Do not participate in price warfare and spread chip share to 30%

"We now have a 30% share in the GSM chip market." On August 16, Lixin You, chairman and CEO of Spreadtrum Communications (Nasdaq: SPRD), responded to this reporter's question on the "chip price war." As of the end of 2009, Spreadtrum’s share was less than 5%.

At the end of 2010, Taiwan’s Lianfa Technology Co., Ltd. (“MediaTek”), the largest chip supplier in the Chinese mobile phone market, initiated a continuous price reduction strategy in order to restore the declining market share.

Related to this industry background, MediaTek once occupied more than 90% of China's GSM mobile phone chip market, and is in an absolute monopoly. However, starting from the beginning of last year, with the rising market share of chip suppliers such as Spreadtrum and Mstar, the monopoly position of MediaTek has been unprecedentedly challenged.

Data from iSuppli shows that at present, MediaTek GSM chips sold 4 million units in the month, and its market share slipped to 63% in the first half of the year.

In this context, MediaTek initiated a sustained price war, and the GSM chip market’s profit margins have been unprecedentedly increased. The incident was once the focus of attention in the Chinese communications chip market.

However, according to this site to understand MediaTek's price war strategy is not effective. On July 27, MediaTek released its second-quarter financial report, showing that its net profit during the period was NT$3.3262 billion, a decrease of 63.2% from the same period last year. Operating income fell by 30% from the same period of last year, and the announcement interpreted this as: "The main reason is that mobile phone chip prices have fallen."

In addition, on August 5th, Spreadtrum’s financial report for the first half of the year showed that net profit for the period amounted to US$32.5 million, a year-on-year increase of 18.2%, a year-on-year increase of 193%.

Li Liyou also said that Spreadtrum will not blindly participate in price wars. For price wars, Spreadtrum is adopting a differentiation strategy. First, it is the first to enter the market for Doka and more; second is to reduce the cost of a single chip by strengthening research and development to maintain corresponding profits. .