finally, Intel's Z3735F, Z3735G and Z3736F Atom SoCs are widely used in tablets, although most prominently in higher-prices models that come equipped with Microsoft Windows.

Update (15 March): 3G smartphone chip inventory unloaded onto Chinese tablet market

In an article published on 13 March 2015, DigiTimes Research reported that due to a high inventory level of 3G smartphone solutions in China, such chips will be unloaded onto the Chinese tablet market by players such as MediaTek, Qualcomm and Spreadtrum.

3G-enabled chip solutions for tablets are usually very similar to similar solutions for smartphones. For example, MediaTek's smartphone solutions have commonly been used in tablets, while MediaTek's official 3G-enabled tablet solutions most likely consist of a chip virtually identical to the smartphone version, with the main difference being a different model number (e.g. MT6582 vs MT8382). That MediaTek would target any excess inventory of 3G smartphone chipsets at the tablet market is not surprising.

However, I am little sceptical about the volume that may be involved. The Chinese tablet market is clearly contracting in the near term, and the volumes in the tablet market are considerably smaller than the smartphone market, even the declining 3G part of the smartphone SoC market. To put things into perspective, MediaTek's quarterly 3G smartphone chip shipments were on the order of 70 million in Q4 2014, while its 3G tablet chip shipments were probably in the range of 5 to 10 million.

The article also mentions Qualcomm, which in the past has not been a major player in the Chinese white-box tablet market. It mentions rumours that Qualcomm may form a partnership with Allwinner (which has been consistently losing market share) to penetrate the tablet market in China. The article also states that while Intel has introduced 3G tablet solutions, Intel's solutions are unlikely to be widely adopted until Intel introduces the 4G version of its Atom x3 (formerly SoFIA) platform.

Sources: DigiTimes (Q1 2015 China tablet AP market article),  DigiTimes Research (smartphone chips inventory unloaded to tablet market)

Updated 15 March 2015.

Both Qualcomm and MediaTek recently reported financial results for the fourth quarter of Q4 2014 and made projections for future periods. Both companies are seeing challenges that are already affecting their revenues and market share now or later in 2015.

Qualcomm lowers forecast for 2015 due to weakness at major customer

In their financial report for Q4 2014, Qualcomm lowered their outlook for 2015, citing as one of the reasons reduced demand from a major customer as that customer has not selected the Snapdragon 810 processor for an upcoming flagship product. This is widely believed to refer to Samsung's upcoming Galaxy S6. In fact the trend of increasing use of in-house Exynos processors already started last year, as models such as Galaxy Alpha, Galaxy S5 Mini and Galaxy Note 4 already saw increasing use of Samsung's own Exynos processors, including modem technology in some cases.

Qualcomm also mentions a share shift among major OEMs that will result in relatively more modem chips as opposed to SoCs (clearly referring to Apple, which only uses Qualcom's modem chips), as well as heightened competition in China. Recently, Qualcomm also recently announced a resolution of the anti-trust investigation by authorities in China, which amounts to a reduction in the patent royalty rate it charges to customers in China.

Qualcomm's total market share currently still strong

At the moment, Qualcomm's market share for smartphone SoCs is still strong as shown by unit shipments and revenues for Q4 2014 and Qualcomm's estimates for Q1 2015, although its product mix has shifted to lower-end products. In comparison to competitor MediaTek, Qualcomm is doing much better in terms of maintaining or growing unit shipments (with Qualcomm in fact seeing a 14% increase in unit shipments in Q4 2014), suggesting that Qualcomm is taking market share from MediaTek as products such as Snapdragon 410 and the new Snapdragon 210 take over large parts of the low-end cost-sensitive market (especially in China) where MediaTek's 3G solutions where previously dominant.

MediaTek losing market share despite successful new products

Meanwhile, although MediaTek has seen widespread adoption of its new MT6752 and MT6732 SoCs with integrated LTE modem for the cost-sensitive mid-range market, the company saw lower unit shipments in Q4 2014 and predicts a 10 to 18% revenue decline for Q1 2015, suggesting its smartphone SoC shipments are under pressure. Given the fact that the new 4G chips have higher selling prices than existing 3G chips, the revenue decline probably reflects a relatively dramatic decline in shipments of existing 3G solutions, with resulting loss of total market share, although price reductions may also play a role. MediaTek has been affected especially by the late introduction of integrated 4G solutions and the lack of a low-end 4G solution and to a lesser extend the delayed introduction of the high-end MT6795.

Captive mobile SoC use becoming more important

Within the total smartphone SoC market (and also in the tablet maket), captive supply (whereby a smartphone manufacturer uses its own SoCs in its smartphone models) is becoming more important, which affects the market opportunity for companies such as Qualcomm and MediaTek. I already mentioned Samsung's increasing use of Exynos processors, which has a significant impact as Samsung is one of the two largest smartphone manufacturers. A major Chinese manufacturr, Huawei, is also increasingly using SoCs from its own HiSilicon division, also extending to lower end models. Apple's gains in market share also has an effect (especially on the high-end market) since it uses proprietary SoCs.

In the tablet market, the low-end and Chinese white-box market is seeing a sharp reduction in shipments in Q1 2015, with market share shifting to brand names (where captive solutions are more important, such as at Samsung) as total shipments are estimated to decline dramatically. This greatly affects traditional players in the tablet SoC market such as Rockchip, Allwinner and MediaTek. Intel's strategy of subsidizing tablet SoCs has also had an impact. According to DigiTimes, the total tablet market will decline 30% sequentially in Q1 2015, with estimates of a decline of 12% for the whole year 2015.


Sources: DigiTimes (tablet market article), DigiTimes (MediaTek results), Qualcomm, MediaTek

Recently, DigiTimes published an article that forecasts smartphone application processor shipments in the China market for Q1 2015. Overall shipments are expected to decline by 10% sequentially when compared to Q4 2014.

The article states that Qualcomm and Spreadtrum will see the biggest declines, with Spreadtrum shipments declining almost 20% because of a lack of LTE solutions and weakness in emerging market demand.

Qualcomm sees declining shipments, but comes off a strong base

The article mentions that Qualcomm's Snapdragon 400 and Snapdragon 600 series are facing a strong challenge from comparable parts from MediaTek, with the cost structure of presumably Snapdragon 615 being less competitive than that of (presumably) MediaTek's MT6752. In earlier posts, I already compared these SoCs in some detail, and there are reasons to expect that such a cost-structure advantage for MediaTek does exist.

However, any decline for Qualcomm will come off a strong base in Q4 2014, which saw its dominance of the integrated LTE SoC market translate into market share gains (mainly at the expense of MediaTek), also in China. For the cost-sensitive part of the LTE market (covered, for example, by Snapdragon 410 and the upcoming Snapdragon 210), it does not yet face a challenge.

MediaTek struggling to reverse trend of market share decline, but product mix improves

MediaTek's market share has been negatively affected in the last part of 2014 because it was relatively late with its integrated LTE solutions, especially for the cost-sensitive part of the market (indeed, the MT6735, intended to cover the cost-sensitive segment, will only ship in Q2 2015). The article says MediaTek's shipments will decline about 15%, which suggests further market share loss in China for MediaTek after what looks like a weak Q4 2014. However, MediaTek's product mix is changing dramatically as a strong ramp of higher-end LTE SoCs such as MT6752 is offsetting declining shipments of MediaTek's existing 3G solutions which have dominated the Chinese smartphone processor market for some time.

The competitiveness of MediaTek's LTE solutions such as MT6752 gives some reason for optimism for its prospects for the rest of 2015 as these new chips ramp. However, another key product, the high-end MT6795, has been reported to have had production issues that seem to have delayed its introduction. Contrary to my original expectations, reports based on a leaked MediaTek roadmap suggest the MT6795 contains Cortex-A57 and Cortex-A53 cores in a big.LITTLE configuration, rather than a high-clocked octa-core Cortex-A53 CPU configuration, putting it squarely in the high-end segment and reducing the potential for MediaTek's chip to be significantly more cost-competitive than competitor's high-end solutions. However, no official information about the exact CPU configuration of MT6795 as well as up-to-date information about its production schedule has yet been given by MediaTek.

MediaTek's revenues for January 2015 came in at NT$17.5 billion, a level similar to the previous month. Although a year-over-year increase of 36% is apparent, the January 2014 revenue figure does not include MStar revenues. MediaTek has merged with MStar and started recognizing revenues from it in February 2014, so the year over year comparison is not very meaningful. According to DigiTimes, market watchers expected MediaTek's Q1 2015 revenues to decline no more than 10% over Q4 2014 with a strong ramp of new 4G smartphone SoCs. However, this turned out to be too optimistic.

HiSilicon gains as Huawei increasingly adopts in-house chips

Given the mentioned declines in shipments, there must be gainers to make up the balance. The article mentions strong shipments by Huawei's HiSilicon division for Huawei smartphone models. This probably reflects a trend more utilization of its own (HiSilicon) SoCs, also for more cost-senstive segments (for example, the recently announced Kirin 620 is likely to come into play).

Sources: DigiTimes Research (China smartphone AP shipment forecast for Q1 2015), DigiTimes Research (article on delay of Snapdragon 810 and MT6795)

Updated February 17, 2015.

Strategy Analytics has published its yearly report detailing global smartphone application processor market share in 2014. The total market had sales of about $21 billion with robust growth of 21%. The report shows that Qualcomm continued to lead the market in terms of revenue share with 52%, followed by Apple with 18% and MediaTek with 14%. The Apple number most likely reflects an estimate because Apple does not sell its chips to third parties. In fourth and fifth place were Speadtrum and Samsung LSI. The report mentions that HiSilicon, Intel and MediaTek had bigger growth than Qualcomm in 2014.

Qualcomm's strength based on Snapdragon 800 series wins in higher-tier phones

According to the report, Qualcomm's leadership was largely based on design wins for its Snapdragon 801 and Snapdragon 805 SoCs in the higher-tier market. Examples of this include the Samsung Galaxy S5 and LG G3. However, as I have previously reported Samsung has increased its use of in-house application processors starting from the second half of 2014, culminating in the exclusive use of Exynos 7420 in the Galaxy S6 in 2015, putting pressure on Qualcomm.

Baseband share in 2014

Strategy Analytics has also published a report with details about baseband (modem) market share in smartphones. According to the report, LTE (4G) basebands accounted for 50% of cellular baseband share in 2014, and the figure is likely to increase significantly in 2015. Qualcomm led in LTE basebands, but HiSilicon, Intel, Marvell, MediaTek and Samsung also increased LTE baseband shipments.

In terms of revenues in the overall baseband market, Qualcomm, MediaTek, Speadtrum, Marvell and Intel had the top positions in 2104. Qualcomm had 66% revenue share, followed by MediaTek with 17% and Speadtrum with 5% sare. Given the product lines of the respective companies in 2014, Qualcomm's revenues are based on both integrated SoC and separate modems, while Intel's sales were mostly separate modem chips, while the other players mostly shipped a mix of integrated SoCs and modem chips.

Comparison with 2013

Comparing with the reports that Strategy Analytics issued for 2013, Qualcomm saws it baseband revenue share remain relatively stable at 66% compared to 64% in 2013. MediaTek saw its AP market share increase from 10% in 2013 to 14% in 2014, and its baseband share increased.

Tablet processor market in 2014

According to another report issued by Strategy Analytics, the market for tablet processors grew 18% in 2014 to $4.2 billion. The top-five revenue share positions were occupied by Apple, Intel, Qualcomm, MediaTek and Samsung LSI. Apple led with 27% share (which must be an estimate), followed by Intel with 17% and Qualcomm with 16% share.

Notable is the absence among the top five of traditional leaders in the Chinese white-box market such as Rockchip and Allwinner. This most likely reflects in increase in brand name tablet shipments at the expense of the white-box tablet market, the low selling prices of white-box tablet processor and the encroachment of MediaTek and Intel into that segment.

Source: Strategy Analytics (Smartphone AP market share), Strategy Analytics (cellular baseband market share), Strategy Analytics (Tablet processor market share)

DigiTimes Research recently posted a report about smartphone AP (application processor) shipments in China in Q1 2015, indicating that Chinese fabless semiconductor company Spreadtrum gained market share in Q1, mainly based on strength for low-end 3G solutions. According to the report, Spreadtrum's market share reached 17.4% in Q1 2015, while MediaTek continues to lead the Chinese market with 46.8% share, followed by Qualcomm, which increased its share to 23.6%.

In terms of overall shipments, according to DigiTimes unit sales of smartphones by Chinese manufacturers declined significantly by about 30% in Q1 2015 compared to Q4 2014, with manufacturers focusing on export sales suffering the largest declines. Huawei, which is moving towards a strategy of using mainly in-house chip solutions from its HiSilicon division, was relatively unaffected and took market share in the quarter.

Spreadtrum's product line

Spreadtrum's increase in 3G smartphone solution shipments most likely reflects the 28 nm SoC it announced in June 2014, the SC883XG. This SoC features a quad-core Cortex-A7 CPU running up to 1.4 GHz, an ARM Mali-400 MP2 GPU, modem support for TD-SCDMA/HSPA(+) and GSM/GPRS/EDGE with dual-SIM capability, and integration of Spreadtrum's Wi-Fi/Bluetooth/GPS/FM chip technology.

The features of the SoC are extremely similar to MediaTek's successful MT6582 platform, which has been on the market for more than one and a half years. The combination of quad-core Cortex-A7 CPU, Mali-400 MP2 GPU and a high level of integration of other functionality on a 28 nm process appears to deliver good performance and very good power efficiency for cost-sensitive devices.

Spreadtrum also recently announced volume shipments of the SC7731G with 3G modem and the SC9830A with LTE modem. Rather than using Cortex-A53 CPU cores, the new chips continue to use efficient Cortex-A7 cores with Mali-400 MP2 GPU with support for Android 5.

MediaTek's 3G market share impacted by Spreadtrum

The DigiTimes report attributes MediaTek's loss of market share in China in Q1 2015 mainly to Spreadtrum's gains for 3G smartphone SoCs, where MediaTek has had a strong position. However, Qualcomm is likely to be a significant factor as well, with indications from new model announcement by companies such as TCL (Alcatel), ZTE, Lenovo/Motorola and others that MediaTek's late introduction of low-cost 4G solution has hurt the company. The resolution of the Chinese monopoly investigation into Qualcomm is also likely to be a factor.

Additionally, a trend has been noticed whereby second and third-tier Chinese smartphone manufacturers have lost share to the largest first-tier manufacturers in China. Since MediaTek's share among second and third-tier manufacturers has been the strongest, this has hurt MediaTek's shipments.

Projections for Q2 2015

For Q2 2015, DigiTimes expects overall AP shipments in China to increase 17.6% sequentially from the low base set in Q1 2015, although that still amounts to an increase of 18% over the same quarter last year (Q2 2014). DigiTimes expects MediaTek to recover some share to reach 48.4%, with Qualcomm seeing a small decline to 21.3% and Spreadtrum's share declining to 15.2%. DigiTimes attributes Spreadtrum's loss of momentum to pressure from MediaTek's 3G solutions, which probably reflects price reductions implemented by MediaTek after it saw shipments decrease and inventories build.

Sources: DigiTimes Research (smartphone AP shipments in China in Q1 2015), (DigiTimes Research (Chinese smartphone shipments in Q1 2015), Spreadtrum (2014 smartphone chip announcement), Spreadtrum (2015 smartphone chips announcement)

Recently, details surfaced about MediaTek's upcoming Helio-X20 SoC, a high performance offering in the series of Helio-branded SoCs, of which the MT6795 (Helio-X10) is the first member. The deca-core Helio-X20, which has the model number MT6797, has a total of ten CPU cores and is the first mobile SoC with a hierarchy of three clusters of progressively less performance-oriented CPU cores: two ARM-Cortex-A72 cores, four high clocked ARM-Cortex-A53 cores and four lower clocked ARM-Cortex-A53 cores.

