Qualcomm: New Growth Points In China Fraught With Competition And Chip Shortage Risks

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According to Omdia, MediaTek's mobile phone chip shipments in 2020 reached 352 million, surging 48% year-on-year. Its market share has increased to 27%, surpassing Qualcomm as the world's largest smartphone chip supplier. In contrast, Qualcomm shipped 319 million handset chips, down 18% compared with 2019, with its global market share dropping to 25%.

MediaTek's newest generation of 5G flagship chips is reportedly going to be manufactured at the 4nm process node. At the same time, it is also researching 3nm cutting-edge products. Not only does MediaTek outperform Qualcomm in terms of shipping volume, but it also takes on its American nemesis at the most advanced nodes.

At present, MediaTek has received orders from OPPO, Vivo and Xiaomi. According to Qualcomm's 2020 financial report, in fiscal years 2020, 2019 and 2018, annual cash flows from Apple, Huawei, OPPO, Vivo, Samsung and Xiaomi accounted for over 10% of its total revenue each.

On the supply side, the global chip shortage is currently hindering the company's development. Along with the post-COVID economic recovery and the new trends, such as smart cars, a shortage has appeared in Qualcomm's upstream: processor component suppliers' inability to deliver more in a short term is having an adverse effect on the company's performance. Likewise, its key customers, such as Samsung and Xiaomi, have been affected.

The shortage might end soon though: all the major contract chip manufacturers are actively expanding their production capacity. TSMC has estimated that it will invest USD 100 billion in the next three years to expand its plants. GlobalFoundries has announced that it will invest USD 1.4 billion in 2021 to increase production at its three key factories. China's national champion SMIC plans to build a 12-inch wafer foundry in Shenzhen in 2021, with a monthly production capacity of 40,000. At the same time, SMIC's 'Capital' project (link in Chinese) will be producing 12-inch and 28nm wafers, with a production capacity of 100,000. This may become bullish news for the fabless Qualcomm.

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