MediaTek plans to transfer part of its 28nm mobile chip orders, including those for the Amazon Echo Dot, to United Microelectronics (UMC) from Taiwan Semiconductor Manufacturing Company (TSMC) starting 2018 to lower costs, according to industry sources.

MediaTek's quotes for its 28nm chips used in Amazon's Echo Dot are around US$5, said the sources. The fabless firm could earn about US$2 per chip after deducting costs for TSMC's foundry and backend services, the sources indicated.

Nevertheless, MediaTek's chip shipments for the Amazon Echo Dot and other IoT-related products are still too small to offset the decline in profits generated from its chip shipments for smartphones, the sources identified. sales generated from shipments for IoT products will account for only 20% of MediaTek's overall revenues by 2020.

MediaTek is also in talks with Globalfoundries about placing chip orders with the US foundry in 2018, the sources noted. The fabless firm is striving to lower its manufacturing costs to improve its gross margin and profitability.

MediaTek is mulling placing chip orders with Globalfoundries using the foundry's 22nm FD-SOI process technology designed for mid-range and entry-level smartphones, previous reports quoted industry sources as saying. A recent report from Taiwan's TechNews also indicated MediaTek may transfer half of its Helio P20 and P25 chip orders, built using TSMC's 16nm FinFET process, to Globalfoundries starting 2018.

MediaTek is already facing strong competitiveness from Qualcomm in the high-end smartphone chip market segment. In the mid-range segment, where MediaTek dominates, Qualcomm has expanded its presence since 2017 with its enhanced offerings such as the addition of 14nm Snapdragon 450 chips.

MediaTek reportedly will roll out its new Helio P23-series manufactured using TSMC's 16nm process technology by the end of 2017. The upcoming solution is regarded as a rival to Qualcomm's recently-launched Snapdragon 450 chip. However, customer response to MediaTek's upcoming Helio P23 is less positive as the chip has only drawn interest from Oppo, according to industry sources.