Three-cluster hierarchy extends the big.LITTLE principle

Execution issues at Qualcomm may help MediaTek's chances of success in high-end

Execution issues at Qualcomm regarding their high-end product roadmap may increase the chances of success of MediaTek's high-end product line. Qualcomm's Snapdragon 810 has some performance issues and has not been a great success, giving MediaTek the opportunity to capture more of the performance-oriented, premium level segment. MediaTek already has Helio-X10 (MT6795) in the market, which has gained design wins, but for which some key characteristics such as power efficiency are still unknown.

Meanwhile, MediaTek has come under pressure in the cost-sensitive smartphone SoC market, previously the bread-and-butter of the company, on which Qualcomm is encroaching by gaining market share for low-end devices in China. This is mainly the result of MediaTek's delayed introduction of cost-sensitive 4G SoC solutions.

MediaTek's sales performance under pressure

On 12 May, MediaTek officially announced Helio-X20. Most of the previously known details are confirmed in the announcement. The chip utilizes MediaTek's new CorePilot 3.0 heterogeneous computing scheduling algorithm, with together with the tri-cluster architecture should provide up to 30% reduction in power consumption. The chip has advanced camera features and has an ARM Cortex-M4-based sensor hub processor for better battery efficiency.

According to AnandTech, quoting MediaTek, the GPU used is not the Mali-T880 but an as yet unannounced Mali-T8xx series GPU, similar to Mali-T880. Compared to Helio-X10's PowerVR G6200, MediaTek sees a 40% performance improvement with a 40% drop in power.

Sources: CNXSoftware (Helio-X20 article), DigiTimes (MediaTek Q2 sales projection), DigiTimes (MediaTek Q2 2015 quarterly results), Gizchina.com (Comparison of MT6797 with Snapdragon 810), MediaTek (Helio-X20 announcement), AnandTech (Helio-X20 article)

Updated 21 May 2015.

Mediatek has reported revenues for the month of February 2015 that show a steep decline, both sequentially and year-over-year.  Revenues came in at only NT$9.671 billion, a decline of 45% from January 2015 and a year-over-year decline of 39%. Since the merger with MStar became effective in February 2014, the year-over-year decline is factual and reflects a steep actual decline in the sales level of the combined businesses.

Although MediaTek has attributed the sales decline to a transition to new products in the smartphone segment, seasonal factors and fewer working days due to Chinese New Year, the main reason is likely to be a dramatic loss of market share in the entry-level segment of the Chinese smartphone market due to changes in the competitive landscape and a lack of a low-cost 4G solutions in MediaTek's product line.

Qualcomm's agreement with regulatory authorities in China has hurt MediaTek

On February 9, Qualcomm announced the resolution of the investigation by Chinese regulatory authorities into alleged monopolistic practices by Qualcomm because of the high royalty rates it imposes on all 3G and 4G-connected devices and its ability to combine royalty agreements with chip sales, effectively shutting out competitors. As part of the resolution, Qualcomm agreed to pay almost US$1 billion and agreed to a lower royalty rate of 65% in China.

However, the agreement may have increased Qualcomm's ability to enforce patent royalties and enhanced its bargaining position with Chinese smartphone manufacturers, leading to a larger proportion of Qualcomm chips being used, mainly at the expense of MediaTek's solutions. Previously, a large number of smartphones, most with MediaTek chips, were produced and sold in a grey market that avoided payment of royalties to Qualcomm. This grey market may quickly have become much smaller, contributing to the decline in MediaTek's shipments.

Additionally,  being a Taiwanese company, MediaTek is a foreign company within China, while policies in China tend to favour Chinese companies. As such, the agreement with Qualcomm and related policies may have been designed to favour upcoming Chinese chip designers such as Huawei's HiSilicon technology and the smartphone manufacturers themselves, rather than supporting MediaTek, which is not fully in the Chinese government's interest.

Lack of entry-level 4G SoC has left gap in MediaTek's product line

Because the MT6732, which is the lowest cost 4G solution that MediaTek currently has in the market, is too costly for the entry-level 4G smartphone segment, MediaTek currently has no cost-effective product offering for this segment. As entry-level smartphones transition to 4G, Qualcomm is taking market share with with its 4G-enabled Snapdragon 400, 410 and 210 SoCs, which are already in production targeting the entry-level market. This comes mainly at the expense of MediaTek's existing 3G solution shipments which previously occupied entry-level models in the product lines of most Chinese manufacturers.

Even for existing 3G models, MediaTek may be seeing market share loss as Qualcomm's cost-reduced 3G SoCs may be favoured by certain manufacturers given the changed environment regarding patent royalties.

MediaTek's loss of market share is evident among the current and new product line ups of smartphone manufacturers that previously used a lot of MediaTek solutions, such as TCL (including the Alcatel brand), ZTE, and Xiaomi, as well as other manufacturers.

However, MediaTek is close to bringing the MT6735 to market, which is a lower-cost 4G solution with a WorldMode modem with which it intends to target the entry-level 4G segment. A cost-reduced octa-core smartphone SoC, the MT6753, has also been introduced. It remains to be seen to what extent and when MediaTek will be able to recover market share in the entry level segment. Although its smartphone product line will soon be in good order and complete, it may be affected by factors beyond its control.

Many companies shipping Snapdragon 615 despite technological superiority of MT6752

Adoption of Qualcomm's mid-range Snapdragon 615 SoC by Chinese manufacturers has been strong, even as MediaTek's MT6752 SoC has ramped into production. According to most reports, the MT6752 SoC has a superior cost structure as well as delivering higher performance when compared to Qualcomm's solution, which also dominates new mid-range models from brand-name smartphone manufacturer outside of China. For the reasons explained in the previous section, Chinese smartphone manufacturers may have a strong impetus to ship models with a Qualcomm SoC in order to better deal with patent royalties, despite the technological superiority of MediaTek's chip.

Previous delay of MediaTek's MT6795/Helios X10

MediaTek's main product for the performance segment of the smartphone market, MT6795 (rebranded to Helios X10 last week at MWC), was originally announced in July 2014 with availablity to end users expected before the end of 2014. However, the chip was delayed and it is likely to come to market in the near future, several months after the planned introduction. This has also hurt MediaTek, although given the patent royalty environment it remains to be seen to what extent MediaTek will be able to gain traction with a high-end product, since patent royalties claimed by Qualcomm are significant for high-end devices with a high selling price.

Update (11 March 2015)

On 10 March, DigTimes reported that industry sources expect MediaTek's sales to rebound significantly in March to a revenue level of about NT$20 billion due a pick-up in demand from Chinese manufacturers. The sources attributed the previous decline in MediaTek's smartphone chip shipments to an inventory correction among Chinese manufacturers. According to the sources, there are signs of a pick-up in demand as vendors gear up for the launch of 4G devices in Q2 2015.

However, it is likely some orders from February 2015 where shifted into March. For the months of February and March combined, MediaTek is still likely to be seeing a disappointing year-over-year decline in revenues. Because of the competitive pressures mentioned above, it remains to be seen at what level MediaTek will be able to maintain revenues in the second quarter of 2015.

MediaTek's 4G smartphone chip product line is becoming more complete as the low-end MT6735 (especially) and MT6753 and the high-end MT6795 reach the market. Additionally, some details have surfaced about the new entry-level MT6570 and MT6580 SoCs, which appears to be developments of the popular MT6572 (dual-core Cortex-A7) and MT6582 (quad-core Cortex-A7) platforms with added support for 4G, comparable to Qualcomm's Snapdragon 210 platform, targeting the entry-level 4G segment. Given these new chips, MediaTek's smartphone performance has potential to improve.

Sources: DigiTimes (MediaTek February 2015 sales)

Updated 23 March 2015 (Mention MT6570 and MT6580).

According to a recent article published by DigiTimes Research, tablet applications processor unit shipments to Chinese manufacturers grew by 4.7% in Q4 2014 to reach 34.7 million units. However, shipments are estimated to decline by 24% in Q1 2015 when compared to Q4 2104. Year-over-year, shipments are expected to drop by about 8%, which marks the first time quarterly tablet processor shipments in China experience a year-over-year decline. Excess inventory from Q4 2014 is given as a cause for the decline in shipments.

MediaTek leads Chinese tablet market in Q1 2015

Based on information published by DigiTimes Research, MediaTek, Rockchip, Allwinner and Intel were the top four providers of tablet processors in China, in that order, in Q4 2014. For Q1 2015, MediaTek is estimated to expand it market share by about 1% to reach 28.5%, although absolute shipments will decline significantly due to the overall market decline.

Rockchip, who was the market share leader for most of 2014, is estimated to see its market share remain stable in Q1 2015, registering a 0.6% increase according to DigiTimes Research, who did not supply a market share figure for Rockchip, although it is probably in the region of 25%. DigiTimes mentioned that Rockchip's new chips launched at the end of 2014 (which includes the Cortex-A7-based RK3126 and RK3128) have not yet reached strong shipments.

Meanwhile, Allwinner continues the trend of a steady decline a market share, being expected to have a share of 15.6% compared to 17.6% in Q4 2014. This allows it to be passed by Intel in terms of market share, with Intel's market share estimated to rise from 15% to 16.3% in Q1 2015.

Intel's global market share has increased and is significant, especially revenue share

It should be noted that in terms of global market share, Intel has a stronger position than what would be inferred just from the Chinese market due to a strong position at brand-name tablet manufacturers outside of China, such as Asus and Acer. The other chip players in the Chinese tablet processor market, especially Rockchip and Allwinner, have a weak position outside of China. Due to the higher-end nature of Intel's product mix, Intel also has a higher revenue share, whereas the sales of companies such as Allwinner are mostly concentrated in low-end processors. It has been reported that Intel is abandoning its "contra-revenue" strategy of subsidizing tablet processor sales, which it probably can afford to do because its chip solutions are fairly competitive on their own.

Global brand names gain share, use different chip suppliers

In the global tablet marker, brand name manufacturers are gaining share and dominate the dollar value of the market, also for semiconductor content. Apple and Samsung, who lead the global tablet market, use a lot of in-house chip solutions (100% in the case of Apple). Samsung also uses suppliers like Qualcomm and Marvell, who otherwise do not have a strong position in the Chinese tablet market.

MediaTek used to have strong market share among Taiwanese tablet manufacturers such as Asus and Acer. However, its market share their seems to have been eroded significantly by strong adoption of Intel's Atom SoCs at these manufacturers (who have strong ties with Intel through PC manufacturing).

Popular tablet SoCs as of Q1 2015

By analyzing the tablet models offered on Chinese e-commerce portals, one can get some idea of what SoCs are currently used the most in tablets from China. I took a look at the tablet offerings on Banggood.com.

Rockchip's RK3188 (which probably means the RK3188T variant in most cases) is still widely used. Originally a mid-range performance segment SoC, there are indications that Rockchip built a significant inventory of this SoC (which is not particularly cheap in terms of manufactuing cost) last year, and the chip has been used in cheaper models as well. Rockchip's RK3126, which is more cost-effective than RK3188, is slowly starting to appear in new tablet models.

Meanwhile, Rockchip's high-end RK3288 is used in several models from Pipo, Teclast and FNF, and these seem to be reasonably popular for a high-end product. I have some concerns about power consumption and battery life regarding these products due to the processor cores used in the SoC.

The most popular MediaTek chips used in tablets are SoCs with 3G connectivity such as the low-end dual-core MT8312 and quad-core MT8382 (the equivalent of the MT6572 and MT6582 smartphone SoCs), as well as the more performance oriented octa-core MT6592/MT8392, which provides good performance and battery-life and has moved down to lower-priced tablet models. Additionally, the new 64-bit MT8752 with 4G (equivalent to the MT6752 smartphone SoC) is starting to appear in new models (Cube, Teclast). For WiFi-only tablets, the MT8127 (which has a relatively powerful GPU for a cheap SoC) is used in some low-to-mid-range tablets.

Allwinner's A31s, which was released in 2013 but perhaps its last successful product introduction, appears to be still used for production. Low-end tablets are available with the A23 and A33 SoCs, although the A33 does not seem to have been very successful and has been affected by weakness in the low-end segment of the tablet market.

Allwinner's new octa-core A83T has started to appear in a few new models, and is probably replacing the high-end A80 Octa which is likely to have had low profit margins.

Finally, Intel's Z3735F, Z3735G and Z3736F Atom SoCs are widely used in tablets, although most prominently in higher-prices models that come equipped with Microsoft Windows.

Update (15 March): 3G smartphone chip inventory unloaded onto Chinese tablet market

In an article published on 13 March 2015, DigiTimes Research reported that due to a high inventory level of 3G smartphone solutions in China, such chips will be unloaded onto the Chinese tablet market by players such as MediaTek, Qualcomm and Spreadtrum.

3G-enabled chip solutions for tablets are usually very similar to similar solutions for smartphones. For example, MediaTek's smartphone solutions have commonly been used in tablets, while MediaTek's official 3G-enabled tablet solutions most likely consist of a chip virtually identical to the smartphone version, with the main difference being a different model number (e.g. MT6582 vs MT8382). That MediaTek would target any excess inventory of 3G smartphone chipsets at the tablet market is not surprising.

However, I am little sceptical about the volume that may be involved. The Chinese tablet market is clearly contracting in the near term, and the volumes in the tablet market are considerably smaller than the smartphone market, even the declining 3G part of the smartphone SoC market. To put things into perspective, MediaTek's quarterly 3G smartphone chip shipments were on the order of 70 million in Q4 2014, while its 3G tablet chip shipments were probably in the range of 5 to 10 million.

The article also mentions Qualcomm, which in the past has not been a major player in the Chinese white-box tablet market. It mentions rumours that Qualcomm may form a partnership with Allwinner (which has been consistently losing market share) to penetrate the tablet market in China. The article also states that while Intel has introduced 3G tablet solutions, Intel's solutions are unlikely to be widely adopted until Intel introduces the 4G version of its Atom x3 (formerly SoFIA) platform.

Sources: DigiTimes (Q1 2015 China tablet AP market article),  DigiTimes Research (smartphone chips inventory unloaded to tablet market)

Updated 15 March 2015.

Both Qualcomm and MediaTek recently reported financial results for the fourth quarter of Q4 2014 and made projections for future periods. Both companies are seeing challenges that are already affecting their revenues and market share now or later in 2015.

Qualcomm lowers forecast for 2015 due to weakness at major customer

In their financial report for Q4 2014, Qualcomm lowered their outlook for 2015, citing as one of the reasons reduced demand from a major customer as that customer has not selected the Snapdragon 810 processor for an upcoming flagship product. This is widely believed to refer to Samsung's upcoming Galaxy S6. In fact the trend of increasing use of in-house Exynos processors already started last year, as models such as Galaxy Alpha, Galaxy S5 Mini and Galaxy Note 4 already saw increasing use of Samsung's own Exynos processors, including modem technology in some cases.

Qualcomm also mentions a share shift among major OEMs that will result in relatively more modem chips as opposed to SoCs (clearly referring to Apple, which only uses Qualcom's modem chips), as well as heightened competition in China. Recently, Qualcomm also recently announced a resolution of the anti-trust investigation by authorities in China, which amounts to a reduction in the patent royalty rate it charges to customers in China.

