Prices for 2.5G handset chipsets have slipped more than 10% in the fourth quarter of 2011, and will continue to fall at the same rate in first-quarter 2012 due to continued oversupply in the market, according to sources at white-box handset makers in China.
With branded and white-box handset vendors shifting their focus to smartphones, demand for 2.5G feature phones in China is decelerating, the sources said. Taking sales during China's National Day holidays last month as an example, supplies were tight for many top-selling smartphones while 2.5G devices were unremarkable, the sources indicated.
As end-market demand began to fall, chipmakers including MediaTek, MStar Semiconductor and Spreadtrum Communications decided to lower their prices for 2.5G solutions to stimulate demand and protect their market shares, the sources pointed out.
Another cause of the intensified price competition is high similarity of products. MediaTek's 40nm-made 2.5G chipset that comes with a high level of integration enabled the company to stand out from the crowd in the first half of 2011, when competition with rivals was less fierce, the sources said. However, with MStar and Spreadtrum both launching 40nm, highly-integrated solutions, competition has intensified leading prices to fall in the second half of the year, the sources noted.
In addition, MediaTek, MStar and Spreadtrum have stepped up R&D efforts for the development of 3G WCDMA and TD-SCDMA chipset solutions, according to the sources.