MediaTek chips to be used by Samsung, goes from local knockoffs to global juggernauts in under a year

Rumors surfaced a couple days ago that Samsung will use Taiwan-based MediaTek processors in its entry level and mid-range lines of smartphones. Previously, Broadcom supplied Samsung’s lower-end processors, but MediaTek’s cheaper and faster chipsets might prove too enticing. They won’t be replacing Qualcomm’s Snapdragon or Nvidia’s Tegra anytime soon, but a potential client in Samsung would be a huge landmark for MediaTek (TPE:2454).

Rags to riches

Three years ago, MediaTek didn’t even make a smartphone processor. The company successfully capitalized on the majority of users in the world that still owned feature phones. As the tide began to shift towards Android, MediaTek launched the 1.0 GHz Cortex A9 in 2011. MediaTek slummed around for over a year on the A9, as the chips were sold to knock-off Android brands throughout Asia. MediaTek appealed to these low-budget brands because it sold system-on-chip processors, which come preloaded with Android and other necessary software. That means less money spent on development for handset makers.

In December 2012, MediaTek finally decided to get serious and released its first quad-core Cortex A7 processor, the MT6589. That chip was first adopted by Alcatel (a.k.a. TCL) for its flagship One Touch line of phones. The chip was immediately scrutinized in benchmark tests, which showed the quad-core A7 barely outpaced Qualcomm’s dual-core Snapdragon S4. Some reviewers called the chip “deceiving,” and alleged it was just a cheap way to put a quad-core label on a budget phone.

Nonetheless, many local handset makers, especially in China and India, used the 1.2 GHz A7 in their flagship devices. MediaTek began its shift away from cheap no-name brands to bigger local names like Micromax, Xiaomi, and TCL. MediaTek’s popularity in the developing world began to catch the attention of bigger international brands. Lenovo and Panasonic both launched localized versions of phones in China and India, respectively, using the MediaTek A7 chip.

The 1.5 GHz turning point

About six months after its first quad-core processor was announced, MediaTek upgraded its Cortex A7 to 1.5 GHz. Lenovo became a repeat customer, using the upgraded chip in its flagship Vibe X for the Chinese market. Sony also announced it will use the new chip in its C3 model – the first time ever for a Japanese company to use a MediaTek chip.

This all led up to what companies like Huawei, Sony, LG, ZTE, Lenovo, and Samsung are all eyeballing right now: MediaTek’s upcoming octa-core chip, with speeds up to 2.0 GHz. Now it’s only a matter of time before MediaTek smartphone chips start popping up outside of Asia. In China, MediaTek is expected to take almost half of the smartphone chip market, and almost 20 percent of the tablet application processor market.

So do Qualcomm and Nvidia have anything to worry about? Probably not. Those two companies are focused on high performance. MediaTek is focused on value, and will probably stick to that model. As its latest sales revenue report indicates, there’s nothing wrong with that.

(Editing by Steven Millward)