Qualcomm's total market share currently still strong

At the moment, Qualcomm's market share for smartphone SoCs is still strong as shown by unit shipments and revenues for Q4 2014 and Qualcomm's estimates for Q1 2015, although its product mix has shifted to lower-end products. In comparison to competitor MediaTek, Qualcomm is doing much better in terms of maintaining or growing unit shipments (with Qualcomm in fact seeing a 14% increase in unit shipments in Q4 2014), suggesting that Qualcomm is taking market share from MediaTek as products such as Snapdragon 410 and the new Snapdragon 210 take over large parts of the low-end cost-sensitive market (especially in China) where MediaTek's 3G solutions where previously dominant.

MediaTek losing market share despite successful new products

Meanwhile, although MediaTek has seen widespread adoption of its new MT6752 and MT6732 SoCs with integrated LTE modem for the cost-sensitive mid-range market, the company saw lower unit shipments in Q4 2014 and predicts a 10 to 18% revenue decline for Q1 2015, suggesting its smartphone SoC shipments are under pressure. Given the fact that the new 4G chips have higher selling prices than existing 3G chips, the revenue decline probably reflects a relatively dramatic decline in shipments of existing 3G solutions, with resulting loss of total market share, although price reductions may also play a role. MediaTek has been affected especially by the late introduction of integrated 4G solutions and the lack of a low-end 4G solution and to a lesser extend the delayed introduction of the high-end MT6795.

Captive mobile SoC use becoming more important

Within the total smartphone SoC market (and also in the tablet maket), captive supply (whereby a smartphone manufacturer uses its own SoCs in its smartphone models) is becoming more important, which affects the market opportunity for companies such as Qualcomm and MediaTek. I already mentioned Samsung's increasing use of Exynos processors, which has a significant impact as Samsung is one of the two largest smartphone manufacturers. A major Chinese manufacturr, Huawei, is also increasingly using SoCs from its own HiSilicon division, also extending to lower end models. Apple's gains in market share also has an effect (especially on the high-end market) since it uses proprietary SoCs.

In the tablet market, the low-end and Chinese white-box market is seeing a sharp reduction in shipments in Q1 2015, with market share shifting to brand names (where captive solutions are more important, such as at Samsung) as total shipments are estimated to decline dramatically. This greatly affects traditional players in the tablet SoC market such as Rockchip, Allwinner and MediaTek. Intel's strategy of subsidizing tablet SoCs has also had an impact. According to DigiTimes, the total tablet market will decline 30% sequentially in Q1 2015, with estimates of a decline of 12% for the whole year 2015.


Sources: DigiTimes (tablet market article), DigiTimes (MediaTek results), Qualcomm, MediaTek

Recently, DigiTimes published an article that forecasts smartphone application processor shipments in the China market for Q1 2015. Overall shipments are expected to decline by 10% sequentially when compared to Q4 2014.

The article states that Qualcomm and Spreadtrum will see the biggest declines, with Spreadtrum shipments declining almost 20% because of a lack of LTE solutions and weakness in emerging market demand.

Qualcomm sees declining shipments, but comes off a strong base

The article mentions that Qualcomm's Snapdragon 400 and Snapdragon 600 series are facing a strong challenge from comparable parts from MediaTek, with the cost structure of presumably Snapdragon 615 being less competitive than that of (presumably) MediaTek's MT6752. In earlier posts, I already compared these SoCs in some detail, and there are reasons to expect that such a cost-structure advantage for MediaTek does exist.

However, any decline for Qualcomm will come off a strong base in Q4 2014, which saw its dominance of the integrated LTE SoC market translate into market share gains (mainly at the expense of MediaTek), also in China. For the cost-sensitive part of the LTE market (covered, for example, by Snapdragon 410 and the upcoming Snapdragon 210), it does not yet face a challenge.

MediaTek struggling to reverse trend of market share decline, but product mix improves

MediaTek's market share has been negatively affected in the last part of 2014 because it was relatively late with its integrated LTE solutions, especially for the cost-sensitive part of the market (indeed, the MT6735, intended to cover the cost-sensitive segment, will only ship in Q2 2015). The article says MediaTek's shipments will decline about 15%, which suggests further market share loss in China for MediaTek after what looks like a weak Q4 2014. However, MediaTek's product mix is changing dramatically as a strong ramp of higher-end LTE SoCs such as MT6752 is offsetting declining shipments of MediaTek's existing 3G solutions which have dominated the Chinese smartphone processor market for some time.

The competitiveness of MediaTek's LTE solutions such as MT6752 gives some reason for optimism for its prospects for the rest of 2015 as these new chips ramp. However, another key product, the high-end MT6795, has been reported to have had production issues that seem to have delayed its introduction. Contrary to my original expectations, reports based on a leaked MediaTek roadmap suggest the MT6795 contains Cortex-A57 and Cortex-A53 cores in a big.LITTLE configuration, rather than a high-clocked octa-core Cortex-A53 CPU configuration, putting it squarely in the high-end segment and reducing the potential for MediaTek's chip to be significantly more cost-competitive than competitor's high-end solutions. However, no official information about the exact CPU configuration of MT6795 as well as up-to-date information about its production schedule has yet been given by MediaTek.

MediaTek's revenues for January 2015 came in at NT$17.5 billion, a level similar to the previous month. Although a year-over-year increase of 36% is apparent, the January 2014 revenue figure does not include MStar revenues. MediaTek has merged with MStar and started recognizing revenues from it in February 2014, so the year over year comparison is not very meaningful. According to DigiTimes, market watchers expected MediaTek's Q1 2015 revenues to decline no more than 10% over Q4 2014 with a strong ramp of new 4G smartphone SoCs. However, this turned out to be too optimistic.

HiSilicon gains as Huawei increasingly adopts in-house chips

Given the mentioned declines in shipments, there must be gainers to make up the balance. The article mentions strong shipments by Huawei's HiSilicon division for Huawei smartphone models. This probably reflects a trend more utilization of its own (HiSilicon) SoCs, also for more cost-senstive segments (for example, the recently announced Kirin 620 is likely to come into play).

Sources: DigiTimes Research (China smartphone AP shipment forecast for Q1 2015), DigiTimes Research (article on delay of Snapdragon 810 and MT6795)

Updated February 17, 2015.

Strategy Analytics has published its yearly report detailing global smartphone application processor market share in 2014. The total market had sales of about $21 billion with robust growth of 21%. The report shows that Qualcomm continued to lead the market in terms of revenue share with 52%, followed by Apple with 18% and MediaTek with 14%. The Apple number most likely reflects an estimate because Apple does not sell its chips to third parties. In fourth and fifth place were Speadtrum and Samsung LSI. The report mentions that HiSilicon, Intel and MediaTek had bigger growth than Qualcomm in 2014.

Qualcomm's strength based on Snapdragon 800 series wins in higher-tier phones

According to the report, Qualcomm's leadership was largely based on design wins for its Snapdragon 801 and Snapdragon 805 SoCs in the higher-tier market. Examples of this include the Samsung Galaxy S5 and LG G3. However, as I have previously reported Samsung has increased its use of in-house application processors starting from the second half of 2014, culminating in the exclusive use of Exynos 7420 in the Galaxy S6 in 2015, putting pressure on Qualcomm.

Baseband share in 2014

Strategy Analytics has also published a report with details about baseband (modem) market share in smartphones. According to the report, LTE (4G) basebands accounted for 50% of cellular baseband share in 2014, and the figure is likely to increase significantly in 2015. Qualcomm led in LTE basebands, but HiSilicon, Intel, Marvell, MediaTek and Samsung also increased LTE baseband shipments.

In terms of revenues in the overall baseband market, Qualcomm, MediaTek, Speadtrum, Marvell and Intel had the top positions in 2104. Qualcomm had 66% revenue share, followed by MediaTek with 17% and Speadtrum with 5% sare. Given the product lines of the respective companies in 2014, Qualcomm's revenues are based on both integrated SoC and separate modems, while Intel's sales were mostly separate modem chips, while the other players mostly shipped a mix of integrated SoCs and modem chips.

Comparison with 2013

Comparing with the reports that Strategy Analytics issued for 2013, Qualcomm saws it baseband revenue share remain relatively stable at 66% compared to 64% in 2013. MediaTek saw its AP market share increase from 10% in 2013 to 14% in 2014, and its baseband share increased.

Tablet processor market in 2014

According to another report issued by Strategy Analytics, the market for tablet processors grew 18% in 2014 to $4.2 billion. The top-five revenue share positions were occupied by Apple, Intel, Qualcomm, MediaTek and Samsung LSI. Apple led with 27% share (which must be an estimate), followed by Intel with 17% and Qualcomm with 16% share.

Notable is the absence among the top five of traditional leaders in the Chinese white-box market such as Rockchip and Allwinner. This most likely reflects in increase in brand name tablet shipments at the expense of the white-box tablet market, the low selling prices of white-box tablet processor and the encroachment of MediaTek and Intel into that segment.

Source: Strategy Analytics (Smartphone AP market share), Strategy Analytics (cellular baseband market share), Strategy Analytics (Tablet processor market share)

DigiTimes Research recently posted a report about smartphone AP (application processor) shipments in China in Q1 2015, indicating that Chinese fabless semiconductor company Spreadtrum gained market share in Q1, mainly based on strength for low-end 3G solutions. According to the report, Spreadtrum's market share reached 17.4% in Q1 2015, while MediaTek continues to lead the Chinese market with 46.8% share, followed by Qualcomm, which increased its share to 23.6%.

In terms of overall shipments, according to DigiTimes unit sales of smartphones by Chinese manufacturers declined significantly by about 30% in Q1 2015 compared to Q4 2014, with manufacturers focusing on export sales suffering the largest declines. Huawei, which is moving towards a strategy of using mainly in-house chip solutions from its HiSilicon division, was relatively unaffected and took market share in the quarter.

Spreadtrum's product line

Spreadtrum's increase in 3G smartphone solution shipments most likely reflects the 28 nm SoC it announced in June 2014, the SC883XG. This SoC features a quad-core Cortex-A7 CPU running up to 1.4 GHz, an ARM Mali-400 MP2 GPU, modem support for TD-SCDMA/HSPA(+) and GSM/GPRS/EDGE with dual-SIM capability, and integration of Spreadtrum's Wi-Fi/Bluetooth/GPS/FM chip technology.

The features of the SoC are extremely similar to MediaTek's successful MT6582 platform, which has been on the market for more than one and a half years. The combination of quad-core Cortex-A7 CPU, Mali-400 MP2 GPU and a high level of integration of other functionality on a 28 nm process appears to deliver good performance and very good power efficiency for cost-sensitive devices.

Spreadtrum also recently announced volume shipments of the SC7731G with 3G modem and the SC9830A with LTE modem. Rather than using Cortex-A53 CPU cores, the new chips continue to use efficient Cortex-A7 cores with Mali-400 MP2 GPU with support for Android 5.

MediaTek's 3G market share impacted by Spreadtrum

The DigiTimes report attributes MediaTek's loss of market share in China in Q1 2015 mainly to Spreadtrum's gains for 3G smartphone SoCs, where MediaTek has had a strong position. However, Qualcomm is likely to be a significant factor as well, with indications from new model announcement by companies such as TCL (Alcatel), ZTE, Lenovo/Motorola and others that MediaTek's late introduction of low-cost 4G solution has hurt the company. The resolution of the Chinese monopoly investigation into Qualcomm is also likely to be a factor.

Additionally, a trend has been noticed whereby second and third-tier Chinese smartphone manufacturers have lost share to the largest first-tier manufacturers in China. Since MediaTek's share among second and third-tier manufacturers has been the strongest, this has hurt MediaTek's shipments.

Projections for Q2 2015

For Q2 2015, DigiTimes expects overall AP shipments in China to increase 17.6% sequentially from the low base set in Q1 2015, although that still amounts to an increase of 18% over the same quarter last year (Q2 2014). DigiTimes expects MediaTek to recover some share to reach 48.4%, with Qualcomm seeing a small decline to 21.3% and Spreadtrum's share declining to 15.2%. DigiTimes attributes Spreadtrum's loss of momentum to pressure from MediaTek's 3G solutions, which probably reflects price reductions implemented by MediaTek after it saw shipments decrease and inventories build.

Sources: DigiTimes Research (smartphone AP shipments in China in Q1 2015), (DigiTimes Research (Chinese smartphone shipments in Q1 2015), Spreadtrum (2014 smartphone chip announcement), Spreadtrum (2015 smartphone chips announcement)

Recently, details surfaced about MediaTek's upcoming Helio-X20 SoC, a high performance offering in the series of Helio-branded SoCs, of which the MT6795 (Helio-X10) is the first member. The deca-core Helio-X20, which has the model number MT6797, has a total of ten CPU cores and is the first mobile SoC with a hierarchy of three clusters of progressively less performance-oriented CPU cores: two ARM-Cortex-A72 cores, four high clocked ARM-Cortex-A53 cores and four lower clocked ARM-Cortex-A53 cores.

Three-cluster hierarchy extends the big.LITTLE principle

Execution issues at Qualcomm may help MediaTek's chances of success in high-end

Execution issues at Qualcomm regarding their high-end product roadmap may increase the chances of success of MediaTek's high-end product line. Qualcomm's Snapdragon 810 has some performance issues and has not been a great success, giving MediaTek the opportunity to capture more of the performance-oriented, premium level segment. MediaTek already has Helio-X10 (MT6795) in the market, which has gained design wins, but for which some key characteristics such as power efficiency are still unknown.

Meanwhile, MediaTek has come under pressure in the cost-sensitive smartphone SoC market, previously the bread-and-butter of the company, on which Qualcomm is encroaching by gaining market share for low-end devices in China. This is mainly the result of MediaTek's delayed introduction of cost-sensitive 4G SoC solutions.

MediaTek's sales performance under pressure

On 12 May, MediaTek officially announced Helio-X20. Most of the previously known details are confirmed in the announcement. The chip utilizes MediaTek's new CorePilot 3.0 heterogeneous computing scheduling algorithm, with together with the tri-cluster architecture should provide up to 30% reduction in power consumption. The chip has advanced camera features and has an ARM Cortex-M4-based sensor hub processor for better battery efficiency.

According to AnandTech, quoting MediaTek, the GPU used is not the Mali-T880 but an as yet unannounced Mali-T8xx series GPU, similar to Mali-T880. Compared to Helio-X10's PowerVR G6200, MediaTek sees a 40% performance improvement with a 40% drop in power.

Sources: CNXSoftware (Helio-X20 article), DigiTimes (MediaTek Q2 sales projection), DigiTimes (MediaTek Q2 2015 quarterly results), Gizchina.com (Comparison of MT6797 with Snapdragon 810), MediaTek (Helio-X20 announcement), AnandTech (Helio-X20 article)

Updated 21 May 2015.

Mediatek has reported revenues for the month of February 2015 that show a steep decline, both sequentially and year-over-year.  Revenues came in at only NT$9.671 billion, a decline of 45% from January 2015 and a year-over-year decline of 39%. Since the merger with MStar became effective in February 2014, the year-over-year decline is factual and reflects a steep actual decline in the sales level of the combined businesses.

Although MediaTek has attributed the sales decline to a transition to new products in the smartphone segment, seasonal factors and fewer working days due to Chinese New Year, the main reason is likely to be a dramatic loss of market share in the entry-level segment of the Chinese smartphone market due to changes in the competitive landscape and a lack of a low-cost 4G solutions in MediaTek's product line.

