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China Briefings

Reports on China issued by Samsung Economic Research Institute

Comparison of Business Model: MTK vs. Techfaith

Comparison of Business Model: MTK vs. Techfaith

Samsung Economic Research Institute Beijing Office

Oct. 16, 2009

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Ι. 'Upstreaming' in the Cell Phone Industry: MTK and Techfaith

□ MTK, Taiwanese fabless IC design manufacturer, has grown rapidly in the mobile phone industry since 2003.

• MTK initially produced CD-ROM chips. Then it began commercial production of DVB-T (Digital Video Broadcasting-Terrestrial) chips, European-based consortium standard for the broadcast transmission.

- MTK was split from UMCi in 1996, and started a multimedia business. In July 2001, MTK became a listed company on the Taiwan Stock Exchange and advanced into integrated circuit (IC) design.

- In 2003, MTK joined the world's top ten companies in IC design for the first time.

• Until 2006, the main customers of MTK's mobile phone chips were large cell phone manufacturers in China .

- MTK competed with mobile phone baseband chip manufacturers from Europe and the US , selling about 33 million sets of chips in China 's GSM/GPRS baseband market in 2003.

-MTK's market share in baseband chip market exceeded 40% in 2007. Companies, including BIRD, TCL, Lenovo, Konka all use MTK products.

•  MTK overtook Texas Instrument to become the largest supplier of cell phone chips in the Chinese market in 2007.

- Surging demand for cell phones spurred demand for cell phone chips as phone manufacturers expanded their international presence.

- MTK maintained an annual growth rate of 15% in sales until 2006, and in 2007, its sales soared by 40%.

- The financial crisis in 2008 dented MTK's sales, but 50% of cell phones produced in China still use MTK chips.

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