MediaTek's story is one of moving from designing featurephone templates to allow other businesses to quickly build and brand their own product, to designing simpler, inexpensive Systems-on-Chips to producing some of the more innovative high end chipsets for today and tomorrow's smartphones and tablets, such as the three tier, big.medium.LITTLE architecture we've seen with the Helio X20. Although MediaTek's business has been driven by the Chinese smartphone market, the majority of MediaTek's current System-on-Chips come with built-in LTE connectivity and many of these feature worldwide band compatibility. This has been a major source of growth for 2015 and we are seeing handsets powered by MediaTek chipsets appearing with increasingly regularity in the developed smartphone markets of Europe, the United Kingdom and North America. However, for 2016, the business is eyeing up the developing markets as a major source of growth.
In particular, MediaTek's president, Ching-Jiang Hsieh, believes that demand for 4G LTE compatible smartphones from India, Southeast Asia, Latin America and the Middle East is set to increase in 2016 and MediaTek is poised to benefit from this. Ching-Jiang believes the global smartphone market will increase by around 10% in 2016 compared with 2015 and thanks to MediaTek's wide ranging portfolio of products, from entry level, mid-range, supermid-range and high end chipsets, the company should be able to provide a competitive System-on-Chip whatever the device being designed. As with other big name chipset companies, MediaTek has incorporated the built-in LTE technology across the full range of chipsets, which makes it relatively easy for a budget smartphone to work with local LTE networks.
However, whilst MediaTek is better known for its smartphone and tablet chipsets, these are the areas of the business where the business is struggling. Part of this reason is that as MediaTek's chipsets have become more sophisticated and complicated, the unit cost has also increased and this in turn means that some manufacturers are opting for less expensive chipsets. MediaTek's end chipsets are becoming more and more sophisticated at a time with the chipset market is rapidly becoming commoditized and it is difficult (or expensive) for designers to add value. We've seen the business rein in its original sales estimates, but Ching-Jiang is optimistic: MediaTek build chipsets for all manner of device and the company Chairman explained that there are other, more favorable areas of the business where MediaTek is still selling products at a higher margin, including consumer electronics, optical storage and televisions. However, MediaTek's success will depend on how successful its new products are as we enter 2016 and how readily it is able to reduce production and other costs.