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Slowdown marks China mobile handset chip market

Posted: 18 Feb 2009 ?? ?Print Version ?Bookmark and Share

Keywords:handsets mobile? chip market handset? decline handset chip?

After a period of rapid growth over the past few years, the China mobile handset chip market has experienced a conspicuous decline in 2008, according to research firm CCID Consulting.

CCID Consulting predicts that the scale of China's mobile phone chips market is expected to reach RMB 110 billion, up by 6 percent, down to single-digit growth for the first time. In the coming years, the mobile phone chip market will rarely regain its explosive growth, as the mobile phone chip sector has entered the stage of flat growth from that of a rapid one.

Lower demand
The production volume of mobile handsets is the most crucial factor on the growth of the chip market. In 2008, the number of manufactured handsets in China is expected to reach approximately 750 million, with the growth rate down to 8.6 percent, while the number of the so-called "knockoff handsets," which have attracted much of the industry's attention, is around 150 million. There are reasons the production volume of mobile handsets in China decreased.

First, China has already become the largest production base for mobile handsets in the world, with several major suppliers including Nokia and Motorola having moved part of their production bases to China, and the annual decrease in the growth rate of mobile handset production will be an inevitable trend.

Second, experience shows that Q4 is a crucial period, a time when new technologies in the production of mobile handsets are released. However, due to a gloomy economic outlook and the shrinking of the global terminals market, the China mobile handset sector experienced a conspicuous decline in Q4 08, compared with the same period over the past years. Following the explosive growth in 2007, knockoff mobile phones witnessed no new breakthrough in terms of production volume in 2008, which had limited impact on driving the growth of the entire industry. Thus, given the impact of various factors, the China mobile phone chip market experienced a drastic decline.

Taiwan's rise
MTK remains the star of the mobile handset chip market in 2008. With the constant expansion of MTK footprint, the competition landscape in mobile handset baseband chips market is undergoing quiet changes, from Infineon's acquisition of Agere, NXP's acquisition of Silicon Lab, to MTK's acquisition of ADI's handsets production lines and the merger of ST and NXP's wireless business. In the context of the withdrawal and consolidation of the traditional mobile handset vendors, the position of Taiwan and mainland chip vendors has been increasingly enhanced.

In terms of shipments, MTK accounts for 23 percent of the total market, with its target market focusing on domestic brands and knockoff handsets. In comparison, TIwith its partnership with international vendors and its advantages in smart phones and W-CDMA baseband chipsaccounts for 13 percent of the total market. In light of the growth in recent years, TI's position in mobile handset chip market has been weakened significantly. In the meantime, TI is moving its focus of product development to the area of application processors. Qualcomm accounts for 12 percent of the market share through its monopoly position in the CDMA field. Infineon, ST-NXP, Freescale and Broadcom, with their respective advantages, have all secured their positions in the baseband chips market. In addition, Spreadtrum, a domestic mobile baseband chips vendor which has gained popularity among domestic mobile handsets enterprises in the field of GSM and TD-SCDMA, is growing rapidly.

In terms of application structure, baseband process modules, multimedia application and memory chips are still the top three application fields in the mobile handset chip market, accounting for 70 percent of the market share and with baseband process modules accounting for 27 percent of the total market.

Although there is fierce competition in the baseband chips market, with the increase both in the integration level of baseband chips and the proportion of high-end chips, there is no significant decrease in its average prices. The rise of multimedia chip market owes much to the popularity of multimedia functions in mobile handsets. However, in the wake of growth over the past years, multimedia applications such as MP3 and photo-taking have reached saturation while new applications have not sprung up. Meanwhile, with the continuous upgrading of the baseband chips' performance, a host of mobile phone solutions enable MP3 and photo-taking functions through baseband chips without additional processors.

In this context, the market proportion of multimedia chips experienced a slight decline, accounting for 20 percent in 2008 according to projection. In terms of capacity, the storage capacity for unit handset increases significantly while its price decreases slightly. In the meantime, the ratio of memory product MCP is further increased. Therefore, there is a slight increase in the proportion of memory chip market, reaching 21 percent by estimate. Besides the three major fields, the market of application processor chips for smart phones (though accounting only for 4.1 percent of the total market) is expected to have huge market potential as the proportion of high-end handsets continues to grow with the coming of 3G age.

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