Chip sales to dip, at least until 5G lands
The increasing pressure placed by consumers on mobile device manufacturers to come up with faster, more powerful, more feature-rich devices is expected to squeeze system-on-chip (SoC) manufacturers’ profits over the next year, according to a report by DIGITIMES.
High-end chipsets are complex to manufacture and, therefore, represent less of a profit to the manufacturers. But as competition between phone makers continues to heat up, companies like Huawei and Samsung are increasingly installing high-end chips into mid-level or even entry-level phones in efforts to claw sales from rivals.
Even the arguably specious claims of artificial intelligence (AI) capabilities embedded into chip designs are now considered to be run-of-the-mill, with little demand for slow, non-AI enabled phones from consumers and business users alike.
As the phone manufacturers jostle for market share, the status of the most powerful chips is degraded as the phones in which they are installed return shorter lifecycles. As a result, chip manufacturers are having to sink sizable budget in order to satisfy a demand for more powerful tech— 7nm and 4nm chips are on the horizon.
Qualcomm’s 8, 7 and 6 series of chips now appear even in mid-market and low-end phones, with the Snapdragon 8 series expected to take up to 70 percent of demand for that company’s products next year. The Snapdragon 6 range is the latest to have AI capabilities baked in– a move made in response to Chinese phone manufacturers selling high-end phones (with AI) at mid-range sector prices.
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Device vendors’ practices are pushing down SoC manufacturers’ profits, and some are struggling to come to terms with the new market for mobile devices, where device replacement cycles are getting shorter.
MediaTek’s chipset range does not include models for high-end phones (or at least, what now comprises a high-end model), with its Helio P60, P70 and P22 platforms only finding their way to mid-range mobile models. The company’s once market-leading AI-on-chip differentiation is no longer unique, so it will have to adjust its business model to preserve its 40 percent gross margin, sources inside the company are said to have stated.
It is not just the SoC makers that are suffering. Unitech PCB is said to be readjusting its target market model for next year as it is experiencing a decline in demand from phone manufacturers for its printed circuits. Instead, it is focussing on increases in demand from the automotive sector, driven to a significant degree by autonomous vehicle technologies.
The advent of 5G uptake across the world is set to push demand up for mobile devices, hopefully reversing the expected 3 percent fall in sales of handsets next year. The next iteration of connectivity technology should drive a resurgence in the handheld market from 2020, research for DIGITIMES has stated.