Qualcomm's agreement with regulatory authorities in China has hurt MediaTek

On February 9, Qualcomm announced the resolution of the investigation by Chinese regulatory authorities into alleged monopolistic practices by Qualcomm because of the high royalty rates it imposes on all 3G and 4G-connected devices and its ability to combine royalty agreements with chip sales, effectively shutting out competitors. As part of the resolution, Qualcomm agreed to pay almost US$1 billion and agreed to a lower royalty rate of 65% in China.

However, the agreement may have increased Qualcomm's ability to enforce patent royalties and enhanced its bargaining position with Chinese smartphone manufacturers, leading to a larger proportion of Qualcomm chips being used, mainly at the expense of MediaTek's solutions. Previously, a large number of smartphones, most with MediaTek chips, were produced and sold in a grey market that avoided payment of royalties to Qualcomm. This grey market may quickly have become much smaller, contributing to the decline in MediaTek's shipments.

Additionally,  being a Taiwanese company, MediaTek is a foreign company within China, while policies in China tend to favour Chinese companies. As such, the agreement with Qualcomm and related policies may have been designed to favour upcoming Chinese chip designers such as Huawei's HiSilicon technology and the smartphone manufacturers themselves, rather than supporting MediaTek, which is not fully in the Chinese government's interest.

Lack of entry-level 4G SoC has left gap in MediaTek's product line

Because the MT6732, which is the lowest cost 4G solution that MediaTek currently has in the market, is too costly for the entry-level 4G smartphone segment, MediaTek currently has no cost-effective product offering for this segment. As entry-level smartphones transition to 4G, Qualcomm is taking market share with with its 4G-enabled Snapdragon 400, 410 and 210 SoCs, which are already in production targeting the entry-level market. This comes mainly at the expense of MediaTek's existing 3G solution shipments which previously occupied entry-level models in the product lines of most Chinese manufacturers.

Even for existing 3G models, MediaTek may be seeing market share loss as Qualcomm's cost-reduced 3G SoCs may be favoured by certain manufacturers given the changed environment regarding patent royalties.

MediaTek's loss of market share is evident among the current and new product line ups of smartphone manufacturers that previously used a lot of MediaTek solutions, such as TCL (including the Alcatel brand), ZTE, and Xiaomi, as well as other manufacturers.

However, MediaTek is close to bringing the MT6735 to market, which is a lower-cost 4G solution with a WorldMode modem with which it intends to target the entry-level 4G segment. A cost-reduced octa-core smartphone SoC, the MT6753, has also been introduced. It remains to be seen to what extent and when MediaTek will be able to recover market share in the entry level segment. Although its smartphone product line will soon be in good order and complete, it may be affected by factors beyond its control.

Many companies shipping Snapdragon 615 despite technological superiority of MT6752

Adoption of Qualcomm's mid-range Snapdragon 615 SoC by Chinese manufacturers has been strong, even as MediaTek's MT6752 SoC has ramped into production. According to most reports, the MT6752 SoC has a superior cost structure as well as delivering higher performance when compared to Qualcomm's solution, which also dominates new mid-range models from brand-name smartphone manufacturer outside of China. For the reasons explained in the previous section, Chinese smartphone manufacturers may have a strong impetus to ship models with a Qualcomm SoC in order to better deal with patent royalties, despite the technological superiority of MediaTek's chip.

Previous delay of MediaTek's MT6795/Helios X10

MediaTek's main product for the performance segment of the smartphone market, MT6795 (rebranded to Helios X10 last week at MWC), was originally announced in July 2014 with availablity to end users expected before the end of 2014. However, the chip was delayed and it is likely to come to market in the near future, several months after the planned introduction. This has also hurt MediaTek, although given the patent royalty environment it remains to be seen to what extent MediaTek will be able to gain traction with a high-end product, since patent royalties claimed by Qualcomm are significant for high-end devices with a high selling price.

Update (11 March 2015)

On 10 March, DigTimes reported that industry sources expect MediaTek's sales to rebound significantly in March to a revenue level of about NT$20 billion due a pick-up in demand from Chinese manufacturers. The sources attributed the previous decline in MediaTek's smartphone chip shipments to an inventory correction among Chinese manufacturers. According to the sources, there are signs of a pick-up in demand as vendors gear up for the launch of 4G devices in Q2 2015.

However, it is likely some orders from February 2015 where shifted into March. For the months of February and March combined, MediaTek is still likely to be seeing a disappointing year-over-year decline in revenues. Because of the competitive pressures mentioned above, it remains to be seen at what level MediaTek will be able to maintain revenues in the second quarter of 2015.

MediaTek's 4G smartphone chip product line is becoming more complete as the low-end MT6735 (especially) and MT6753 and the high-end MT6795 reach the market. Additionally, some details have surfaced about the new entry-level MT6570 and MT6580 SoCs, which appears to be developments of the popular MT6572 (dual-core Cortex-A7) and MT6582 (quad-core Cortex-A7) platforms with added support for 4G, comparable to Qualcomm's Snapdragon 210 platform, targeting the entry-level 4G segment. Given these new chips, MediaTek's smartphone performance has potential to improve.

Sources: DigiTimes (MediaTek February 2015 sales)

Updated 23 March 2015 (Mention MT6570 and MT6580).

According to a recent article published by DigiTimes Research, tablet applications processor unit shipments to Chinese manufacturers grew by 4.7% in Q4 2014 to reach 34.7 million units. However, shipments are estimated to decline by 24% in Q1 2015 when compared to Q4 2104. Year-over-year, shipments are expected to drop by about 8%, which marks the first time quarterly tablet processor shipments in China experience a year-over-year decline. Excess inventory from Q4 2014 is given as a cause for the decline in shipments.

MediaTek leads Chinese tablet market in Q1 2015

Based on information published by DigiTimes Research, MediaTek, Rockchip, Allwinner and Intel were the top four providers of tablet processors in China, in that order, in Q4 2014. For Q1 2015, MediaTek is estimated to expand it market share by about 1% to reach 28.5%, although absolute shipments will decline significantly due to the overall market decline.

Rockchip, who was the market share leader for most of 2014, is estimated to see its market share remain stable in Q1 2015, registering a 0.6% increase according to DigiTimes Research, who did not supply a market share figure for Rockchip, although it is probably in the region of 25%. DigiTimes mentioned that Rockchip's new chips launched at the end of 2014 (which includes the Cortex-A7-based RK3126 and RK3128) have not yet reached strong shipments.

Meanwhile, Allwinner continues the trend of a steady decline a market share, being expected to have a share of 15.6% compared to 17.6% in Q4 2014. This allows it to be passed by Intel in terms of market share, with Intel's market share estimated to rise from 15% to 16.3% in Q1 2015.

Intel's global market share has increased and is significant, especially revenue share

It should be noted that in terms of global market share, Intel has a stronger position than what would be inferred just from the Chinese market due to a strong position at brand-name tablet manufacturers outside of China, such as Asus and Acer. The other chip players in the Chinese tablet processor market, especially Rockchip and Allwinner, have a weak position outside of China. Due to the higher-end nature of Intel's product mix, Intel also has a higher revenue share, whereas the sales of companies such as Allwinner are mostly concentrated in low-end processors. It has been reported that Intel is abandoning its "contra-revenue" strategy of subsidizing tablet processor sales, which it probably can afford to do because its chip solutions are fairly competitive on their own.

Global brand names gain share, use different chip suppliers

In the global tablet marker, brand name manufacturers are gaining share and dominate the dollar value of the market, also for semiconductor content. Apple and Samsung, who lead the global tablet market, use a lot of in-house chip solutions (100% in the case of Apple). Samsung also uses suppliers like Qualcomm and Marvell, who otherwise do not have a strong position in the Chinese tablet market.

MediaTek used to have strong market share among Taiwanese tablet manufacturers such as Asus and Acer. However, its market share their seems to have been eroded significantly by strong adoption of Intel's Atom SoCs at these manufacturers (who have strong ties with Intel through PC manufacturing).

Popular tablet SoCs as of Q1 2015

By analyzing the tablet models offered on Chinese e-commerce portals, one can get some idea of what SoCs are currently used the most in tablets from China. I took a look at the tablet offerings on Banggood.com.

Rockchip's RK3188 (which probably means the RK3188T variant in most cases) is still widely used. Originally a mid-range performance segment SoC, there are indications that Rockchip built a significant inventory of this SoC (which is not particularly cheap in terms of manufactuing cost) last year, and the chip has been used in cheaper models as well. Rockchip's RK3126, which is more cost-effective than RK3188, is slowly starting to appear in new tablet models.

Meanwhile, Rockchip's high-end RK3288 is used in several models from Pipo, Teclast and FNF, and these seem to be reasonably popular for a high-end product. I have some concerns about power consumption and battery life regarding these products due to the processor cores used in the SoC.

The most popular MediaTek chips used in tablets are SoCs with 3G connectivity such as the low-end dual-core MT8312 and quad-core MT8382 (the equivalent of the MT6572 and MT6582 smartphone SoCs), as well as the more performance oriented octa-core MT6592/MT8392, which provides good performance and battery-life and has moved down to lower-priced tablet models. Additionally, the new 64-bit MT8752 with 4G (equivalent to the MT6752 smartphone SoC) is starting to appear in new models (Cube, Teclast). For WiFi-only tablets, the MT8127 (which has a relatively powerful GPU for a cheap SoC) is used in some low-to-mid-range tablets.

Allwinner's A31s, which was released in 2013 but perhaps its last successful product introduction, appears to be still used for production. Low-end tablets are available with the A23 and A33 SoCs, although the A33 does not seem to have been very successful and has been affected by weakness in the low-end segment of the tablet market.

Allwinner's new octa-core A83T has started to appear in a few new models, and is probably replacing the high-end A80 Octa which is likely to have had low profit margins.

Finally, Intel's Z3735F, Z3735G and Z3736F Atom SoCs are widely used in tablets, although most prominently in higher-prices models that come equipped with Microsoft Windows.

Update (15 March): 3G smartphone chip inventory unloaded onto Chinese tablet market

In an article published on 13 March 2015, DigiTimes Research reported that due to a high inventory level of 3G smartphone solutions in China, such chips will be unloaded onto the Chinese tablet market by players such as MediaTek, Qualcomm and Spreadtrum.

3G-enabled chip solutions for tablets are usually very similar to similar solutions for smartphones. For example, MediaTek's smartphone solutions have commonly been used in tablets, while MediaTek's official 3G-enabled tablet solutions most likely consist of a chip virtually identical to the smartphone version, with the main difference being a different model number (e.g. MT6582 vs MT8382). That MediaTek would target any excess inventory of 3G smartphone chipsets at the tablet market is not surprising.

However, I am little sceptical about the volume that may be involved. The Chinese tablet market is clearly contracting in the near term, and the volumes in the tablet market are considerably smaller than the smartphone market, even the declining 3G part of the smartphone SoC market. To put things into perspective, MediaTek's quarterly 3G smartphone chip shipments were on the order of 70 million in Q4 2014, while its 3G tablet chip shipments were probably in the range of 5 to 10 million.

The article also mentions Qualcomm, which in the past has not been a major player in the Chinese white-box tablet market. It mentions rumours that Qualcomm may form a partnership with Allwinner (which has been consistently losing market share) to penetrate the tablet market in China. The article also states that while Intel has introduced 3G tablet solutions, Intel's solutions are unlikely to be widely adopted until Intel introduces the 4G version of its Atom x3 (formerly SoFIA) platform.

Sources: DigiTimes (Q1 2015 China tablet AP market article),  DigiTimes Research (smartphone chips inventory unloaded to tablet market)

Updated 15 March 2015.

Both Qualcomm and MediaTek recently reported financial results for the fourth quarter of Q4 2014 and made projections for future periods. Both companies are seeing challenges that are already affecting their revenues and market share now or later in 2015.

Qualcomm lowers forecast for 2015 due to weakness at major customer

In their financial report for Q4 2014, Qualcomm lowered their outlook for 2015, citing as one of the reasons reduced demand from a major customer as that customer has not selected the Snapdragon 810 processor for an upcoming flagship product. This is widely believed to refer to Samsung's upcoming Galaxy S6. In fact the trend of increasing use of in-house Exynos processors already started last year, as models such as Galaxy Alpha, Galaxy S5 Mini and Galaxy Note 4 already saw increasing use of Samsung's own Exynos processors, including modem technology in some cases.

Qualcomm also mentions a share shift among major OEMs that will result in relatively more modem chips as opposed to SoCs (clearly referring to Apple, which only uses Qualcom's modem chips), as well as heightened competition in China. Recently, Qualcomm also recently announced a resolution of the anti-trust investigation by authorities in China, which amounts to a reduction in the patent royalty rate it charges to customers in China.

Qualcomm's total market share currently still strong

At the moment, Qualcomm's market share for smartphone SoCs is still strong as shown by unit shipments and revenues for Q4 2014 and Qualcomm's estimates for Q1 2015, although its product mix has shifted to lower-end products. In comparison to competitor MediaTek, Qualcomm is doing much better in terms of maintaining or growing unit shipments (with Qualcomm in fact seeing a 14% increase in unit shipments in Q4 2014), suggesting that Qualcomm is taking market share from MediaTek as products such as Snapdragon 410 and the new Snapdragon 210 take over large parts of the low-end cost-sensitive market (especially in China) where MediaTek's 3G solutions where previously dominant.

MediaTek losing market share despite successful new products

Meanwhile, although MediaTek has seen widespread adoption of its new MT6752 and MT6732 SoCs with integrated LTE modem for the cost-sensitive mid-range market, the company saw lower unit shipments in Q4 2014 and predicts a 10 to 18% revenue decline for Q1 2015, suggesting its smartphone SoC shipments are under pressure. Given the fact that the new 4G chips have higher selling prices than existing 3G chips, the revenue decline probably reflects a relatively dramatic decline in shipments of existing 3G solutions, with resulting loss of total market share, although price reductions may also play a role. MediaTek has been affected especially by the late introduction of integrated 4G solutions and the lack of a low-end 4G solution and to a lesser extend the delayed introduction of the high-end MT6795.

Captive mobile SoC use becoming more important

Within the total smartphone SoC market (and also in the tablet maket), captive supply (whereby a smartphone manufacturer uses its own SoCs in its smartphone models) is becoming more important, which affects the market opportunity for companies such as Qualcomm and MediaTek. I already mentioned Samsung's increasing use of Exynos processors, which has a significant impact as Samsung is one of the two largest smartphone manufacturers. A major Chinese manufacturr, Huawei, is also increasingly using SoCs from its own HiSilicon division, also extending to lower end models. Apple's gains in market share also has an effect (especially on the high-end market) since it uses proprietary SoCs.

In the tablet market, the low-end and Chinese white-box market is seeing a sharp reduction in shipments in Q1 2015, with market share shifting to brand names (where captive solutions are more important, such as at Samsung) as total shipments are estimated to decline dramatically. This greatly affects traditional players in the tablet SoC market such as Rockchip, Allwinner and MediaTek. Intel's strategy of subsidizing tablet SoCs has also had an impact. According to DigiTimes, the total tablet market will decline 30% sequentially in Q1 2015, with estimates of a decline of 12% for the whole year 2015.


Sources: DigiTimes (tablet market article), DigiTimes (MediaTek results), Qualcomm, MediaTek

Recently, DigiTimes published an article that forecasts smartphone application processor shipments in the China market for Q1 2015. Overall shipments are expected to decline by 10% sequentially when compared to Q4 2014.

The article states that Qualcomm and Spreadtrum will see the biggest declines, with Spreadtrum shipments declining almost 20% because of a lack of LTE solutions and weakness in emerging market demand.

