When an industry does not sell a product itself but is essentially built on supplying another industry, it naturally follows that its fortunes will mirror those of its customers.
Such is the case with the semiconductor industry, which has recently seen the revenues and stock prices of big players shaken by developments in the smartphone industry.
For example, ARM saw its share price plummet after Apple reported disappointing financials, while Qualcomm‘s Q2 results suffered from its dependence on struggling customer Samsung.
However, according to MediaTek’s Siegmund Redl, Vice President and General Manager Corporate Marketing, Europe, chipset companies have a perfectly stable future ahead as long as they are focusing on the right segments.
"In the whole smartphone market, growth has been slowing down," said Redl. "Growth is still there; we will grow by 15 percent in smartphones, but it’s slowing down, meaning it’s not 27 or 28 percent anymore and not 35 percent any more like the last two years."
The key, Redl argues, is where the future growth is coming from.
"We are not in Samsung and we are not in Apple, as is known. But we are in many of these challengers, and many of these are now local brands. They are gaining traction.
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"LTE, for instance, has been a market for top-notch devices, so Samsung Galaxys and Apple iPhones. That was the first wave.
"If we expect to see another 500 to 700 million LTE subscriptions this year, they will not be iPhones. You may have noticed the launch of branded devices from Vodafone, or the Rook from EE, a MediaTek-based handset costing £45.
"This is where LTE needs to go, in this region, say £50-200. In order to enable this market you have to be in that range, which we call super-mid. MediaTek is very well positioned to supply this market.
"If we talk about democratising 4G technology, it will not be at the high-end, it cannot happen there.
Democratising means you bring everyone into the position to enjoy these services, features and functionality."
According to Redl, it is not just manufacturers who should look to this segment for their growth.
"Operators also have a vested interest. They have congested 3G networks, they want people to move onto LTE."
Redl argues that emerging markets will supply much of this growth in coming years.
"Until now, emerging markets have been very much a 3G play, with cheaper devices. We see a trend even in emerging markets to go for bigger displays and also operators launching LTE services, and again having the problem that their 3G networks are congested.
"They have a vested interest in investing and working with OEMs and ODMs to get the right price points to get the right products onto the shelves.
"They will always need an entry-level with a minimum feature set, then there will be mid-range segments. In some emerging markets there is also high volume for high-end. It’s still not that high volume, but it’s a market you might want to address as an operator as well as a manufacturer."
Despite his optimism, Redl acknowledged the threat posed by in-house chip manufacturing to his industry. For Samsung’s latest S6 model, which has been considerably more successful than the S5, Samsung produces the chip in-house. In addition, Huawei has been experimenting with its own line of processors to replace Qualcomm in higher-end devices.
"Of course, I would be lying if I said that this is not a concern. Certainly, the vertical integrated silicon supply is something that is taking away our market.
"Nevertheless there is still competition for these guys out there that we can address. As I said, there are always niches and places where we have the best proposition in terms of power consumption, performance by power consumption and cost."
