Taiwanese chip giant MediaTek today launched the world’s first quad-core “system on a chip” for smartphones. The new chip, the MT6589, is cheaper to manufacture—which will help lower the price of smartphone hardware globally.
MediaTek is probably the most ubiquitous Asian tech business you’ve never heard of. The firm’s processors go into everything from mobile phones and optical storage systems to digital TVs and networking equipment. As Asia’s largest mobile-chip company, it counts Samsung, Sony, LG, and Huawei among its clients, and with the pending acquisition of smaller local competitor MStar Semiconductor, it will soon become the fourth-largest fabless chip maker globally by revenue.
The company has until now focused on making components for feature phones and low-end smartphones; the quad-core launch marks its move into the high-end market. Since the launch of its first smartphone chip a year and a half ago, shipments have grown from just 10 million out of a total of 550 million units sold worldwide to a projected 110 million by the end of 2012.
“Ten or 11 times unit growth per year is obviously not sustainable, but this has been a great breakthrough year for us,” says MediaTek’s business development director, Finbarr Moynihan.
Moynihan says the MT6589 is different from rival quad-core offerings from Qualcomm, Nvidia, and others because it combines an ARM CPU, a PowerVR Series5XT graphics chip from Imagination Technologies—featured in the iPhone 4S—and a wireless modem chip.
“Integrating all of these in one system on a chip brings greater cost efficiency,” Moynihan says. “And with the quad-core Cortex-A7, we can offer that ‘super-phone’ experience and do it in a much more efficient power envelope.”
The chip supports the kind of hardware found in high-end phones: a full HD display, a 13-megapixel camera, 1080p video playback and recording, and support for 3-D display.
MediaTek has prospered thanks to its partnerships with not only Chinese smartphone brands like Huawei, ZTE, and Lenovo but also the raft of smaller local players who have historically occupied the 2G feature-phone space and who are now eyeing the smartphone market themselves. These firms, and the huge potential for further growth in what is already the world’s largest smartphone market, are driving MediaTek’s strategy.
“The specification [of the MT6589] reflects Chinese manufacturers’ requirements and market trends in smartphone processors: more cores, lower price, high compatibility for different 3G standards,” says Gartner research director Roger Sheng. “This platform will enable low-cost smartphones to have premium models’ features.”
This, in turn, could force the industry at a global level to undergo another cycle of price competition, which would have a big impact on high-end brands like Samsung, according to IDC analyst Teck-Zhung Wong.
“Talking about quad-core will no longer be enough for them,” Wong says of high-end manufacturers. They’ll have to move onto something that differentiates them better. Quad-core will be less relevant next year—consumers will lose sense of how much better these [high-end] branded phones are.”
MediaTek’s is by no means alone in pushing this trend. U.S. giant Qualcomm, which ranks as the third-largest chipmaker in the world by revenue after Intel and Samsung, has been going after MediaTek in its backyard.
Qualcomm unveiled its own low-cost quad-core solution, the MSM8225Q, in September and followed it up with two more—the MSM8226 and MSM8626—in December. The firm has played to its historical advantage in the modem technology space by producing multi-mode chips, which are likely to be well received in a China market that hosts three competing 3G standards.
MediaTek’s Moynihan does not appear bothered by the competition, however. “We have many customers who take our reference designs and make a huge plethora of designs and localization on top,” he says. “We’ve found the right balance between offering a complete reference design while allowing enough flexibility and innovation.”
However, he says, the company’s success still depends on serving the high-volume lower end.
“Most of our customers and platforms are focused on the lower end of the smartphone segment, and this is where most unit growth will come in the next couple of years, as people move off feature phones,” he says. “It’s happening in China but in many other markets, too, such as Latin America, Southeast Asia, India, and Russia.”
The good news for global smartphone users is that MediaTek’s efforts to push into the higher end will drive greater innovation and price competition across the market.
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