Smaller vendors of TDDI, optical fingerprint identification and Type-C PD chips are reportedly lowering quotes to vie for orders in 2019, but the average unit prices of smartphone chips remain relatively stable as handset vendors are keen to upgrade AI functions at their devices, according to industry sources.

The sources said that as foundry capacity utilization may trend downward in the first half of 2019, second-tier and small-size IC designers can more easily secure sufficient capacity support, driving them to adopt highly flexible pricing strategies to land more chipset orders for new devices from clients. This has driven down average unit prices of diverse chipsets.

Qualcomm, MediaTek and Unisoc have maintained a balance in their offerings for high-tier, midrange and low-end mobile phones. This, coupled with little space for pice cuts in the terminal market, has served to stabilize prices for handset chips, the sources commented.

Price reduction can hardly stimulate replacement demand at consumers, and instead, newer applications and greater power saving performance can better win patronages from consumers, prompting handset vendors to incorporate more advanced AI functions to their new models.

After AI functions have been massively applied to midrange and high-tier smartphones in 2018, entry-level models are expected to incorporate AI as a basic feature in 2019, preventing chip prices from falling. Rather, relatively higher chip prices for new-generation smartphones are expected to be major revenue growth driver for chipmakers in 2019, industry sources indicated.