White-box handset makers in China are gearing up their production of in-house designed smartphones and 3G handsets, a trend which will benefit Taiwan-based IC design house MediaTek. China's white-box handset industry in 2010, has begun to place more emphasis on upgrading specifications and added value to enter the high-end segment, and has allocated more resources on development of intellectual property.
Even the China government has voiced its support for the white-box industry. Yang Xueshan, Deputy Minister of the Ministry of Industry and Information Technology (MIIT), recently said that the government will support the white-box business model as long as there is no infringement of IP.
Yang pointed out that from imitation to innovation is a process white-box handset makers have to go through, citing China-based telecom equipment maker Huawei Technologies as a success story. Huawei's foray into the handset sector began with low-cost products and the company now has research and development capability, he said.
Supporting the white-box business model, given that no patents are infringed, is a good way to protect intellectual property rights as well as provide the most cost-effective products to consumers, Yang added.
Smartphone and 3G phone sales in China in the past year have seen fierce growth thanks to both domestic brand vendors and white-box players introducing functionally more powerful devices at acceptable prices, according to sources in Taiwan's IC channel. Higher price tags and higher margins have attracted a slew of handset manufacturers into the high-end segment and most products are aimed at the business and handset replacement markets, the sources noted.
White-box handset makers, in particular, have leveraged their superior cost management and chipset solutions from MediaTek to roll out new devices prior to the Lunar New Year.
For MediaTek, strong interest for its high-end 3G solutions is good news as the company has seen its market share for 2.5G chipsets eroded by second-tier competitors Spreadtrum Communications and MStar Semiconductor. However, with two price cuts in the second half of 2010 and smartphone chipsets MT6516 and MT6268 now down to under US$10, MediaTek is making a strong push to secure its leading position in the white-box market.
MediaTek noted that its EDGE chipsets are scheduled to start volume production soon followed by HSPA models in early 2011. Due to handset makers increasing procurement ahead of the Lunar New Year peak season, MediaTek is expecting strong growth in December revenues.