Introduction to Mediatek

Introduction to MediaTek

MediaTek is an international Taiwan-based fabless semiconductor company with worldwide presence in 102 countries. Its mission is to provide the products and services for communication, entertainment and information technology. It produces system-on-chip designs and solutions, including both hardware and software, for mainly mobile handsets. To differentiate itself from other tier-one chip producers, MediaTek focuses on offering products for 2.5G or 2.75G and targeting the Chinese and other emerging markets. It exports 30%-40% of its chips overseas to Middle East or Southeast Asia. The company, therefore, enjoyed huge success in those markets as China and South Asia had quickly became the largest handset market in the world with the large population.

Due to the affordability of MediaTek’s chips the emerging market and the removal of licenses in China, it gave birth to the illegal shanzhai market. MediaTek indirectly supplied over 50% of the Shanzahi market for all chipsets destined for handsets designed in China. It sells chipsets to legitimate mobile producers at a very low cost if they do bulk purchase. Some producers, however, resell part of their chipsets to the black market and earn handsome profits along the way. The rapid development of the Shanzhai market has been unstoppable with skyrocketing demand in the emerging markets.

The Rise of the Shanzhai Market

Historically, "Shanzhai" means villages in the mountain that have stockade houses or fenced place in the forest. It is sometimes used as a metaphor to describe bandits who oppose and evade the corrupted authority to perform deeds they see as justified. As time goes on, “Shanzhai” denotes Chinese imitation and pirated brands and goods. It has various definitions. In broad terms, it includes white-box or no-brand phone makers K-Touch or ZTE; in narrow terms, it refers to illegal counterfeits or knock-offs.

In 2007, the Chinese government abolished the mobile producer licensing which significantly lowered the barrier of entering mobile producing market. With the rising supply of cheap and integrated MediaTek’s chips in the grey market, Shanzhai gained first-mover advantage by simply copying from other brands and manufacture similar but coarse products. Later, it became indifferent with market products and most products were equipped with essential features. Since 2009, it had been innovating itself and employed different innovation strategies alongside with the popularity of Internet to promote its handsets. Nowadays, it is expanding its foreign sales.

The Analysis of the Shanzhai Market

There is increasing sales of Shanzhai phones relative to phones from China brands and non-China brands, reflecting an increasing popularity of Shanzhai phones in China. Also, Shanzhai ji has market share of 25-30% in