China's low-priced smartphone manufacturers could face more fierce competition as demand booms and the cost of chips continues to decline.
Local smartphone makers are growing rapidly in mid- and low-end markets, said Hao Jian, an analyst at China academy of telecomunication research, part of the Ministry of Industry and Information Technology.
"The absence of the world's top players such as Apple Inc, Nokia Corp and Samsung Electronics Co (from low-end markets) has provided a stupendous opportunity for local makers," said Hao, adding that the rapid development of low-end chips has helped Chinese smartphone makers to reduce costs, a key factor to grab market share among price-sensitive buyers.
Shipments of smartphones on the Chinese mainland hit 18 million in April, accounting for more than half of the mobile phone market, data from the academy showed. More than 77 percent of the shipment was contributed by local brands targeting mid- and low-end customers.
MediaTek Inc, a Taiwan-based company that designs and sells components for wireless communication and is famous for its low-priced smartphone chips, plans to expand business on the Chinese mainland in the face of growing demand. On June 27, the company released a dual-core chip developed specifically for smartphones priced lower than $200.
"The new chip added the next level of performance and enhanced user experience to the MediaTek smartphone family, delivering enhanced user interactivity, mobile connectivity and rich multi-media experience previously only available on high-end devices," said Ching-Jiang Hsieh, president of MediaTek.
MediaTek's monthly revenue amounted to NT$78.45 billion ($2.6 billion) in June, jumping by more than 16 percent year-on-year, a company statement showed.
"Competition among chip providers will become more intense because China's smartphone makers are finding any possible way to try to reduce their costs. The price of smartphone chips is set to fall," said Hao.
The world's large chip makers, who previously ignored the low-end markets, are now looking at the sector as growing demand could help to generate higher profits.
In May, Intel Corp, the world's largest semiconductor chip maker by revenue, returned to the smartphone chip-making sector by teaming up with Lenovo Group's mobile phone department. The giant in the personal computer chip sector sold XScale, the company's cellphone chip arm, in 2006.
