With Qualcomm lowering prices for its Snapdragon 450 chips to less than US$10.50, MediaTek is under pressure to cut prices for its upcoming Helio P23 series designed for mid-range smartphones, according to industry sources.

MediaTek is likely to sell its Helio P23 chips at as low as less than US$10 to better compete with Qualcomm, which already cut prices for its Snapdragon 450 series introduced in June, said the sources. Built using 14nm process technology, the Qualcomm Snapdragon 450 is expected to bring more competition in the already-competitive mid-range and lower mid-range mobile chip market segment.

Samsung, which uses 14nm process technology to fabricate Qualcomm's Snapdragon 450 chips, has reportedly offered US$2,500 per wafer enabling Qualcomm to lower the chip prices, the sources said. MediaTek, which contracts TSMC to manufacture its upcoming Helio P23 chips, still has to pay the foundry more than US$3,500 for the cost of 16nm per wafer, the sources said.

MediaTek initially set the official price of the Helio P23 solution at around US$15, the sources noted. However, the prices have recently been cut to US$11-12 as the company intends to secure orders from its major China-based clients, the sources said.

MediaTek is expected to launch the Helio P23 series in the fourth quarter of 2017, with target shipments for the chips of 5-6 million units monthly, the sources indicated. The upcoming Helio P23 chips have obtained orders from Oppo, Vivo, Gionee and Meizu, the sources said.

MediaTek will continue seeing fierce price competition in the smartphone-SoC market particularly the mid-range segment in the second half of 2017, the sources suggested. It is unlikely for the company to make a substantial improvement in gross margin in the rest of 2017.

MediaTek saw its gross margin grow to 35% in the second quarter of 2017 from 33.5% in the first quarter. However, the gross margin slid from 35.2% during the same period in 2016.

MediaTek's gross margin fell 7.6pp on year to a record low of 35.6% in 2016, though consolidated revenues for the year increased 29.2% to a record high of NT$275.5 billion.