MediaTek and the battle of the budget quad cores

mediatek logoLast week Asian chip giant MediaTek launched its latest System on a Chip design, the 28nm quad core MT6589. Before you click on to something more interesting, here’s why it should make anyone with a mobile phone sit up and take notice.

First, MediaTek. It’s probably the most ubiquitous chip company you’ve never heard of. Asia’s biggest and the fourth largest fabless chip company by revenue globally, it lists LG, Huawei, Sony and others among its clients. Until now the firm has largely been focused on the 2G feature phone market, especially in China where demand was huge  until recently, but this announcement sees it really break out into the high end smartphone space.

The analysts I spoke to pretty unanimously agreed that MediaTek and arch rival Qualcomm between them are making a seriously disruptive play in the mobile space. Put simply, MediaTek is making quad core affordable by sticking CPU, GPU and wireless modem on the same SoC, which means the MT6589 will end up in plenty of cheap smartphones as well as some higher end ones.

The result? The big brands are going to have to differentiate on something other than quad core. In effect, as IDC analyst Teck-Zhung Wong told me, it’s going to kick off a whole new round of price competition, which is great for users and will spur the industry forward to keep on innovating, which is good for all stakeholders.

In the background there’s also the tussle between Qualcomm and MediaTek.

Qualcomm is doing amazing things this year and now sits third by revenue in IHS iSuppli’s new ranking of global chip companies. It has already produced a quad core aimed at the same market and has an advantage in its modem capabilities, which even MediaTek admitted to me. So it’s Taiwan versus the US in the battle of the budget quad cores. MediaTek historically has that huge customer base in China to tap and is likely to be faster to market but Qualcomm is catching up and apeing many of MediaTek’s technical advantages and customer relations strategies.

The jury’s out but it will be an interesting 12 months to see who the smartphone winners and losers will be.

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China’s software revolution – fact or fiction?

great wall of chinaI’m not one to believe everything I read in the papers, especially if that paper happens to be one of China’s state run media outlets, but an interesting stat caught my eye in a recent article in China Daily.

The piece detailed how China – infamously a country which has a huge trade imbalance with the rest of the world, flogging it cheap exports – is actually importing more technology products than it exports.

The tech trade deficit apparently stands at $10bn – imports at $32bn and exports $21bn – which is a far cry from its huge overall trade surplus with the US which stood at around $300bn in 2011.

It is an interesting one because with China becoming an increasingly affluent and sizeable market in its own right it’s likely that more and more goods made in the country will not be exported but sold to its own consumers, so it’s hard to see how the government is going to be able to close this gap.

That aside though, the article pointed out that 89 per cent of China’s exports were in the sphere of “computer software”.

Really? The country famous for being the technology manufacturing centre of the world? Where the huge Taiwanese ODM/OEMs have plants the size of small towns, building everything from iPhones to children’s toys?

Yes, China has its successful web companies like Baidu, Tencent and Alibaba, but could its computer software industry really be that successful on the world stage?

Well, no is the short answer.

Gartner’s Matthew Cheung explained to me the likely reason for the unusually high figure is that they have counted revenue from a certain type of outsourced service in that figure.

Companies such as HiSoft, Beyondsoft and VanceInfo offer a raft of services to big name foreign companies looking to localise their own software products in China.

These services, Cheung said, have effectively been calculated as exports, as they are carried out on behalf of foreign companies, even though, aside from some work for the Japanese and Korean market, they are basically China-centric.

I have to say it’s a market I never knew existed but will be an interesting one to follow, because while China may not be the software centre of the world yet, it’s certainly an area where it could end up dominating if it decides to devote the full weight of its resources.

These companies are by no means minor players; some are NASDAQ listed, $10-$100m businesses and they’re already acquiring foreign rivals, said Cheung.

This could yet be the first stirrings of a Chinese software revolution to match that which propelled the country to become the pre-eminent tech manufacturing hub.