Qualcomm sees declining shipments, but comes off a strong base

The article mentions that Qualcomm's Snapdragon 400 and Snapdragon 600 series are facing a strong challenge from comparable parts from MediaTek, with the cost structure of presumably Snapdragon 615 being less competitive than that of (presumably) MediaTek's MT6752. In earlier posts, I already compared these SoCs in some detail, and there are reasons to expect that such a cost-structure advantage for MediaTek does exist.

However, any decline for Qualcomm will come off a strong base in Q4 2014, which saw its dominance of the integrated LTE SoC market translate into market share gains (mainly at the expense of MediaTek), also in China. For the cost-sensitive part of the LTE market (covered, for example, by Snapdragon 410 and the upcoming Snapdragon 210), it does not yet face a challenge.

MediaTek struggling to reverse trend of market share decline, but product mix improves

MediaTek's market share has been negatively affected in the last part of 2014 because it was relatively late with its integrated LTE solutions, especially for the cost-sensitive part of the market (indeed, the MT6735, intended to cover the cost-sensitive segment, will only ship in Q2 2015). The article says MediaTek's shipments will decline about 15%, which suggests further market share loss in China for MediaTek after what looks like a weak Q4 2014. However, MediaTek's product mix is changing dramatically as a strong ramp of higher-end LTE SoCs such as MT6752 is offsetting declining shipments of MediaTek's existing 3G solutions which have dominated the Chinese smartphone processor market for some time.

The competitiveness of MediaTek's LTE solutions such as MT6752 gives some reason for optimism for its prospects for the rest of 2015 as these new chips ramp. However, another key product, the high-end MT6795, has been reported to have had production issues that seem to have delayed its introduction. Contrary to my original expectations, reports based on a leaked MediaTek roadmap suggest the MT6795 contains Cortex-A57 and Cortex-A53 cores in a big.LITTLE configuration, rather than a high-clocked octa-core Cortex-A53 CPU configuration, putting it squarely in the high-end segment and reducing the potential for MediaTek's chip to be significantly more cost-competitive than competitor's high-end solutions. However, no official information about the exact CPU configuration of MT6795 as well as up-to-date information about its production schedule has yet been given by MediaTek.

MediaTek's revenues for January 2015 came in at NT$17.5 billion, a level similar to the previous month. Although a year-over-year increase of 36% is apparent, the January 2014 revenue figure does not include MStar revenues. MediaTek has merged with MStar and started recognizing revenues from it in February 2014, so the year over year comparison is not very meaningful. According to DigiTimes, market watchers expected MediaTek's Q1 2015 revenues to decline no more than 10% over Q4 2014 with a strong ramp of new 4G smartphone SoCs. However, this turned out to be too optimistic.

HiSilicon gains as Huawei increasingly adopts in-house chips

Given the mentioned declines in shipments, there must be gainers to make up the balance. The article mentions strong shipments by Huawei's HiSilicon division for Huawei smartphone models. This probably reflects a trend more utilization of its own (HiSilicon) SoCs, also for more cost-senstive segments (for example, the recently announced Kirin 620 is likely to come into play).

Sources: DigiTimes Research (China smartphone AP shipment forecast for Q1 2015), DigiTimes Research (article on delay of Snapdragon 810 and MT6795)

Updated February 17, 2015.

Strategy Analytics has published its yearly report detailing global smartphone application processor market share in 2014. The total market had sales of about $21 billion with robust growth of 21%. The report shows that Qualcomm continued to lead the market in terms of revenue share with 52%, followed by Apple with 18% and MediaTek with 14%. The Apple number most likely reflects an estimate because Apple does not sell its chips to third parties. In fourth and fifth place were Speadtrum and Samsung LSI. The report mentions that HiSilicon, Intel and MediaTek had bigger growth than Qualcomm in 2014.

Qualcomm's strength based on Snapdragon 800 series wins in higher-tier phones

According to the report, Qualcomm's leadership was largely based on design wins for its Snapdragon 801 and Snapdragon 805 SoCs in the higher-tier market. Examples of this include the Samsung Galaxy S5 and LG G3. However, as I have previously reported Samsung has increased its use of in-house application processors starting from the second half of 2014, culminating in the exclusive use of Exynos 7420 in the Galaxy S6 in 2015, putting pressure on Qualcomm.

Baseband share in 2014

Strategy Analytics has also published a report with details about baseband (modem) market share in smartphones. According to the report, LTE (4G) basebands accounted for 50% of cellular baseband share in 2014, and the figure is likely to increase significantly in 2015. Qualcomm led in LTE basebands, but HiSilicon, Intel, Marvell, MediaTek and Samsung also increased LTE baseband shipments.

In terms of revenues in the overall baseband market, Qualcomm, MediaTek, Speadtrum, Marvell and Intel had the top positions in 2104. Qualcomm had 66% revenue share, followed by MediaTek with 17% and Speadtrum with 5% sare. Given the product lines of the respective companies in 2014, Qualcomm's revenues are based on both integrated SoC and separate modems, while Intel's sales were mostly separate modem chips, while the other players mostly shipped a mix of integrated SoCs and modem chips.

Comparison with 2013

Comparing with the reports that Strategy Analytics issued for 2013, Qualcomm saws it baseband revenue share remain relatively stable at 66% compared to 64% in 2013. MediaTek saw its AP market share increase from 10% in 2013 to 14% in 2014, and its baseband share increased.

Tablet processor market in 2014

According to another report issued by Strategy Analytics, the market for tablet processors grew 18% in 2014 to $4.2 billion. The top-five revenue share positions were occupied by Apple, Intel, Qualcomm, MediaTek and Samsung LSI. Apple led with 27% share (which must be an estimate), followed by Intel with 17% and Qualcomm with 16% share.

Notable is the absence among the top five of traditional leaders in the Chinese white-box market such as Rockchip and Allwinner. This most likely reflects in increase in brand name tablet shipments at the expense of the white-box tablet market, the low selling prices of white-box tablet processor and the encroachment of MediaTek and Intel into that segment.

Source: Strategy Analytics (Smartphone AP market share), Strategy Analytics (cellular baseband market share), Strategy Analytics (Tablet processor market share)

DigiTimes Research recently posted a report about smartphone AP (application processor) shipments in China in Q1 2015, indicating that Chinese fabless semiconductor company Spreadtrum gained market share in Q1, mainly based on strength for low-end 3G solutions. According to the report, Spreadtrum's market share reached 17.4% in Q1 2015, while MediaTek continues to lead the Chinese market with 46.8% share, followed by Qualcomm, which increased its share to 23.6%.

In terms of overall shipments, according to DigiTimes unit sales of smartphones by Chinese manufacturers declined significantly by about 30% in Q1 2015 compared to Q4 2014, with manufacturers focusing on export sales suffering the largest declines. Huawei, which is moving towards a strategy of using mainly in-house chip solutions from its HiSilicon division, was relatively unaffected and took market share in the quarter.

Spreadtrum's product line

Spreadtrum's increase in 3G smartphone solution shipments most likely reflects the 28 nm SoC it announced in June 2014, the SC883XG. This SoC features a quad-core Cortex-A7 CPU running up to 1.4 GHz, an ARM Mali-400 MP2 GPU, modem support for TD-SCDMA/HSPA(+) and GSM/GPRS/EDGE with dual-SIM capability, and integration of Spreadtrum's Wi-Fi/Bluetooth/GPS/FM chip technology.

The features of the SoC are extremely similar to MediaTek's successful MT6582 platform, which has been on the market for more than one and a half years. The combination of quad-core Cortex-A7 CPU, Mali-400 MP2 GPU and a high level of integration of other functionality on a 28 nm process appears to deliver good performance and very good power efficiency for cost-sensitive devices.

Spreadtrum also recently announced volume shipments of the SC7731G with 3G modem and the SC9830A with LTE modem. Rather than using Cortex-A53 CPU cores, the new chips continue to use efficient Cortex-A7 cores with Mali-400 MP2 GPU with support for Android 5.

MediaTek's 3G market share impacted by Spreadtrum

The DigiTimes report attributes MediaTek's loss of market share in China in Q1 2015 mainly to Spreadtrum's gains for 3G smartphone SoCs, where MediaTek has had a strong position. However, Qualcomm is likely to be a significant factor as well, with indications from new model announcement by companies such as TCL (Alcatel), ZTE, Lenovo/Motorola and others that MediaTek's late introduction of low-cost 4G solution has hurt the company. The resolution of the Chinese monopoly investigation into Qualcomm is also likely to be a factor.

Additionally, a trend has been noticed whereby second and third-tier Chinese smartphone manufacturers have lost share to the largest first-tier manufacturers in China. Since MediaTek's share among second and third-tier manufacturers has been the strongest, this has hurt MediaTek's shipments.

Projections for Q2 2015

For Q2 2015, DigiTimes expects overall AP shipments in China to increase 17.6% sequentially from the low base set in Q1 2015, although that still amounts to an increase of 18% over the same quarter last year (Q2 2014). DigiTimes expects MediaTek to recover some share to reach 48.4%, with Qualcomm seeing a small decline to 21.3% and Spreadtrum's share declining to 15.2%. DigiTimes attributes Spreadtrum's loss of momentum to pressure from MediaTek's 3G solutions, which probably reflects price reductions implemented by MediaTek after it saw shipments decrease and inventories build.

Sources: DigiTimes Research (smartphone AP shipments in China in Q1 2015), (DigiTimes Research (Chinese smartphone shipments in Q1 2015), Spreadtrum (2014 smartphone chip announcement), Spreadtrum (2015 smartphone chips announcement)

Recently, details surfaced about MediaTek's upcoming Helio-X20 SoC, a high performance offering in the series of Helio-branded SoCs, of which the MT6795 (Helio-X10) is the first member. The deca-core Helio-X20, which has the model number MT6797, has a total of ten CPU cores and is the first mobile SoC with a hierarchy of three clusters of progressively less performance-oriented CPU cores: two ARM-Cortex-A72 cores, four high clocked ARM-Cortex-A53 cores and four lower clocked ARM-Cortex-A53 cores.

Three-cluster hierarchy extends the big.LITTLE principle

Execution issues at Qualcomm may help MediaTek's chances of success in high-end

Execution issues at Qualcomm regarding their high-end product roadmap may increase the chances of success of MediaTek's high-end product line. Qualcomm's Snapdragon 810 has some performance issues and has not been a great success, giving MediaTek the opportunity to capture more of the performance-oriented, premium level segment. MediaTek already has Helio-X10 (MT6795) in the market, which has gained design wins, but for which some key characteristics such as power efficiency are still unknown.

Meanwhile, MediaTek has come under pressure in the cost-sensitive smartphone SoC market, previously the bread-and-butter of the company, on which Qualcomm is encroaching by gaining market share for low-end devices in China. This is mainly the result of MediaTek's delayed introduction of cost-sensitive 4G SoC solutions.

MediaTek's sales performance under pressure

On 12 May, MediaTek officially announced Helio-X20. Most of the previously known details are confirmed in the announcement. The chip utilizes MediaTek's new CorePilot 3.0 heterogeneous computing scheduling algorithm, with together with the tri-cluster architecture should provide up to 30% reduction in power consumption. The chip has advanced camera features and has an ARM Cortex-M4-based sensor hub processor for better battery efficiency.

According to AnandTech, quoting MediaTek, the GPU used is not the Mali-T880 but an as yet unannounced Mali-T8xx series GPU, similar to Mali-T880. Compared to Helio-X10's PowerVR G6200, MediaTek sees a 40% performance improvement with a 40% drop in power.

Sources: CNXSoftware (Helio-X20 article), DigiTimes (MediaTek Q2 sales projection), DigiTimes (MediaTek Q2 2015 quarterly results), Gizchina.com (Comparison of MT6797 with Snapdragon 810), MediaTek (Helio-X20 announcement), AnandTech (Helio-X20 article)

Updated 21 May 2015.

Mediatek has reported revenues for the month of February 2015 that show a steep decline, both sequentially and year-over-year.  Revenues came in at only NT$9.671 billion, a decline of 45% from January 2015 and a year-over-year decline of 39%. Since the merger with MStar became effective in February 2014, the year-over-year decline is factual and reflects a steep actual decline in the sales level of the combined businesses.

Although MediaTek has attributed the sales decline to a transition to new products in the smartphone segment, seasonal factors and fewer working days due to Chinese New Year, the main reason is likely to be a dramatic loss of market share in the entry-level segment of the Chinese smartphone market due to changes in the competitive landscape and a lack of a low-cost 4G solutions in MediaTek's product line.

Qualcomm's agreement with regulatory authorities in China has hurt MediaTek

On February 9, Qualcomm announced the resolution of the investigation by Chinese regulatory authorities into alleged monopolistic practices by Qualcomm because of the high royalty rates it imposes on all 3G and 4G-connected devices and its ability to combine royalty agreements with chip sales, effectively shutting out competitors. As part of the resolution, Qualcomm agreed to pay almost US$1 billion and agreed to a lower royalty rate of 65% in China.

However, the agreement may have increased Qualcomm's ability to enforce patent royalties and enhanced its bargaining position with Chinese smartphone manufacturers, leading to a larger proportion of Qualcomm chips being used, mainly at the expense of MediaTek's solutions. Previously, a large number of smartphones, most with MediaTek chips, were produced and sold in a grey market that avoided payment of royalties to Qualcomm. This grey market may quickly have become much smaller, contributing to the decline in MediaTek's shipments.

Additionally,  being a Taiwanese company, MediaTek is a foreign company within China, while policies in China tend to favour Chinese companies. As such, the agreement with Qualcomm and related policies may have been designed to favour upcoming Chinese chip designers such as Huawei's HiSilicon technology and the smartphone manufacturers themselves, rather than supporting MediaTek, which is not fully in the Chinese government's interest.

Lack of entry-level 4G SoC has left gap in MediaTek's product line

Because the MT6732, which is the lowest cost 4G solution that MediaTek currently has in the market, is too costly for the entry-level 4G smartphone segment, MediaTek currently has no cost-effective product offering for this segment. As entry-level smartphones transition to 4G, Qualcomm is taking market share with with its 4G-enabled Snapdragon 400, 410 and 210 SoCs, which are already in production targeting the entry-level market. This comes mainly at the expense of MediaTek's existing 3G solution shipments which previously occupied entry-level models in the product lines of most Chinese manufacturers.

Even for existing 3G models, MediaTek may be seeing market share loss as Qualcomm's cost-reduced 3G SoCs may be favoured by certain manufacturers given the changed environment regarding patent royalties.

MediaTek's loss of market share is evident among the current and new product line ups of smartphone manufacturers that previously used a lot of MediaTek solutions, such as TCL (including the Alcatel brand), ZTE, and Xiaomi, as well as other manufacturers.

However, MediaTek is close to bringing the MT6735 to market, which is a lower-cost 4G solution with a WorldMode modem with which it intends to target the entry-level 4G segment. A cost-reduced octa-core smartphone SoC, the MT6753, has also been introduced. It remains to be seen to what extent and when MediaTek will be able to recover market share in the entry level segment. Although its smartphone product line will soon be in good order and complete, it may be affected by factors beyond its control.

Many companies shipping Snapdragon 615 despite technological superiority of MT6752

Adoption of Qualcomm's mid-range Snapdragon 615 SoC by Chinese manufacturers has been strong, even as MediaTek's MT6752 SoC has ramped into production. According to most reports, the MT6752 SoC has a superior cost structure as well as delivering higher performance when compared to Qualcomm's solution, which also dominates new mid-range models from brand-name smartphone manufacturer outside of China. For the reasons explained in the previous section, Chinese smartphone manufacturers may have a strong impetus to ship models with a Qualcomm SoC in order to better deal with patent royalties, despite the technological superiority of MediaTek's chip.

