As worldwide smartphone vendors are expected to further lower prices for new models to stimulate replacement demand in 2019, global chipmakers including Qualcomm, MediaTek and UNISOC (Spreadtrum & RDA) may see their gross margins and earning capabilities undermined by the device vendors' new marketing practice, according to industry sources.

The sources said that smartphone vendors have been forced to sell high-end models at midrange prices or adopt high-end chips for midrange models, so as to effectively drive replacement demand amid the headwind facing the smartphone market.

For chipmakers, such a trend will shorten the life cycles for their chips, squeeze the reasonable profitability, and downgrade the market status of their flagship and high-end mobile SoCs, the sources commented.

Qualcomm now offers Snapdragon 8, 7, 6 and 4 series mobile platforms to meet demand from global vendors of high-end, midrange and low-end smartphones. In 2018, the chipmaker has even launched Snapdragon 7 series and incorporated brand-new AI capabilities into its Snapdragon 6 series in line with China vendors selling high-end models at lower-than-expected prices.

In fact, China vendors have increasingly adopted Snapdragon 6 and 7 series SOCs for new low-end smartphone models priced at around CNY3,000 (US$432.85), and even applied Snapdragon 8 series to new midrange models with price tags of CNY4,000-5,000.

As Snapdragon 8 series platforms are estimated to command over 50% or even 70% of Qualcomm's annual mobile SoC production value for 2019, the chipmaker will feel increasing impact from the latest marketing trend at vendors, industry sources indicated.

As to MediaTek, the company has not yet released chip solutions for flagship smartphones, and its existing Helio P60, P70, P22 and A22 platforms are zeroed in on global markets for midrange and low-end smartphones.

Bu MediaTek can no longer be able to persuade customers to adopt its high-end mobile chips by highlighting their AI capabilities, as such capabilities have become a basic requirement for even entry-level smartphones. MediaTek will have to adjust the cost structure for its Helio chipsets if the company wants to have its gross margin rebound to the 40% level, the sources noted.