(Corrects date in dateline)
By Michael Gold
TAIPEI, June 13 Suppliers of chips to smartphone
makers are taking the unusual step of helping customers procure
other phone components such as speakers and camera lenses in a
bid to win more business in an increasingly competitive sector.
Demand for smartphone chips, needed to support capabilities
ranging from voice recognition to flash photography, is growing
in part due to a spurt in the low-end but feature-packed phone
As phone makers rush to push out more budget handsets with
features formerly reserved for premium models, they need to keep
their costs in check as they incorporate more chips into their
The spotlight on costs has ramped up competition among
chipmakers like Qualcomm Inc and MediaTek Inc
. Besides cutting prices, they are also saving phone
makers the expense of finding and testing, for instance, the
speakers and camera lenses that get the most out of their audio
and photography chips.
"In the past, Qualcomm would just offer the chips and the
manufacturer would do the whole device," David Tokunaga, a
senior director in product management at Qualcomm, told Reuters.
"Now we offer a whole hardware ecosystem that makes it very easy
for customers to just plug and play what they want."
Offering chips, hardware and even the phone design helped
Taiwan's MediaTek capture half of the Chinese market for
smartphone chips, according to one analyst. In that market,
handsets priced under $150 accounted for almost 70 percent of
all smartphones sold in the first quarter of this year, said
"MediaTek gets all the components ready for the client, so
all the manufacturer has to do is put the phone together," said
analyst Sherman Shang at SinoPac Securities.
Qualcomm, the world's No. 1 smartphone chipmaker, has had a
more difficult time in China, which accounts for the sale of one
in every three smartphones globally.
The high-end chipmaker recently posted its smallest
quarterly revenue rise in four years, in part because of the
shift of smartphone growth to the lower end of the market in
The company has since stepped up its game by mimicking
high-end features. It has developed audio technology one
Qualcomm executive dubbed the "poor man's Dolby", to sidestep
the cost of licensing a pricey equivalent from sound specialist
Dolby Laboratories Inc.
"Today's high-performance phone will quickly become
tomorrow's standard model," MediaTek Chief Executive M.K. Tsai
said in a recent interview, noting the shift in demand growth to
cheap but feature-rich phones.
Global shipments of smartphones priced below $150 are likely
to grow 17 percent each year though 2018, said Chief Executive
Simon Segars of ARM Holdings, which designs chips found
in almost all smartphones.
By comparison, phones priced $150 to $300 will grow 14
percent, and those over $300 just 4 percent, he said.
As the sales and specifications of low-end phones rise in
tandem, pricey phones such as Apple Inc's iPhone will
begin to lose their technological advantage over offerings from
such cut-rate smartphone makers as China's Xiaomi Inc.
"The smartphone market is turning into the TV market," said
Jeffrey Ju, MediaTek's senior vice president of smartphones. "If
you hide the logo on a TV you really can't tell the difference.
The smartphone market is getting similar."
But not every feature is destined to trickle down. Some
functions, like fingerprint sensing, not only have technological
constraints keeping prices high for the foreseeable future, but
also face a sceptical and fast-changing consumer base.
"You have to look at who will be buying these entry-level
phones, and it's largely customers in developing countries,"
said ARM's Segars. "The tastes of these consumers - for cultural
or other reasons - is bound to be different."
(Editing by Christopher Cushing)