Previous delay of MediaTek's MT6795/Helios X10

MediaTek's main product for the performance segment of the smartphone market, MT6795 (rebranded to Helios X10 last week at MWC), was originally announced in July 2014 with availablity to end users expected before the end of 2014. However, the chip was delayed and it is likely to come to market in the near future, several months after the planned introduction. This has also hurt MediaTek, although given the patent royalty environment it remains to be seen to what extent MediaTek will be able to gain traction with a high-end product, since patent royalties claimed by Qualcomm are significant for high-end devices with a high selling price.

Update (11 March 2015)

On 10 March, DigTimes reported that industry sources expect MediaTek's sales to rebound significantly in March to a revenue level of about NT$20 billion due a pick-up in demand from Chinese manufacturers. The sources attributed the previous decline in MediaTek's smartphone chip shipments to an inventory correction among Chinese manufacturers. According to the sources, there are signs of a pick-up in demand as vendors gear up for the launch of 4G devices in Q2 2015.

However, it is likely some orders from February 2015 where shifted into March. For the months of February and March combined, MediaTek is still likely to be seeing a disappointing year-over-year decline in revenues. Because of the competitive pressures mentioned above, it remains to be seen at what level MediaTek will be able to maintain revenues in the second quarter of 2015.

MediaTek's 4G smartphone chip product line is becoming more complete as the low-end MT6735 (especially) and MT6753 and the high-end MT6795 reach the market. Additionally, some details have surfaced about the new entry-level MT6570 and MT6580 SoCs, which appears to be developments of the popular MT6572 (dual-core Cortex-A7) and MT6582 (quad-core Cortex-A7) platforms with added support for 4G, comparable to Qualcomm's Snapdragon 210 platform, targeting the entry-level 4G segment. Given these new chips, MediaTek's smartphone performance has potential to improve.

Sources: DigiTimes (MediaTek February 2015 sales)

Updated 23 March 2015 (Mention MT6570 and MT6580).

According to a recent article published by DigiTimes Research, tablet applications processor unit shipments to Chinese manufacturers grew by 4.7% in Q4 2014 to reach 34.7 million units. However, shipments are estimated to decline by 24% in Q1 2015 when compared to Q4 2104. Year-over-year, shipments are expected to drop by about 8%, which marks the first time quarterly tablet processor shipments in China experience a year-over-year decline. Excess inventory from Q4 2014 is given as a cause for the decline in shipments.

MediaTek leads Chinese tablet market in Q1 2015

Based on information published by DigiTimes Research, MediaTek, Rockchip, Allwinner and Intel were the top four providers of tablet processors in China, in that order, in Q4 2014. For Q1 2015, MediaTek is estimated to expand it market share by about 1% to reach 28.5%, although absolute shipments will decline significantly due to the overall market decline.

Rockchip, who was the market share leader for most of 2014, is estimated to see its market share remain stable in Q1 2015, registering a 0.6% increase according to DigiTimes Research, who did not supply a market share figure for Rockchip, although it is probably in the region of 25%. DigiTimes mentioned that Rockchip's new chips launched at the end of 2014 (which includes the Cortex-A7-based RK3126 and RK3128) have not yet reached strong shipments.

Meanwhile, Allwinner continues the trend of a steady decline a market share, being expected to have a share of 15.6% compared to 17.6% in Q4 2014. This allows it to be passed by Intel in terms of market share, with Intel's market share estimated to rise from 15% to 16.3% in Q1 2015.

Intel's global market share has increased and is significant, especially revenue share

It should be noted that in terms of global market share, Intel has a stronger position than what would be inferred just from the Chinese market due to a strong position at brand-name tablet manufacturers outside of China, such as Asus and Acer. The other chip players in the Chinese tablet processor market, especially Rockchip and Allwinner, have a weak position outside of China. Due to the higher-end nature of Intel's product mix, Intel also has a higher revenue share, whereas the sales of companies such as Allwinner are mostly concentrated in low-end processors. It has been reported that Intel is abandoning its "contra-revenue" strategy of subsidizing tablet processor sales, which it probably can afford to do because its chip solutions are fairly competitive on their own.

Global brand names gain share, use different chip suppliers

In the global tablet marker, brand name manufacturers are gaining share and dominate the dollar value of the market, also for semiconductor content. Apple and Samsung, who lead the global tablet market, use a lot of in-house chip solutions (100% in the case of Apple). Samsung also uses suppliers like Qualcomm and Marvell, who otherwise do not have a strong position in the Chinese tablet market.

MediaTek used to have strong market share among Taiwanese tablet manufacturers such as Asus and Acer. However, its market share their seems to have been eroded significantly by strong adoption of Intel's Atom SoCs at these manufacturers (who have strong ties with Intel through PC manufacturing).

Popular tablet SoCs as of Q1 2015

By analyzing the tablet models offered on Chinese e-commerce portals, one can get some idea of what SoCs are currently used the most in tablets from China. I took a look at the tablet offerings on Banggood.com.

Rockchip's RK3188 (which probably means the RK3188T variant in most cases) is still widely used. Originally a mid-range performance segment SoC, there are indications that Rockchip built a significant inventory of this SoC (which is not particularly cheap in terms of manufactuing cost) last year, and the chip has been used in cheaper models as well. Rockchip's RK3126, which is more cost-effective than RK3188, is slowly starting to appear in new tablet models.

Meanwhile, Rockchip's high-end RK3288 is used in several models from Pipo, Teclast and FNF, and these seem to be reasonably popular for a high-end product. I have some concerns about power consumption and battery life regarding these products due to the processor cores used in the SoC.

The most popular MediaTek chips used in tablets are SoCs with 3G connectivity such as the low-end dual-core MT8312 and quad-core MT8382 (the equivalent of the MT6572 and MT6582 smartphone SoCs), as well as the more performance oriented octa-core MT6592/MT8392, which provides good performance and battery-life and has moved down to lower-priced tablet models. Additionally, the new 64-bit MT8752 with 4G (equivalent to the MT6752 smartphone SoC) is starting to appear in new models (Cube, Teclast). For WiFi-only tablets, the MT8127 (which has a relatively powerful GPU for a cheap SoC) is used in some low-to-mid-range tablets.

Allwinner's A31s, which was released in 2013 but perhaps its last successful product introduction, appears to be still used for production. Low-end tablets are available with the A23 and A33 SoCs, although the A33 does not seem to have been very successful and has been affected by weakness in the low-end segment of the tablet market.

Allwinner's new octa-core A83T has started to appear in a few new models, and is probably replacing the high-end A80 Octa which is likely to have had low profit margins.

Finally, Intel's Z3735F, Z3735G and Z3736F Atom SoCs are widely used in tablets, although most prominently in higher-prices models that come equipped with Microsoft Windows.

Update (15 March): 3G smartphone chip inventory unloaded onto Chinese tablet market

In an article published on 13 March 2015, DigiTimes Research reported that due to a high inventory level of 3G smartphone solutions in China, such chips will be unloaded onto the Chinese tablet market by players such as MediaTek, Qualcomm and Spreadtrum.

3G-enabled chip solutions for tablets are usually very similar to similar solutions for smartphones. For example, MediaTek's smartphone solutions have commonly been used in tablets, while MediaTek's official 3G-enabled tablet solutions most likely consist of a chip virtually identical to the smartphone version, with the main difference being a different model number (e.g. MT6582 vs MT8382). That MediaTek would target any excess inventory of 3G smartphone chipsets at the tablet market is not surprising.

However, I am little sceptical about the volume that may be involved. The Chinese tablet market is clearly contracting in the near term, and the volumes in the tablet market are considerably smaller than the smartphone market, even the declining 3G part of the smartphone SoC market. To put things into perspective, MediaTek's quarterly 3G smartphone chip shipments were on the order of 70 million in Q4 2014, while its 3G tablet chip shipments were probably in the range of 5 to 10 million.

The article also mentions Qualcomm, which in the past has not been a major player in the Chinese white-box tablet market. It mentions rumours that Qualcomm may form a partnership with Allwinner (which has been consistently losing market share) to penetrate the tablet market in China. The article also states that while Intel has introduced 3G tablet solutions, Intel's solutions are unlikely to be widely adopted until Intel introduces the 4G version of its Atom x3 (formerly SoFIA) platform.

Sources: DigiTimes (Q1 2015 China tablet AP market article),  DigiTimes Research (smartphone chips inventory unloaded to tablet market)

Updated 15 March 2015.

Both Qualcomm and MediaTek recently reported financial results for the fourth quarter of Q4 2014 and made projections for future periods. Both companies are seeing challenges that are already affecting their revenues and market share now or later in 2015.

Qualcomm lowers forecast for 2015 due to weakness at major customer

In their financial report for Q4 2014, Qualcomm lowered their outlook for 2015, citing as one of the reasons reduced demand from a major customer as that customer has not selected the Snapdragon 810 processor for an upcoming flagship product. This is widely believed to refer to Samsung's upcoming Galaxy S6. In fact the trend of increasing use of in-house Exynos processors already started last year, as models such as Galaxy Alpha, Galaxy S5 Mini and Galaxy Note 4 already saw increasing use of Samsung's own Exynos processors, including modem technology in some cases.

Qualcomm also mentions a share shift among major OEMs that will result in relatively more modem chips as opposed to SoCs (clearly referring to Apple, which only uses Qualcom's modem chips), as well as heightened competition in China. Recently, Qualcomm also recently announced a resolution of the anti-trust investigation by authorities in China, which amounts to a reduction in the patent royalty rate it charges to customers in China.

Qualcomm's total market share currently still strong

At the moment, Qualcomm's market share for smartphone SoCs is still strong as shown by unit shipments and revenues for Q4 2014 and Qualcomm's estimates for Q1 2015, although its product mix has shifted to lower-end products. In comparison to competitor MediaTek, Qualcomm is doing much better in terms of maintaining or growing unit shipments (with Qualcomm in fact seeing a 14% increase in unit shipments in Q4 2014), suggesting that Qualcomm is taking market share from MediaTek as products such as Snapdragon 410 and the new Snapdragon 210 take over large parts of the low-end cost-sensitive market (especially in China) where MediaTek's 3G solutions where previously dominant.

MediaTek losing market share despite successful new products

Meanwhile, although MediaTek has seen widespread adoption of its new MT6752 and MT6732 SoCs with integrated LTE modem for the cost-sensitive mid-range market, the company saw lower unit shipments in Q4 2014 and predicts a 10 to 18% revenue decline for Q1 2015, suggesting its smartphone SoC shipments are under pressure. Given the fact that the new 4G chips have higher selling prices than existing 3G chips, the revenue decline probably reflects a relatively dramatic decline in shipments of existing 3G solutions, with resulting loss of total market share, although price reductions may also play a role. MediaTek has been affected especially by the late introduction of integrated 4G solutions and the lack of a low-end 4G solution and to a lesser extend the delayed introduction of the high-end MT6795.

Captive mobile SoC use becoming more important

Within the total smartphone SoC market (and also in the tablet maket), captive supply (whereby a smartphone manufacturer uses its own SoCs in its smartphone models) is becoming more important, which affects the market opportunity for companies such as Qualcomm and MediaTek. I already mentioned Samsung's increasing use of Exynos processors, which has a significant impact as Samsung is one of the two largest smartphone manufacturers. A major Chinese manufacturr, Huawei, is also increasingly using SoCs from its own HiSilicon division, also extending to lower end models. Apple's gains in market share also has an effect (especially on the high-end market) since it uses proprietary SoCs.

In the tablet market, the low-end and Chinese white-box market is seeing a sharp reduction in shipments in Q1 2015, with market share shifting to brand names (where captive solutions are more important, such as at Samsung) as total shipments are estimated to decline dramatically. This greatly affects traditional players in the tablet SoC market such as Rockchip, Allwinner and MediaTek. Intel's strategy of subsidizing tablet SoCs has also had an impact. According to DigiTimes, the total tablet market will decline 30% sequentially in Q1 2015, with estimates of a decline of 12% for the whole year 2015.


Sources: DigiTimes (tablet market article), DigiTimes (MediaTek results), Qualcomm, MediaTek

Recently, DigiTimes published an article that forecasts smartphone application processor shipments in the China market for Q1 2015. Overall shipments are expected to decline by 10% sequentially when compared to Q4 2014.

The article states that Qualcomm and Spreadtrum will see the biggest declines, with Spreadtrum shipments declining almost 20% because of a lack of LTE solutions and weakness in emerging market demand.

Qualcomm sees declining shipments, but comes off a strong base

The article mentions that Qualcomm's Snapdragon 400 and Snapdragon 600 series are facing a strong challenge from comparable parts from MediaTek, with the cost structure of presumably Snapdragon 615 being less competitive than that of (presumably) MediaTek's MT6752. In earlier posts, I already compared these SoCs in some detail, and there are reasons to expect that such a cost-structure advantage for MediaTek does exist.

However, any decline for Qualcomm will come off a strong base in Q4 2014, which saw its dominance of the integrated LTE SoC market translate into market share gains (mainly at the expense of MediaTek), also in China. For the cost-sensitive part of the LTE market (covered, for example, by Snapdragon 410 and the upcoming Snapdragon 210), it does not yet face a challenge.

MediaTek struggling to reverse trend of market share decline, but product mix improves

MediaTek's market share has been negatively affected in the last part of 2014 because it was relatively late with its integrated LTE solutions, especially for the cost-sensitive part of the market (indeed, the MT6735, intended to cover the cost-sensitive segment, will only ship in Q2 2015). The article says MediaTek's shipments will decline about 15%, which suggests further market share loss in China for MediaTek after what looks like a weak Q4 2014. However, MediaTek's product mix is changing dramatically as a strong ramp of higher-end LTE SoCs such as MT6752 is offsetting declining shipments of MediaTek's existing 3G solutions which have dominated the Chinese smartphone processor market for some time.

The competitiveness of MediaTek's LTE solutions such as MT6752 gives some reason for optimism for its prospects for the rest of 2015 as these new chips ramp. However, another key product, the high-end MT6795, has been reported to have had production issues that seem to have delayed its introduction. Contrary to my original expectations, reports based on a leaked MediaTek roadmap suggest the MT6795 contains Cortex-A57 and Cortex-A53 cores in a big.LITTLE configuration, rather than a high-clocked octa-core Cortex-A53 CPU configuration, putting it squarely in the high-end segment and reducing the potential for MediaTek's chip to be significantly more cost-competitive than competitor's high-end solutions. However, no official information about the exact CPU configuration of MT6795 as well as up-to-date information about its production schedule has yet been given by MediaTek.

MediaTek's revenues for January 2015 came in at NT$17.5 billion, a level similar to the previous month. Although a year-over-year increase of 36% is apparent, the January 2014 revenue figure does not include MStar revenues. MediaTek has merged with MStar and started recognizing revenues from it in February 2014, so the year over year comparison is not very meaningful. According to DigiTimes, market watchers expected MediaTek's Q1 2015 revenues to decline no more than 10% over Q4 2014 with a strong ramp of new 4G smartphone SoCs. However, this turned out to be too optimistic.

HiSilicon gains as Huawei increasingly adopts in-house chips

Given the mentioned declines in shipments, there must be gainers to make up the balance. The article mentions strong shipments by Huawei's HiSilicon division for Huawei smartphone models. This probably reflects a trend more utilization of its own (HiSilicon) SoCs, also for more cost-senstive segments (for example, the recently announced Kirin 620 is likely to come into play).

