Ming-Chi Kuo’s latest report points out that the U.S. ban on Huawei will impact MediaTek and affect its product development. Coupled with China’s efforts to develop its semiconductor chips, it cannot be ruled out that in the next three to five years, low-priced mobile phones from Chinese brands will adopt Chinese SoCs. This has become a major challenge for MediaTek.
Ming-Chi Kuo pointed out that MediaTek’s 5G SoC gross margin could drop to 30% in 2021, mainly due to the rapid increase in the shipment proportion of low-priced, low-margin products such as the Dimensity 720. In addition, MediaTek lacks bargaining power with TSMC and lacks a price advantage in competition. The average selling price (ASP) of MediaTek’s 5G SoCs is expected to be $32–34, $20–22, and $14–16 in 2020, 2021, and 2022, respectively, which are lower than market expectations.
Ming-Chi Kuo also pointed out that the national policies of China and the United States are not favorable to MediaTek’s development. The US’s stance of prioritizing its own interests and the implementation of China’s 14th Five-Year Plan may pose challenges to MediaTek’s future market share growth in the 5G SoC market.
Ming-Chi Kuo believes that MediaTek’s non-Huawei customer order demand is only 70% of that for Huawei orders. Since Qualcomm is the main 5G SoC supplier to other Android brands, MediaTek’s product portfolio has changed significantly after the Huawei ban. MediaTek primarily supplies SoCs for low-end smartphones, and demand for its high-end and mid-range 5G SoCs (including the Dimensity 1000 series and Dimensity 800 series) is expected to decline. Therefore, despite the continued increase in 5G smartphone penetration, overall shipments are still trending downward, indicating that 5G technology has not yet significantly driven smartphone replacement demand.
In addition, Ming-Chi Kuo also pointed out that the localization of IC design is an important national semiconductor policy for China over the next five years. It is expected that within 3 to 5 years, low-cost smartphones from Chinese brands will begin using Chinese SoCs, and MediaTek’s share of the SoC market will gradually increase. MediaTek will face growth bottlenecks.