MediaTek's Q2 2020 earnings call has released a lot of good news, particularly on the market update for MTK's 5G SoC in China. A big part of this cheer can be attributed to the problems being faced by Huawei.
Takeaways from the earnings call include:
MediaTek's estimates for 2020 5G smartphone shipments are close to Qualcomm's. Qualcomm estimated in its June earnings call that global 5G smartphone shipments in 2020 would be between 175 million and 225 million, compared to MediaTek estimate of between 170 million and 200 million.
Qualcomm and MediaTek are targeting slightly different price ranges for smartphones. According to Counterpoint data, in the second quarter, most smartphones with MediaTek SoCs were priced at $150-$399 (Dimensity 800) and $250-$499 (Dimensity 1000) while smartphones with Qualcomm SoCs were priced at $400-$799 (Snapdragon 865).
Like Qualcomm, MediaTek is very confident of its 5G sales in China, believing that all major Chinese mobile phone brands have adopted its 5G SoC products. Thanks to the strong demand and promotion of 5G smartphones and services in China, MediaTek expects its China 5G market share to reach 40% by the end of 2020. However, Counterpoint's monthly smartphone sales tracker shows MTK chips accounted for only 7.6% of China's 5G SoCs in May. On the other hand, Huawei (HiSilicon) has a 63% market share of 5G SoCs in China due to Huawei's strong growth in the second quarter.
Under a ban announced by the US Bureau of Industry and Security (BIS) on May 15, Huawei will not be able to get any product made for it at its most important foundries (TSMC’s) 120 days after the effective date, which is September 15. This makes Huawei unable to use its Kirin SoC. Furthermore, Huawei's options are limited, and the ban forces it to use SoCs from competitors. Therefore, if the share of MediaTek's SoC reaches 40% of China's 5G market by the end of 2020, it is bound to see MediaTek's 5G chips being widely adopted by Huawei. Besides, since Huawei's cutting-edge SoC was being produced at TSMC's 5nm, the switch to MTK SoC will also affect TSMC's capacity allocation.
Therefore, under the two assumptions of (1) Market shares of all smartphone OEMs in China remaining unchanged and (2) Sell-through of 5G smartphones in China in 2020 reaching 100 million and MediaTek's 5G SoC share reaching 40% in Q4 2020, Counterpoint’s estimates of MediaTek's 5G chip shipments and its share of TSMC's 7nm capacity in the third quarter are as follows:
Exhibit: Share of 5G chipsets in China, 2020
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Dec 24, 2020