Sources: DigiTimes Research (China smartphone AP shipment forecast for Q1 2015), DigiTimes Research (article on delay of Snapdragon 810 and MT6795)

Updated February 17, 2015.

Strategy Analytics has published its yearly report detailing global smartphone application processor market share in 2014. The total market had sales of about $21 billion with robust growth of 21%. The report shows that Qualcomm continued to lead the market in terms of revenue share with 52%, followed by Apple with 18% and MediaTek with 14%. The Apple number most likely reflects an estimate because Apple does not sell its chips to third parties. In fourth and fifth place were Speadtrum and Samsung LSI. The report mentions that HiSilicon, Intel and MediaTek had bigger growth than Qualcomm in 2014.

Qualcomm's strength based on Snapdragon 800 series wins in higher-tier phones

According to the report, Qualcomm's leadership was largely based on design wins for its Snapdragon 801 and Snapdragon 805 SoCs in the higher-tier market. Examples of this include the Samsung Galaxy S5 and LG G3. However, as I have previously reported Samsung has increased its use of in-house application processors starting from the second half of 2014, culminating in the exclusive use of Exynos 7420 in the Galaxy S6 in 2015, putting pressure on Qualcomm.

Baseband share in 2014

Strategy Analytics has also published a report with details about baseband (modem) market share in smartphones. According to the report, LTE (4G) basebands accounted for 50% of cellular baseband share in 2014, and the figure is likely to increase significantly in 2015. Qualcomm led in LTE basebands, but HiSilicon, Intel, Marvell, MediaTek and Samsung also increased LTE baseband shipments.

In terms of revenues in the overall baseband market, Qualcomm, MediaTek, Speadtrum, Marvell and Intel had the top positions in 2104. Qualcomm had 66% revenue share, followed by MediaTek with 17% and Speadtrum with 5% sare. Given the product lines of the respective companies in 2014, Qualcomm's revenues are based on both integrated SoC and separate modems, while Intel's sales were mostly separate modem chips, while the other players mostly shipped a mix of integrated SoCs and modem chips.

Comparison with 2013

Comparing with the reports that Strategy Analytics issued for 2013, Qualcomm saws it baseband revenue share remain relatively stable at 66% compared to 64% in 2013. MediaTek saw its AP market share increase from 10% in 2013 to 14% in 2014, and its baseband share increased.

Tablet processor market in 2014

According to another report issued by Strategy Analytics, the market for tablet processors grew 18% in 2014 to $4.2 billion. The top-five revenue share positions were occupied by Apple, Intel, Qualcomm, MediaTek and Samsung LSI. Apple led with 27% share (which must be an estimate), followed by Intel with 17% and Qualcomm with 16% share.

Notable is the absence among the top five of traditional leaders in the Chinese white-box market such as Rockchip and Allwinner. This most likely reflects in increase in brand name tablet shipments at the expense of the white-box tablet market, the low selling prices of white-box tablet processor and the encroachment of MediaTek and Intel into that segment.

Source: Strategy Analytics (Smartphone AP market share), Strategy Analytics (cellular baseband market share), Strategy Analytics (Tablet processor market share)

DigiTimes Research recently posted a report about smartphone AP (application processor) shipments in China in Q1 2015, indicating that Chinese fabless semiconductor company Spreadtrum gained market share in Q1, mainly based on strength for low-end 3G solutions. According to the report, Spreadtrum's market share reached 17.4% in Q1 2015, while MediaTek continues to lead the Chinese market with 46.8% share, followed by Qualcomm, which increased its share to 23.6%.

In terms of overall shipments, according to DigiTimes unit sales of smartphones by Chinese manufacturers declined significantly by about 30% in Q1 2015 compared to Q4 2014, with manufacturers focusing on export sales suffering the largest declines. Huawei, which is moving towards a strategy of using mainly in-house chip solutions from its HiSilicon division, was relatively unaffected and took market share in the quarter.

Spreadtrum's product line

Spreadtrum's increase in 3G smartphone solution shipments most likely reflects the 28 nm SoC it announced in June 2014, the SC883XG. This SoC features a quad-core Cortex-A7 CPU running up to 1.4 GHz, an ARM Mali-400 MP2 GPU, modem support for TD-SCDMA/HSPA(+) and GSM/GPRS/EDGE with dual-SIM capability, and integration of Spreadtrum's Wi-Fi/Bluetooth/GPS/FM chip technology.

The features of the SoC are extremely similar to MediaTek's successful MT6582 platform, which has been on the market for more than one and a half years. The combination of quad-core Cortex-A7 CPU, Mali-400 MP2 GPU and a high level of integration of other functionality on a 28 nm process appears to deliver good performance and very good power efficiency for cost-sensitive devices.

Spreadtrum also recently announced volume shipments of the SC7731G with 3G modem and the SC9830A with LTE modem. Rather than using Cortex-A53 CPU cores, the new chips continue to use efficient Cortex-A7 cores with Mali-400 MP2 GPU with support for Android 5.

MediaTek's 3G market share impacted by Spreadtrum

The DigiTimes report attributes MediaTek's loss of market share in China in Q1 2015 mainly to Spreadtrum's gains for 3G smartphone SoCs, where MediaTek has had a strong position. However, Qualcomm is likely to be a significant factor as well, with indications from new model announcement by companies such as TCL (Alcatel), ZTE, Lenovo/Motorola and others that MediaTek's late introduction of low-cost 4G solution has hurt the company. The resolution of the Chinese monopoly investigation into Qualcomm is also likely to be a factor.

Additionally, a trend has been noticed whereby second and third-tier Chinese smartphone manufacturers have lost share to the largest first-tier manufacturers in China. Since MediaTek's share among second and third-tier manufacturers has been the strongest, this has hurt MediaTek's shipments.

Projections for Q2 2015

For Q2 2015, DigiTimes expects overall AP shipments in China to increase 17.6% sequentially from the low base set in Q1 2015, although that still amounts to an increase of 18% over the same quarter last year (Q2 2014). DigiTimes expects MediaTek to recover some share to reach 48.4%, with Qualcomm seeing a small decline to 21.3% and Spreadtrum's share declining to 15.2%. DigiTimes attributes Spreadtrum's loss of momentum to pressure from MediaTek's 3G solutions, which probably reflects price reductions implemented by MediaTek after it saw shipments decrease and inventories build.

Sources: DigiTimes Research (smartphone AP shipments in China in Q1 2015), (DigiTimes Research (Chinese smartphone shipments in Q1 2015), Spreadtrum (2014 smartphone chip announcement), Spreadtrum (2015 smartphone chips announcement)

Recently, details surfaced about MediaTek's upcoming Helio-X20 SoC, a high performance offering in the series of Helio-branded SoCs, of which the MT6795 (Helio-X10) is the first member. The deca-core Helio-X20, which has the model number MT6797, has a total of ten CPU cores and is the first mobile SoC with a hierarchy of three clusters of progressively less performance-oriented CPU cores: two ARM-Cortex-A72 cores, four high clocked ARM-Cortex-A53 cores and four lower clocked ARM-Cortex-A53 cores.

Three-cluster hierarchy extends the big.LITTLE principle

Execution issues at Qualcomm may help MediaTek's chances of success in high-end

Execution issues at Qualcomm regarding their high-end product roadmap may increase the chances of success of MediaTek's high-end product line. Qualcomm's Snapdragon 810 has some performance issues and has not been a great success, giving MediaTek the opportunity to capture more of the performance-oriented, premium level segment. MediaTek already has Helio-X10 (MT6795) in the market, which has gained design wins, but for which some key characteristics such as power efficiency are still unknown.

Meanwhile, MediaTek has come under pressure in the cost-sensitive smartphone SoC market, previously the bread-and-butter of the company, on which Qualcomm is encroaching by gaining market share for low-end devices in China. This is mainly the result of MediaTek's delayed introduction of cost-sensitive 4G SoC solutions.

MediaTek's sales performance under pressure

On 12 May, MediaTek officially announced Helio-X20. Most of the previously known details are confirmed in the announcement. The chip utilizes MediaTek's new CorePilot 3.0 heterogeneous computing scheduling algorithm, with together with the tri-cluster architecture should provide up to 30% reduction in power consumption. The chip has advanced camera features and has an ARM Cortex-M4-based sensor hub processor for better battery efficiency.

According to AnandTech, quoting MediaTek, the GPU used is not the Mali-T880 but an as yet unannounced Mali-T8xx series GPU, similar to Mali-T880. Compared to Helio-X10's PowerVR G6200, MediaTek sees a 40% performance improvement with a 40% drop in power.

Sources: CNXSoftware (Helio-X20 article), DigiTimes (MediaTek Q2 sales projection), DigiTimes (MediaTek Q2 2015 quarterly results), Gizchina.com (Comparison of MT6797 with Snapdragon 810), MediaTek (Helio-X20 announcement), AnandTech (Helio-X20 article)

Updated 21 May 2015.

Mediatek has reported revenues for the month of February 2015 that show a steep decline, both sequentially and year-over-year.  Revenues came in at only NT$9.671 billion, a decline of 45% from January 2015 and a year-over-year decline of 39%. Since the merger with MStar became effective in February 2014, the year-over-year decline is factual and reflects a steep actual decline in the sales level of the combined businesses.

Although MediaTek has attributed the sales decline to a transition to new products in the smartphone segment, seasonal factors and fewer working days due to Chinese New Year, the main reason is likely to be a dramatic loss of market share in the entry-level segment of the Chinese smartphone market due to changes in the competitive landscape and a lack of a low-cost 4G solutions in MediaTek's product line.

Qualcomm's agreement with regulatory authorities in China has hurt MediaTek

On February 9, Qualcomm announced the resolution of the investigation by Chinese regulatory authorities into alleged monopolistic practices by Qualcomm because of the high royalty rates it imposes on all 3G and 4G-connected devices and its ability to combine royalty agreements with chip sales, effectively shutting out competitors. As part of the resolution, Qualcomm agreed to pay almost US$1 billion and agreed to a lower royalty rate of 65% in China.

However, the agreement may have increased Qualcomm's ability to enforce patent royalties and enhanced its bargaining position with Chinese smartphone manufacturers, leading to a larger proportion of Qualcomm chips being used, mainly at the expense of MediaTek's solutions. Previously, a large number of smartphones, most with MediaTek chips, were produced and sold in a grey market that avoided payment of royalties to Qualcomm. This grey market may quickly have become much smaller, contributing to the decline in MediaTek's shipments.

Additionally,  being a Taiwanese company, MediaTek is a foreign company within China, while policies in China tend to favour Chinese companies. As such, the agreement with Qualcomm and related policies may have been designed to favour upcoming Chinese chip designers such as Huawei's HiSilicon technology and the smartphone manufacturers themselves, rather than supporting MediaTek, which is not fully in the Chinese government's interest.

Lack of entry-level 4G SoC has left gap in MediaTek's product line

Because the MT6732, which is the lowest cost 4G solution that MediaTek currently has in the market, is too costly for the entry-level 4G smartphone segment, MediaTek currently has no cost-effective product offering for this segment. As entry-level smartphones transition to 4G, Qualcomm is taking market share with with its 4G-enabled Snapdragon 400, 410 and 210 SoCs, which are already in production targeting the entry-level market. This comes mainly at the expense of MediaTek's existing 3G solution shipments which previously occupied entry-level models in the product lines of most Chinese manufacturers.

Even for existing 3G models, MediaTek may be seeing market share loss as Qualcomm's cost-reduced 3G SoCs may be favoured by certain manufacturers given the changed environment regarding patent royalties.

MediaTek's loss of market share is evident among the current and new product line ups of smartphone manufacturers that previously used a lot of MediaTek solutions, such as TCL (including the Alcatel brand), ZTE, and Xiaomi, as well as other manufacturers.

However, MediaTek is close to bringing the MT6735 to market, which is a lower-cost 4G solution with a WorldMode modem with which it intends to target the entry-level 4G segment. A cost-reduced octa-core smartphone SoC, the MT6753, has also been introduced. It remains to be seen to what extent and when MediaTek will be able to recover market share in the entry level segment. Although its smartphone product line will soon be in good order and complete, it may be affected by factors beyond its control.

Many companies shipping Snapdragon 615 despite technological superiority of MT6752

Adoption of Qualcomm's mid-range Snapdragon 615 SoC by Chinese manufacturers has been strong, even as MediaTek's MT6752 SoC has ramped into production. According to most reports, the MT6752 SoC has a superior cost structure as well as delivering higher performance when compared to Qualcomm's solution, which also dominates new mid-range models from brand-name smartphone manufacturer outside of China. For the reasons explained in the previous section, Chinese smartphone manufacturers may have a strong impetus to ship models with a Qualcomm SoC in order to better deal with patent royalties, despite the technological superiority of MediaTek's chip.

Previous delay of MediaTek's MT6795/Helios X10

MediaTek's main product for the performance segment of the smartphone market, MT6795 (rebranded to Helios X10 last week at MWC), was originally announced in July 2014 with availablity to end users expected before the end of 2014. However, the chip was delayed and it is likely to come to market in the near future, several months after the planned introduction. This has also hurt MediaTek, although given the patent royalty environment it remains to be seen to what extent MediaTek will be able to gain traction with a high-end product, since patent royalties claimed by Qualcomm are significant for high-end devices with a high selling price.

Update (11 March 2015)

On 10 March, DigTimes reported that industry sources expect MediaTek's sales to rebound significantly in March to a revenue level of about NT$20 billion due a pick-up in demand from Chinese manufacturers. The sources attributed the previous decline in MediaTek's smartphone chip shipments to an inventory correction among Chinese manufacturers. According to the sources, there are signs of a pick-up in demand as vendors gear up for the launch of 4G devices in Q2 2015.

However, it is likely some orders from February 2015 where shifted into March. For the months of February and March combined, MediaTek is still likely to be seeing a disappointing year-over-year decline in revenues. Because of the competitive pressures mentioned above, it remains to be seen at what level MediaTek will be able to maintain revenues in the second quarter of 2015.

MediaTek's 4G smartphone chip product line is becoming more complete as the low-end MT6735 (especially) and MT6753 and the high-end MT6795 reach the market. Additionally, some details have surfaced about the new entry-level MT6570 and MT6580 SoCs, which appears to be developments of the popular MT6572 (dual-core Cortex-A7) and MT6582 (quad-core Cortex-A7) platforms with added support for 4G, comparable to Qualcomm's Snapdragon 210 platform, targeting the entry-level 4G segment. Given these new chips, MediaTek's smartphone performance has potential to improve.

Sources: DigiTimes (MediaTek February 2015 sales)

Updated 23 March 2015 (Mention MT6570 and MT6580).

According to a recent article published by DigiTimes Research, tablet applications processor unit shipments to Chinese manufacturers grew by 4.7% in Q4 2014 to reach 34.7 million units. However, shipments are estimated to decline by 24% in Q1 2015 when compared to Q4 2104. Year-over-year, shipments are expected to drop by about 8%, which marks the first time quarterly tablet processor shipments in China experience a year-over-year decline. Excess inventory from Q4 2014 is given as a cause for the decline in shipments.

MediaTek leads Chinese tablet market in Q1 2015

Based on information published by DigiTimes Research, MediaTek, Rockchip, Allwinner and Intel were the top four providers of tablet processors in China, in that order, in Q4 2014. For Q1 2015, MediaTek is estimated to expand it market share by about 1% to reach 28.5%, although absolute shipments will decline significantly due to the overall market decline.

