Qualcomm slashing prices in China

Chipmaker Qualcomm is slashing the price of its chipsets in China in a bid to see off low-cost outfits such as MediaTek.

In a recent report to shareholders, Qualcomm said that it needs to capture growth opportunity in emerging markets such as China and India.

At the moment chip demand in these countries is soaring as telecom operators start to adopt 3G. Normally Qualcomm would be happy competing with Intel and Texas Instruments but it seems that this end of the market is attractive to those making more cheap and cheerful items.

The Chinese chip market often favours the cheap rather than the brand as some of the western chipmakers are finding to their cost.

Chen Xianglin, VP of Huawei’s wireless terminal division, revealed that Huawei was considering using handset chips from MediaTek.

Huawei currently uses Qualcomm chips in most of its 3G handsets and Texas Instruments chips in its 2G feature phones. MediaTek is not currently one of its suppliers.

MediaTek started mass producing its MT6575 1 GHz smartphone chipset at the beginning of the year. The chip is similar to Qualcomm’s MSM7227A and MSM7225A.

According to Strategy Analytics, Qualcomm is the leading player in the baseband chipset market in China with a share of around 42 percent followed by Intel, MediaTek and Texas Instruments.

Qualcomm’s thinking is that by cutting the average chipsets pricing for its chips in China it will not only see off the rivals, it will help it gain market share.

Earlier this week Digitimes pointed out that Qualcomm has to decrease prices because its quotes for 3G handset chip solutions are 20 percent higher than MediaTek.

While the cheap and cheerful chipmakers are unlikely to be able to cut their margins further, it will be interesting to see if Intel and TI follow suit.