China-based handset solution vendor Spreadtrum Communications has followed the step of rival MediaTek to cut its solution prices, intensifying the pricing competition between the two companies, according to industry sources.
Spreadtrum has also increased its orders for wafer starts at foundry houses as well as backend services at packaging and testing firms, with the sequential growth rates for wafer starts and backend services to reach over 50% in the fourth quarter, the sources estimated.
MediaTek lowered the prices of its MT6253 2.5G/2.75G single-chip GSM/GPRS solutions once again in early October, bringing total reduction of the chip price to 10% in two months. Despite the price cuts, MediaTek has seen its shipments of handset solutions decline 13-15% in October as compared to those shipped in September, the sources noted.
Based on current order visibility, MediaTek is likely to see its revenues drop by 10-20% sequentially in October from NT$9.854 billion (US$319.33 million) recorded in September, the sources estimated.
Spreadtrum also slashed prices of its main GSM/GPRS baseband chip solutions by 5-10% in mid-October – a move which is likely to boost its shipments by 15-20% sequentially in the month, the sources added.
Spreadtrum's wafer start orders at Taiwan Semiconductor Manufacturing Company (TSMC) are expected to top 80,000 units in the fourth quarter, up 60% sequentially. Meanwhile, Spreadtrum's orders for IC packaging and testing services at Advanced Semiconductor Engineering (ASE) are expected to record an over 50% sequential growth in the fourth quarter.
Despite growing concern of a possible setback of the global communication industry in 2011, Spreadtrum's wafer start orders at TSMC for the first quarter of 2011 are likely to be on par with those placed in the fourth quarter of 2010, while MediaTek will see its wafer start orders stay flat during the same period, said the sources
The price cuts initiated by Spreadtrum and MediaTek are expected to push up handset solution shipments in November, but then demand from China-based handset makers may begin to weaken in December and in the first quarter of 2011, affecting sales of the two chipset solution vendors, the sources commented.