The future of the smartphone belongs to the ‘super mid-market’ devices made by brands you’ve never heard of. And chip maker Mediatek is going to make it happen. Tim Green met the firm’s CMO Johan Lodenius…
Are you using a Tecno phone? How about a Torque? Or a Gionee? Maybe a Viettel.
If you’re confused, this could be because you live in the US or Europe, and you think the handset market revolves around the holy duo of Apple and Samsung, with Nokia, HTC, Sony, LG and Moto mopping up the rest.
But you’re very wrong. In the world’s emerging markets, the device space is all to play for and a host of agile players are eating up market share.
Tecno, for example, is estimated to have 31.8 per cent of the smartphone market in Nigeria. Two years ago, its share was virtually at zero. The Chinese-made phones compare pretty favorably in terms of features with high-end Samsung devices but prices start at N13,500, rather than N35000.
The Android factor
So what explains the rise of Tecno, Torque, Gionee, Viettel and others? Partly it’s Android, which has given these OEMs a ready-made platform for powering their devices.
The rest is down to Mediatek.
The Tawianese processor specialist produces the affordable and advanced chips that make it hard to tell the difference between a Galaxy and a Gionee.
In fact, the firm has a ‘turnkey model’ process that reduces the phone development cycle from nine months to four months. And in 2014 to date, over 1500 mobile models accounting for 700m units were shipped globally using it.
Mediatek was also involved in the creation of Android One, Google’s template for enabling the manufacture of ultra-affordable smartphones. The project went live this summer and saw devices go on sale in India for as little as £65 without a contract. The program is set to expand to Indonesia, Philippines, Pakistan, Nepal, Bangladesh, Nepal and Sri Lanka with more countries set to follow in 2015.
The era of super mid
However, Mediatek is equally interested in another rising smartphone trend – which it calls ‘super mid market’.
The firm believes the gap between mid-range and premium is closing and that this, along with the emergence of a growing middle class in new economies, will give super mid-market 80 per cent of handset volume, with low and high-end phones holding 10 per cent each.
It says the transition to super mid-market will take place in two or three years, noting that in China, nearly all devices now being sold are smartphones. And it reckons this will prompt a change in the perception of the newer OEMs emerging across Asia.
David Ku, CFO of MediaTek, says: “Somehow, people outside this region, because they don’t know these brands, have a negative feeling, talking about copycats or whatever. Most of the brands may be small, and they may be local and not global yet, but that doesn’t mean they are bad brands.”
Middle class revolution
Mediatek quotes Yankee research to support its thesis that the emerging world is turning middle class – and that this will drive demand for mid-range phones. It estimates 28 per cent of the world’s middle income individuals came from Asia Pac in 2009, but that 66 per cent of this group will be Asia-based in 2030.
Given that Mediatek has such a pivotal role in such potentially huge changes, you’d think it would be better known. After all, this is a company that posted revenues of $5.3bn in the first half of 2014, nearly as much as the whole of 2013.
Well, now, the firm is trying to change that. After years in the background, Mediatek launched a very public re-brand at Mobile World Congress last February centered around a new tagline ‘Everyday Genius’.
Johan Lodenius, CMO of Mediatek, admits: “Until recently, there really was no brand. Mediatek was a very good engineering company that just didn’t really think about the way it communicated internally and externally. Now, we do. But all we’re doing is articulating the same vision we’ve always had – enriching people’s lives. And I think ‘everyday genius’ sums it up perfectly.”
In recent weeks, Mediatek has stepped up the PR, arranging its first ever press and analyst event in London. Lodenius concedes this was a long time coming. But he feels the firm’s east-to-west direction is an advantage. “We’re coming from the emerging markets where everyone wants to go right now. That’s pretty unusual. And I think it’s probably easier for us to bring our technology here than it is for Qualcomm and the rest to look east and figure out how to turn out low cost devices.”
Needless to say, as a chip maker, Mediatek is looking beyond phones and preparing for the era of wearables and internet of things. Earlier this year, it launched the LinkIt Development Platform, a reference design to help developers create hardware more quickly. Then, in September, it announced the MediaTek Labs project to give makers information and support on using Linkit and getting to market.
Lodenius says: “It’s still early for IoT and there are issues to solve. When it works, though, it will attract the interest of vast sectors like energy and insurance, and it will be huge.”