How Qualcomm drives collaboration between MediaTek and Intel?

Taiwan’s leading smart phone chip company MediaTek announced on November 25 that it is partnering with Intel. MediaTek will develop a new 5G modem and Intel will define the chip’s specification. Dell and HP are also expected to deliver their laptops powered by Intel and MediaTek’s 5G solution.

 

“We just hit it off immediately.” CEO of MediaTek Rick Tsai said at a press conference that the companies fit each other because Intel is leading the PC chip market and MediaTek is rising in 5G chip development.

 

It is way beyond the market’s imagination that MediaTek decides to step into PC chip market. MediaTek is the second biggest smart phone chip provider, just right after Qualcomm.

 

“MediaTek has been saying their 5G mmWave chips will be ready in 2020, and they will be also targeting at non-smart phone markets. But no one knew what their ‘non-smart phone markets’ implied. Some even guessed if it would be small base station,” said an analyst with an American investment research company who doesn’t want to be named due to company policy. MediaTek gives the answer: 5G modem in PC.

 

MediaTek now picks the biggest market out of smart phone at the first place. Intel’s CPU has

about 80 percent market share in PC market. MediaTek and Intel’s partnership is looking to help MediaTek increase its market share in PC. Right after the announcement, Morgan Stanley filed a report reiterating “outperform”.

 

Charlie Chan, a technology research analyst at Morgan Stanley, wrote in the report that if 5G PC has a 5 percent penetration rate in 2021, the partnership may contribute $100 million to MediaTek’s revenue. The amount would be accounted for 1/100 of MediaTek’s total revenue of the year.

 

What surprises the market is that the CPU giant is willing to work with MediaTek. “In the past, big companies like Intel didn’t take Asian IC design companies seriously. They felt that Asian companies were in a lower level,” said a former senior manager at TSMC, MediaTek’s long-term foundry partner in Taiwan and Intel’s competitor.

 

“Semiconductor industry is a very globalized industry. It’s pretty natural to see a good company working with another good company,” Tsai told Business Weekly at the press conference.

 

However, many people would still be shocked that Intel picked MediaTek as its partner since Qualcomm is the biggest player in 5G modem chips.

 

There are only four companies in the market that is capable to launch 5G modem chips: Qualcomm, MediaTek, Samsung and Huawei’s HiSilicon.

 

In order to get into smart phone market, Intel acquired Infineon’s wireless solutions business in 2010. Six years later, Intel finally had its chips inside Apple’s iPhone 7. It also secured iPhone processor orders for two years while Qualcomm had been busy charging unreasonable royalties from Apple.

 

Intel and Qualcomm had been suing each other for years. This April, the two companies finally reached a settlement with a six-year licensing agreement, which Qualcomm will continue selling chips to Apple for the next six years. Right after the settlement, Intel quit the 5G smartphone modem business.

 

The competition between Intel and Qualcomm never end even after the legal settlement. Qualcomm now is trying to step into PC market, where Intel has dominated for decades.

 

At this year’s Computex in Taipei, Qualcomm and Lenovo together announced the world’s first 5G laptop, with Qualcomm’s 5G processor inside. The chip is set to compete with Intel CPU in PC market. Microsoft’s Surface Pro X and Samsung Galaxy Book 2 also start to use Qualcomm’s processors.

 

Qualcomm can bring low-power consumption to laptop. It claims that it can not only connect to 5G, but also offer a 20-hour battery life. Intel will have to keep a lookout.

 

That is why when MediaTek, Qualcomm’s competitor in smart phone market, meets Intel, Qualcomm’s competitor in PC market, they spontaneously became "friends".

 

“MediaTek is exactly what Intel needs. The partnership also brings out MediaTek’s value in 5G,” said IHS Markit Analyst Jeff Lin.

 

Gartner Research also estimated that global PC shipments in 2019 would be totaled 255 million units. While the number is not as much as smart phone shipments, Tsai still sees 5G PC’s potential. “PC is just a start. There will be more equipment needed to be connected.”

 

Lin said that Intel doesn’t have many choices. For example, Samsung’s chips are very competitive, and the company may not want to listen to Intel. PC companies such as Dell and HP as well may not use Samsung chips because the Korean company has its own laptop products. Huawei’s HiSilicon is right in the middle of the U.S.-China war and so it is unlikely to partner with the American Intel.

 

MediaTek is the only one left.

 

5G changes how companies compete and cooperate. Intel and Microsoft’s “Wintel” partnership is also changing. For example, Microsoft’s new Surface product for the first time broke the “Wintel” partnership -- It brought AMD and Qualcomm inside as Intel’s replacement.

 

Through partnering with Intel, MediaTek finds its way to get into PC market in good timing. It doesn’t mean that MediaTek will have the last laugh, but this is definitely a good start.

 

The article was first published in Business Weekly https://www.businessweekly.com.tw/focus/blog/3000837 in Chinese on Nov 27, 2019.