According to a new report from a renowned analyst, MediaTek stands to lose out on profits and its 5G chip orders. The reason for this is its primary competitor, Qualcomm, slashing the Snapdragon 765 prices.
Ming Chi Kuo’s report suggests Qualcomm is rethinking its pricing for the mid range 5G chipset after the demand for high end 5G smartphones fell short on expectations. Furthermore, the aggressive pricing policy will aso extend to its low-end offerings in the second half of 2020. Hence, MediaTek faces stiff competition in every category about 3 to 6 months earlier than predicted for its Dimensity lineup of 5G chipsets.
As it stands right now, MediaTek’s pricing strategy isn’t as lucrative as Qualcomm’s which could see a gross profit margin of 5G processors being lower than 30 to even 35 percent. The report from Ming Chi Kuo also indicates that after high end 5G smartphone demand turned out to be lower than expected; Qualcomm reduced the price of its Snapdragon 765 5G chipset by about 30 percent to about $40. This is a more affordable alternative to MediaTek’s Dimensity 1000L SoC that costs about $60 to $70 (manufacturing cost being around $45 to $50).
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The figures clearly state that Qualcomm’s new pricing strategy undercuts the MediaTek’s entire market of offering 5G processors at affordable rates. Currently, MediaTek had received orders for about 20 to 25 million chips from various smartphone OEMs like Oppo, Vivo, and Xiaomi. These orders were supposed to start shipping by February 2020; Thus, the new pricing might disrupt the large scale order MediaTek had received which is predicted to shift towards Qualcomm.
The Snapdragon 865 with X55 5G modem has not had its price of $120 to $130 changed. Since it outperforms MediaTek’s Dimensity 1000 SoC. Notably, Dimesity 1000L technically outperforms the Snapdragon 765, although only noticeable during heavy gaming. Lastly, the report also details that the greatest threat is faced by Dimensity 800 SoC. This low end 5G chipset was expected to be released in May 2020 for $40 to $45 (manufacturing cost being around $30 to $35).
Thus, the report states that the competition has arrived 3 to 6 months earlier. It is also expected that Qualcomm will follow the aggressive pricing strategy to avoid a further decline in overall profits.
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