Mobile Chipset – Fabless getting Faster and Better

China produced over 800mn smartphones in 2012 and 226mn smartphones. China’s smartphone output should exceed 400mn in 2013 with exports reaching 60-80mn. At the same time, Mediatek expressed confidence that its quad-core chipsets can enable China OEMs to sell smartphones with similar specs to the Samsung Galaxy S3 at one third of the price.

Meanwhile, ARM has showcased its big.LITTLE chipset, a game changer in the performance/power race. As big.LITTLE finds its way into low-priced phones, we expect chipset ASPs to fall even further, albeit with higher volumes. With big.LITTLE chipset expected in tablets this year (10m targets) and in phones perhaps next year (with an integrated chipset) and LTE modem ramping in Q4Cheaper chipsets could ultimately accelerate tablet demand in China and other EMs, as consumers move away from notebooks.

Handset chip players are bullish on unit growth but anticipate battles to continue within the low-cost segment as well as high performance. However, chipset companies are comfortable with the quad-core market where MTK appears to have a leadership position.

Qualcomm is not expected to have a comparable chip (to MT6589) until 3Q/4Q. Our checks indicate the MT6589 pricing has been relatively stable, contrary to recent reports. Strong demand in high-performance phones, coupled with stable pricing, should provide a lift to MTK’s GPM in 2H13