Top analyst says Qualcomm has started a price war that will impact prices of 5G phones
A report issued by reliable analyst Ming-Chi Kuo says that a price war has begun in the 5G chip industry. Kuo's note to clients, as reported by IT Home, says that Qualcomm has cut pricing for its mid-range 5G Snapdragon 765 chipset after sales of high-end 5G smartphones fell short of expectations. By cutting the cost of its mid-range 5G chips to manufacturers, Qualcomm is trying to get these firms to produce more affordable 5G handsets to entice the public. The price cuts will also extend to Qualcomm's low-end chips as well.
As a result of the price cut, Kuo sees MediaTek facing pricing pressure for its Dimesnity line of 5G chips three to six months earlier than expected. Instead of achieving gross margins of 40% to 50% for its chips as the consensus expects, the analyst sees MediaTek's margins dropping to less than 30%-35%.
MediaTek's margins are too thin to withstand Qualcomm's price cut
Qualcomm has reportedly cut the price of the 5G Snapdragon 765 chipset (SD7250) by $25-$30 to $40. MediaTek's Dimensity 1000 5G chipset costs the company $45-$50 to make and it sells for $60-$70 per chip. As a comparison, Qualcomm's top-of-the-line Snapdragon 865 Mobile Platform with the Snapdragon X55 5G modem costs $120-$130 and has not had its price cut. The company's flagship chip outperforms the MediaTek Dimensity 1000 and Qualcomm sees no need to drop the price of its high-end chipset.
The recently announced MediaTek Dimensity 800 chipset, which supports only the slower sub-6GHz 5G signals, is due to be released in May. This chip, developed for lower-priced 5G handsets, is expected to be sold at a price of $40-$45 per chip and costs MediaTek $30-$35 to make. There might not be that much room for MediaTek to maneuver in response to Qualcomm's pricing actions.
Qualcomm is starting a price war by cutting the price of the Snapdragon 765 5G chipset
The pricing shakeup could cost MediaTek some business. The company's major 5G chip customers like Oppo, Vivo, and Xiaomi are said to be switching orders for 20 million to 25 million chips from MediaTek to Qualcomm. These components are scheduled to be shipped next month.
The Snapdragon 765 SoC is equipped with eight Kryo 475 CPU cores running at a clock speed as fast as 2.4GHz. It features an integrated Snapdragon X52 5G modem that supports both mmWave and sub-6GHz 5G signals, and sports the Adreno 620 graphics processor. There is also a Snapdragon 765G for gaming phones that is equipped with an enhanced version of the GPU offering 10% faster graphics rendering compared to the standard Snapdragon 765 chipset.
The Dimensity 1000 also has an integrated 5G modem and is packed with four performance Cortex-A77 CPU cores running at a clock speed of up to 2.6GHz. Four efficiency Cortex-A55 CPU cores are also included. This SoC is equipped with the ARM Mali-G77 MC9
Qualcomm's salvo would have less of an impact on the market if MediaTek's margins were a little wider. A larger margin would allow the company to take a hit and still thrive. But the Dimensity 1000 brings $10-$25 per chip to MediaTek's bottom line and the Dimensity 800 garners profits of $5-$15 per chip.
MediaTek's Dimensity 1000 and Dimensity are manufactured by TSMC using its 7nm process. The Snapdragon 765/765G will be manufactured by Samsung using its 7nm process. The flagship Snapdragon 865 Mobile Platform is also a 7nm chip, and it also will be produced by TSMC. Qualcomm originally planned to have Samsung's foundry roll out the Snapdragon 865, but the chipmaker was concerned about allowing Samsung to get a peek under the hood of its top chipset for 2020.
Chip prices might also run into pressure halfway through this year when TSMC starts producing more powerful and energy-efficient 5nm chips. Among the first to be manufactured will be Apple's A14 Bionic and Huawei's next high-end IC expected to be named the Kirin 1020.
FCC OKs Cingular\'s purchase of AT&T Wireless
Things that are NOT allowed: