MediaTek: King of the Shanzhai

If there is one company that has almost single-handedly driven the growth of China's shanzhai manufacturing base, it's the Taiwan IC design house MediaTek.

After establishing itself as the largest supplier of chipsets for CD-ROM and DVD-ROM drives in the world, the company has most recently achieved rapid growth in the GSM handset IC market by supplying its shanzhai customers with complete kits that made it easy and cheap for them to bring mobile phones to market.

So successful has this strategy been that MediaTek has not only beaten out such formidable competitors as TI and Infineon, but it is also on course to ship 100 million units in the third quarter of 2009 according to a report just issued by BNP Paribas.

To put this into perspective, this number is higher than the 92 million feature phone shipments that Nokia is projected to ship during the same period this year, and according to the report MediaTek powered phones are outselling Nokia phones in high-growth markets such as the Middle East, Africa, and Latin America.

With its unique strategy of providing kits to its shanzhai customers, MediaTek has not only enabled hundreds of new manufacturers to enter the mobile phone business but also helped to expand the overall size of the market by driving down the prices of mobile phones for consumers throughout the world.

For all of its success with its GSM chipsets, MediaTek does face a major long-tem challenge ahead as it seeks to acquire a 3G handset IC license in order to enter the Smart Phone market.  In the short term, however, there's no doubt that MediaTek and it shanzhai customers will continue to challenge major players such as Nokia in the most price-sensitive segments of the mobile phone market.

Articles - Asia Analysis