Abstract

In-House Protocol Stack Design Capability Is Key

Companies' ability to design protocol stacks in-house is a key factor in mobile communications industry competition. In the past, ADI and Intel relied on TTPCom to provide protocol stacks and middleware. However, after Motorola acquired TTPCom, ADI suddenly lost its software support. Intel, which sought to develop communications chips, sold its communications and application processor businesses to Marvell. The lack of in-house capabilities to design protocol stacks was a key factor in the initial problems in expanding these businesses.

MediaTek's acquisition of ADI's communications operations will have a definite effect on MediaTek's efforts to expand its product line and to supplement technology gaps. However, MediaTek obtains its protocol stacks from Sasken (GSM), while ADI obtains these from TTPCom (GSM) and Datang Mobile (TD-SCDMA).

Although the acquisition strengthens MediaTek's hardware capabilities, after the acquisition the company still lacks the in-house capabilities to design protocol stacks, and has to rely on external sources. This means the company could face potential obstacles in this area, and in order to ensure long-term and stable development in the mobile communications field, the company must find the right opportunity to acquire the technological capabilities to design protocol stacks.

Business Models of the Global Industry Need to Be Followed if MediaTek Wants to Move into the Global Market

China is the main market for MediaTek's communications chips. Except for Huawei, ZTE, and Amoi, which do not yet use MediaTek's GSM chips, other brands such as Lenovo, Bird, TCL, Gionee, Tianyu, Guohong (Ahong), and CECT, as well as a large number of IDHs, all adopt MediaTek's products as their main solutions. Therefore, MediaTek's share of Chinese vendors' GSM mobile phone chips stands at approximately 70%, and could be said to have reached its peak.

One of the main reasons for the fact that MediaTek has been able to become so successful in China in just a few years is that the company provides turnkey solutions which meet the needs of local downstream clients and are in line with market and industry characteristics. Also, their strong support of IDHs has been a key factor in the company's success.

MediaTek currently faces competition from Broadcom, Infineon, and NXP, which use EDGE and single chip products to win market share in China, and from Spreadtrum, which has copied MediaTek's business model and gradually is taking away market share from MediaTek. If MediaTek wants to continue its growth, it needs to move beyond the Chinese market and look for new opportunities to enter worldwide markets.

Although MediaTek could also copy its own business model to other countries, currently the main mobile phone production clusters are located in China, Japan, and Korea. In India a local industry production value-chain has not yet been formed. Therefore, copying its business model will not be easy.

If MediaTek moves into global markets, it will need to follow well-established business models in the global industry. As its past business model has only been used in China, it will be critical for MediaTek to adjust its internal resources and business models within a short period of time to meet demand from international vendors in order to optimize the synergy created by the acquisition of ADI's communications operations.

Attitude towards TD-SCDMA Could Affect Both TD-SCDMA Technology and MediaTek's Future Development

MediaTek currently has four main product lines, including digital consumer chips, digital TV chips, optical storage chips, and mobile phone chips. In all these four areas, the company plays the role of follower, using price competition to win market share after a market has entered its growth period.

Business opportunities associated with TD-SCDMA are currently not yet evident, and the technological maturity of TD-SCDMA and its future roadmap are not yet clear. TD-SCDMA still needs large amounts of investment to further develop. With MediaTek traditionally being a follower, whether the company will be able and willing to play ADI's past role of technology leader in the TD-SCDMA field and invest large amounts in both technology and market development will not only affect TD-SCDMA's development roadmap, but will also provide a test for MediaTek's technology capabilities and ambition in this area.

Furthermore, the level of aggressiveness with which MediaTek chooses to approach TD-SCDMA could also impact its cooperation with Datang Mobile, and affect MediaTek's overall development strategies.