China-based smartphone vendor Meizu, which currently supplies over 90% of its smartphones with MediaTek application processor (AP) solutions, is expected to begin largely adopting AP solutions from Qualcomm in the third quarter of 2017, and 30% of Meizu's shipments in the year are expected to be Qualcomm-powered models, according to sources from the upstream supply chain.

Meizu's move comes after domestic rival vendors Oppo and Vivo began to lower the ratio of MediaTek's AP solutions used in their total smartphone production in the fourth quarter of 2016, the sources indicated.

Although strong orders from Oppo and Vivo did contribute significantly to 30% on-year revenue growth at MediaTek in 2016, the Taiwan-based AP solution provider saw its gross margin decline 7.6 pps to 35.6% during the year due to keen price competition with Qualcomm in the entry-level to mid-tier AP segments, said the sources.

About 50% of Oppo's smartphone shipments of 99.3 million units in 2016 were powered by MediaTek's AP solutions, while 20% of Vivo's shipments of over 77 million units also adopted MediaTek's APs, the sources estimated.

Meizu, which shipped about 22 million smartphones in 2016, signed a patent licensing agreement with Qualcomm in late 2016, paving the way for Meizu to switch part of its AP orders to Qualcomm, said the sources.