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Smartphone chips suppliers to see gross margins rebound in 2018
Source: DIGITIMES   Editor: Helan   Update Time :2017/12/6 17:11:19

Smartphone chip solution providers including MediaTek, Spreadtrum Communications and Qualcomm are expected to see their gross margins rebound in 2018, as smartphone vendors are incorporating more fucntions to drive more innovative applications to shore up the unit prices of their new models, according to industry sources.

Over the past few years, unit prices of smartphones have declined fast due partly to brand vendors failing to roll out models with appealing applications and designs, and party to their volume shipments of a variety of devices to China and other newly emerging markets. This has caught smartphone chipmakers in a fierce price-cutting competition in vying for orders from smartphone vendors, the sources said.

Amid the vicious price competition, MediaTek has seen its gross margins decline all the way to under 33% from well over 47%; Spreadtrum has failed to realize its original expectation for high profitability; and Qualcomm has witnessed its gross margins for mobile chips keep shrinking to undermine its overall profit growth, the sources continued.

But situations are changing for the better, as international and China brand smartphone vendors are now keen to roll out models with new functions and applications to boost their average selling prices (ASP) and appeal to consumer demand for high-performance models.

For instance, Apple has incorporated 3D sensing technology into its iPhone X devices; Huawei's latest Mate 10 has adopted AI chips; and other China brands such as Oppo, Vivo and Xiaomi will also start to utilize 3D sensing modules in their models in the first half of 2018. They are also moving to develop models featuring AR function and compatible with 5G mobile communication technology, according to the industry sources.

Serving as the largest driver for new functions and applications of smartphones, smartphone chip solution providers are poised to embrace a lucrative year in 2018 and demonstrate their prowess in different segments. Qualcomm, for instance, is striving to sustain its share of the market for high-end smartphone chips; MediaTek will zero in on the midrange smartphone segment; and Spreadtrum will keep trying to expand to higher-tier market segments. Accordingly, the price competition among the three major smartphone chipmakers will weaken significantly in 2018, allowing their gross margins to rebound, the sources said.

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