Source: “Taiwan’s ‘bandit phone king’ hit by US crackdown on Huawei”, FT, 24th August 2020
In May 2020, the US barred chipmakers from selling Huawei any custom-made semiconductors made with US equipment. For Huawei, this would have made MediaTek’s off-the-shelf smartphone chipsets the obvious choice, a development that would have boosted the Taiwanese chipmaker’s fortunes immensely. MediaTek’s Dimensity 5G chips are set to be significantly cheaper than Qualcomm’s latest Snapdragon chip, with a long battery life and high energy efficiency.
But the dream was shattered last week when the US Department of Commerce closed the loopholes in its May sanctions by barring the sale of chips made using equipment or US software to Huawei, without a license. Given the prevalence of US technology in the semiconductor industry, this would include chipsets sold by MediaTek.
Even if Huawei is pushed out of the smartphone market, and the market share vacuum taken up by Chinese rivals such as Oppo, Vivo or Xiaomi, it could still be a problem for MediaTek. These competitors are likely to take up MediaTek’s cheaper offering, the Dimensity 700 chips, rather than the more expensive variety of 5G chipsets Huawei was expected to use.
According to analysts, the US government could still issue licenses for certain suppliers if vital US interests were at stake.
History
MediaTek spun off from United Microchip Corporation, the Taiwanese chipmaker, in 1997. It built its business designing chips for CD drives and later DVD drives, before moving into chips for TV sets and finally mobile devices. It has grown to become Taiwan’s largest and the world’s fourth-largest chip design company. Its biggest break came after it started offering a turnkey solution for mobile phones in 2004 that enabled scored of no-name workshops manufacturing knock-off handsets – “bandit phones” – in the southern city of Shenzhen to produce more sophisticated products. For small factories, the platform included a chipset and reference designs for phone features that they would not have been able to develop themselves.
The Equity Analyst 