Qualcomm Cuts Prices to Defend Market Share

25 Jul

In response to the rising competition from MediaTek Inc., Qualcomm Inc., the world’s biggest maker of mobile phone chips, is reportedly reducing prices unprecedentedly in order to secure its leading position in the market.

Qualcomm not only cut the prices of system on chips (SoC) that have an integrated LTE Modem-AP solution, but also those of its LTE baseband chips.

South Korea’s Etnews reported on July 24 that to prevent MediaTek from cannibalizing market share any further, Qualcomm has trimmed down Snapdragon 410 prices substantially. It is said that Qualcomm has lowered SoC prices several times, a rare move made by the American chip maker.

In addition, it is said that Qualcomm cut its LTE chip prices from US$25 to less than US$20, forcing its rivals to follow suit in order to survive in the competitive market.

In the third quarter 2013, Qualcomm and MediaTek took up 66 percent and 12 percent share in baseband chip, respectively. But MediaTek’s share rose to 15 percent in the first quarter of this year while Qualcomm’s remained the same. In the meantime, Qualcomm saw its LTE chip share decline to 91 percent in the first quarter 2014, down from 95 percent a year ago, according to data compiled by market research firm Strategy Analytic.

As for the AP market, Qualcomm held market share of 53.6 percent while MediaTek had 9.7 percent in 2013. However, in the first quarter 2014, MediaTek’s share rose to 12.5 percent whereas Qualcomm’s dropped to 53.4 percent and Apple earned 15.9 percent.

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Market observers say that Qualcomm is earning considerable licensing fees in China that are higher than its chip cost, so the company has an edge in launching price war to ensure its leading status in China’s market.

According to Qualcomm’s financial report for the third quarter ending in June in the 2014 fiscal year, the company holds a relatively conservative outlook for this quarter, affected by its setbacks in important markets such as China, even though the company reported better-than-expected performance in the third quarter.

The financial report was disclosed after the stock market closed on July 23 in the United States. Despite its brisk third-quarter performance, Qualcomm’s bearish market outlook led to the decline in its share prices in after-hours trading.

MediaTek, one of Taiwan’s leading integrated circuit designers, plans to roll out 64-bit MT6795 SoC with octa-core processor in late fourth quarter 2014 or the first quarter of next year, kitguru.net reported in early July. The MT6795 chipset is more advanced than MT6752 so it is very likely to challenge Qualcomm’s Snapdragon 610 or even Snapdragon 810.

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