Rockchip, who was the market share leader for most of 2014, is estimated to see its market share remain stable in Q1 2015, registering a 0.6% increase according to DigiTimes Research, who did not supply a market share figure for Rockchip, although it is probably in the region of 25%. DigiTimes mentioned that Rockchip's new chips launched at the end of 2014 (which includes the Cortex-A7-based RK3126 and RK3128) have not yet reached strong shipments.

Meanwhile, Allwinner continues the trend of a steady decline a market share, being expected to have a share of 15.6% compared to 17.6% in Q4 2014. This allows it to be passed by Intel in terms of market share, with Intel's market share estimated to rise from 15% to 16.3% in Q1 2015.

Intel's global market share has increased and is significant, especially revenue share

It should be noted that in terms of global market share, Intel has a stronger position than what would be inferred just from the Chinese market due to a strong position at brand-name tablet manufacturers outside of China, such as Asus and Acer. The other chip players in the Chinese tablet processor market, especially Rockchip and Allwinner, have a weak position outside of China. Due to the higher-end nature of Intel's product mix, Intel also has a higher revenue share, whereas the sales of companies such as Allwinner are mostly concentrated in low-end processors. It has been reported that Intel is abandoning its "contra-revenue" strategy of subsidizing tablet processor sales, which it probably can afford to do because its chip solutions are fairly competitive on their own.

Global brand names gain share, use different chip suppliers

In the global tablet marker, brand name manufacturers are gaining share and dominate the dollar value of the market, also for semiconductor content. Apple and Samsung, who lead the global tablet market, use a lot of in-house chip solutions (100% in the case of Apple). Samsung also uses suppliers like Qualcomm and Marvell, who otherwise do not have a strong position in the Chinese tablet market.

MediaTek used to have strong market share among Taiwanese tablet manufacturers such as Asus and Acer. However, its market share their seems to have been eroded significantly by strong adoption of Intel's Atom SoCs at these manufacturers (who have strong ties with Intel through PC manufacturing).

Popular tablet SoCs as of Q1 2015

By analyzing the tablet models offered on Chinese e-commerce portals, one can get some idea of what SoCs are currently used the most in tablets from China. I took a look at the tablet offerings on Banggood.com.

Rockchip's RK3188 (which probably means the RK3188T variant in most cases) is still widely used. Originally a mid-range performance segment SoC, there are indications that Rockchip built a significant inventory of this SoC (which is not particularly cheap in terms of manufactuing cost) last year, and the chip has been used in cheaper models as well. Rockchip's RK3126, which is more cost-effective than RK3188, is slowly starting to appear in new tablet models.

Meanwhile, Rockchip's high-end RK3288 is used in several models from Pipo, Teclast and FNF, and these seem to be reasonably popular for a high-end product. I have some concerns about power consumption and battery life regarding these products due to the processor cores used in the SoC.

The most popular MediaTek chips used in tablets are SoCs with 3G connectivity such as the low-end dual-core MT8312 and quad-core MT8382 (the equivalent of the MT6572 and MT6582 smartphone SoCs), as well as the more performance oriented octa-core MT6592/MT8392, which provides good performance and battery-life and has moved down to lower-priced tablet models. Additionally, the new 64-bit MT8752 with 4G (equivalent to the MT6752 smartphone SoC) is starting to appear in new models (Cube, Teclast). For WiFi-only tablets, the MT8127 (which has a relatively powerful GPU for a cheap SoC) is used in some low-to-mid-range tablets.

Allwinner's A31s, which was released in 2013 but perhaps its last successful product introduction, appears to be still used for production. Low-end tablets are available with the A23 and A33 SoCs, although the A33 does not seem to have been very successful and has been affected by weakness in the low-end segment of the tablet market.

Allwinner's new octa-core A83T has started to appear in a few new models, and is probably replacing the high-end A80 Octa which is likely to have had low profit margins.

Finally, Intel's Z3735F, Z3735G and Z3736F Atom SoCs are widely used in tablets, although most prominently in higher-prices models that come equipped with Microsoft Windows.

Update (15 March): 3G smartphone chip inventory unloaded onto Chinese tablet market

In an article published on 13 March 2015, DigiTimes Research reported that due to a high inventory level of 3G smartphone solutions in China, such chips will be unloaded onto the Chinese tablet market by players such as MediaTek, Qualcomm and Spreadtrum.

3G-enabled chip solutions for tablets are usually very similar to similar solutions for smartphones. For example, MediaTek's smartphone solutions have commonly been used in tablets, while MediaTek's official 3G-enabled tablet solutions most likely consist of a chip virtually identical to the smartphone version, with the main difference being a different model number (e.g. MT6582 vs MT8382). That MediaTek would target any excess inventory of 3G smartphone chipsets at the tablet market is not surprising.

However, I am little sceptical about the volume that may be involved. The Chinese tablet market is clearly contracting in the near term, and the volumes in the tablet market are considerably smaller than the smartphone market, even the declining 3G part of the smartphone SoC market. To put things into perspective, MediaTek's quarterly 3G smartphone chip shipments were on the order of 70 million in Q4 2014, while its 3G tablet chip shipments were probably in the range of 5 to 10 million.

The article also mentions Qualcomm, which in the past has not been a major player in the Chinese white-box tablet market. It mentions rumours that Qualcomm may form a partnership with Allwinner (which has been consistently losing market share) to penetrate the tablet market in China. The article also states that while Intel has introduced 3G tablet solutions, Intel's solutions are unlikely to be widely adopted until Intel introduces the 4G version of its Atom x3 (formerly SoFIA) platform.

Sources: DigiTimes (Q1 2015 China tablet AP market article),  DigiTimes Research (smartphone chips inventory unloaded to tablet market)

Updated 15 March 2015.

Both Qualcomm and MediaTek recently reported financial results for the fourth quarter of Q4 2014 and made projections for future periods. Both companies are seeing challenges that are already affecting their revenues and market share now or later in 2015.

Qualcomm lowers forecast for 2015 due to weakness at major customer

In their financial report for Q4 2014, Qualcomm lowered their outlook for 2015, citing as one of the reasons reduced demand from a major customer as that customer has not selected the Snapdragon 810 processor for an upcoming flagship product. This is widely believed to refer to Samsung's upcoming Galaxy S6. In fact the trend of increasing use of in-house Exynos processors already started last year, as models such as Galaxy Alpha, Galaxy S5 Mini and Galaxy Note 4 already saw increasing use of Samsung's own Exynos processors, including modem technology in some cases.

Qualcomm also mentions a share shift among major OEMs that will result in relatively more modem chips as opposed to SoCs (clearly referring to Apple, which only uses Qualcom's modem chips), as well as heightened competition in China. Recently, Qualcomm also recently announced a resolution of the anti-trust investigation by authorities in China, which amounts to a reduction in the patent royalty rate it charges to customers in China.

Qualcomm's total market share currently still strong

At the moment, Qualcomm's market share for smartphone SoCs is still strong as shown by unit shipments and revenues for Q4 2014 and Qualcomm's estimates for Q1 2015, although its product mix has shifted to lower-end products. In comparison to competitor MediaTek, Qualcomm is doing much better in terms of maintaining or growing unit shipments (with Qualcomm in fact seeing a 14% increase in unit shipments in Q4 2014), suggesting that Qualcomm is taking market share from MediaTek as products such as Snapdragon 410 and the new Snapdragon 210 take over large parts of the low-end cost-sensitive market (especially in China) where MediaTek's 3G solutions where previously dominant.

MediaTek losing market share despite successful new products

Meanwhile, although MediaTek has seen widespread adoption of its new MT6752 and MT6732 SoCs with integrated LTE modem for the cost-sensitive mid-range market, the company saw lower unit shipments in Q4 2014 and predicts a 10 to 18% revenue decline for Q1 2015, suggesting its smartphone SoC shipments are under pressure. Given the fact that the new 4G chips have higher selling prices than existing 3G chips, the revenue decline probably reflects a relatively dramatic decline in shipments of existing 3G solutions, with resulting loss of total market share, although price reductions may also play a role. MediaTek has been affected especially by the late introduction of integrated 4G solutions and the lack of a low-end 4G solution and to a lesser extend the delayed introduction of the high-end MT6795.

Captive mobile SoC use becoming more important

Within the total smartphone SoC market (and also in the tablet maket), captive supply (whereby a smartphone manufacturer uses its own SoCs in its smartphone models) is becoming more important, which affects the market opportunity for companies such as Qualcomm and MediaTek. I already mentioned Samsung's increasing use of Exynos processors, which has a significant impact as Samsung is one of the two largest smartphone manufacturers. A major Chinese manufacturr, Huawei, is also increasingly using SoCs from its own HiSilicon division, also extending to lower end models. Apple's gains in market share also has an effect (especially on the high-end market) since it uses proprietary SoCs.

In the tablet market, the low-end and Chinese white-box market is seeing a sharp reduction in shipments in Q1 2015, with market share shifting to brand names (where captive solutions are more important, such as at Samsung) as total shipments are estimated to decline dramatically. This greatly affects traditional players in the tablet SoC market such as Rockchip, Allwinner and MediaTek. Intel's strategy of subsidizing tablet SoCs has also had an impact. According to DigiTimes, the total tablet market will decline 30% sequentially in Q1 2015, with estimates of a decline of 12% for the whole year 2015.


Sources: DigiTimes (tablet market article), DigiTimes (MediaTek results), Qualcomm, MediaTek

Recently, DigiTimes published an article that forecasts smartphone application processor shipments in the China market for Q1 2015. Overall shipments are expected to decline by 10% sequentially when compared to Q4 2014.

The article states that Qualcomm and Spreadtrum will see the biggest declines, with Spreadtrum shipments declining almost 20% because of a lack of LTE solutions and weakness in emerging market demand.

Qualcomm sees declining shipments, but comes off a strong base

The article mentions that Qualcomm's Snapdragon 400 and Snapdragon 600 series are facing a strong challenge from comparable parts from MediaTek, with the cost structure of presumably Snapdragon 615 being less competitive than that of (presumably) MediaTek's MT6752. In earlier posts, I already compared these SoCs in some detail, and there are reasons to expect that such a cost-structure advantage for MediaTek does exist.

However, any decline for Qualcomm will come off a strong base in Q4 2014, which saw its dominance of the integrated LTE SoC market translate into market share gains (mainly at the expense of MediaTek), also in China. For the cost-sensitive part of the LTE market (covered, for example, by Snapdragon 410 and the upcoming Snapdragon 210), it does not yet face a challenge.

MediaTek struggling to reverse trend of market share decline, but product mix improves

MediaTek's market share has been negatively affected in the last part of 2014 because it was relatively late with its integrated LTE solutions, especially for the cost-sensitive part of the market (indeed, the MT6735, intended to cover the cost-sensitive segment, will only ship in Q2 2015). The article says MediaTek's shipments will decline about 15%, which suggests further market share loss in China for MediaTek after what looks like a weak Q4 2014. However, MediaTek's product mix is changing dramatically as a strong ramp of higher-end LTE SoCs such as MT6752 is offsetting declining shipments of MediaTek's existing 3G solutions which have dominated the Chinese smartphone processor market for some time.

The competitiveness of MediaTek's LTE solutions such as MT6752 gives some reason for optimism for its prospects for the rest of 2015 as these new chips ramp. However, another key product, the high-end MT6795, has been reported to have had production issues that seem to have delayed its introduction. Contrary to my original expectations, reports based on a leaked MediaTek roadmap suggest the MT6795 contains Cortex-A57 and Cortex-A53 cores in a big.LITTLE configuration, rather than a high-clocked octa-core Cortex-A53 CPU configuration, putting it squarely in the high-end segment and reducing the potential for MediaTek's chip to be significantly more cost-competitive than competitor's high-end solutions. However, no official information about the exact CPU configuration of MT6795 as well as up-to-date information about its production schedule has yet been given by MediaTek.

MediaTek's revenues for January 2015 came in at NT$17.5 billion, a level similar to the previous month. Although a year-over-year increase of 36% is apparent, the January 2014 revenue figure does not include MStar revenues. MediaTek has merged with MStar and started recognizing revenues from it in February 2014, so the year over year comparison is not very meaningful. According to DigiTimes, market watchers expected MediaTek's Q1 2015 revenues to decline no more than 10% over Q4 2014 with a strong ramp of new 4G smartphone SoCs. However, this turned out to be too optimistic.

HiSilicon gains as Huawei increasingly adopts in-house chips

Given the mentioned declines in shipments, there must be gainers to make up the balance. The article mentions strong shipments by Huawei's HiSilicon division for Huawei smartphone models. This probably reflects a trend more utilization of its own (HiSilicon) SoCs, also for more cost-senstive segments (for example, the recently announced Kirin 620 is likely to come into play).

Sources: DigiTimes Research (China smartphone AP shipment forecast for Q1 2015), DigiTimes Research (article on delay of Snapdragon 810 and MT6795)

Updated February 17, 2015.

Strategy Analytics has published its yearly report detailing global smartphone application processor market share in 2014. The total market had sales of about $21 billion with robust growth of 21%. The report shows that Qualcomm continued to lead the market in terms of revenue share with 52%, followed by Apple with 18% and MediaTek with 14%. The Apple number most likely reflects an estimate because Apple does not sell its chips to third parties. In fourth and fifth place were Speadtrum and Samsung LSI. The report mentions that HiSilicon, Intel and MediaTek had bigger growth than Qualcomm in 2014.

Qualcomm's strength based on Snapdragon 800 series wins in higher-tier phones

According to the report, Qualcomm's leadership was largely based on design wins for its Snapdragon 801 and Snapdragon 805 SoCs in the higher-tier market. Examples of this include the Samsung Galaxy S5 and LG G3. However, as I have previously reported Samsung has increased its use of in-house application processors starting from the second half of 2014, culminating in the exclusive use of Exynos 7420 in the Galaxy S6 in 2015, putting pressure on Qualcomm.

Baseband share in 2014

Strategy Analytics has also published a report with details about baseband (modem) market share in smartphones. According to the report, LTE (4G) basebands accounted for 50% of cellular baseband share in 2014, and the figure is likely to increase significantly in 2015. Qualcomm led in LTE basebands, but HiSilicon, Intel, Marvell, MediaTek and Samsung also increased LTE baseband shipments.

In terms of revenues in the overall baseband market, Qualcomm, MediaTek, Speadtrum, Marvell and Intel had the top positions in 2104. Qualcomm had 66% revenue share, followed by MediaTek with 17% and Speadtrum with 5% sare. Given the product lines of the respective companies in 2014, Qualcomm's revenues are based on both integrated SoC and separate modems, while Intel's sales were mostly separate modem chips, while the other players mostly shipped a mix of integrated SoCs and modem chips.

Comparison with 2013

Comparing with the reports that Strategy Analytics issued for 2013, Qualcomm saws it baseband revenue share remain relatively stable at 66% compared to 64% in 2013. MediaTek saw its AP market share increase from 10% in 2013 to 14% in 2014, and its baseband share increased.

Tablet processor market in 2014

According to another report issued by Strategy Analytics, the market for tablet processors grew 18% in 2014 to $4.2 billion. The top-five revenue share positions were occupied by Apple, Intel, Qualcomm, MediaTek and Samsung LSI. Apple led with 27% share (which must be an estimate), followed by Intel with 17% and Qualcomm with 16% share.

Notable is the absence among the top five of traditional leaders in the Chinese white-box market such as Rockchip and Allwinner. This most likely reflects in increase in brand name tablet shipments at the expense of the white-box tablet market, the low selling prices of white-box tablet processor and the encroachment of MediaTek and Intel into that segment.

Source: Strategy Analytics (Smartphone AP market share), Strategy Analytics (cellular baseband market share), Strategy Analytics (Tablet processor market share)