MediaTek redistributing commissions

MediaTek redistributing commissions

MediaTek is willing to partially outsource processor production to U.S. companies Intel and GlobalFoundries, which will be commissioned to manufacture integrated circuits that are not quite cutting-edge, such as chips for routers and smart TVs, whereas the most innovative chips will still be produced by Taiwan’s TSMC.

MediaTek redistributing commissions

The goal of such diversification is to reduce dependency on Taiwan, whose semiconductor manufacturing industry can potentially be affected by the ongoing trade war between the U.S. and China.

Not putting all eggs in one basket

MediaTek, a Taiwanese company and the world’s largest smartphone processor supplier, made the decision to diversify its CPU production, according to Reuters. Today the company’s chips are manufactured at TSMC’s plants in Taiwan; however, MediaTek is not at all happy with that.

MediaTek is the world’s largest smartphone processor maker. In the second quarter of 2022, the company’s market share amounted to 39 %, whereas those of Qualcomm and Apple amounted to 29 and 14 %, respectively, according to statistics provided by Counterpoint Research. However, MediaTek achieved success through deceitful means and a global scam, as stated by CNews.

TSMC is the world’s biggest contract manufacturer of integrated circuits. It produces chips for AMD, Apple, Qualcomm, MediaTek and many other companies, reporting revenue growth every month. According to CNews, in November 2022, TSMC stated that it would like to stay away from high-purity neon from Russia and Ukraine (the gas is used in chip manufacturing) and source most of it from Taiwanese companies.

It is unclear whether that is related to MediaTek’s decision to pass some of its commissions to other companies. The statement of the company’s management mentions only the tensions around the confrontation between the U.S. and China.

The company also pointed out that some of MediaTek’s clients, that is, equipment manufacturers, are calling for processors to be sourced not only from Taiwan but also from other countries and regions of the world, such as Europe and the U.S. “I think in those cases, we will have to find multiple sources for the same chip if the business warrants that,” stated Rick Tsai, co-CEO of MediaTek.

Open to the New World

All of the above was told by Mr. Tsai and MediaTek top managers to Reuters experts at a press conference held by the company in the U.S. Mr. Tsai was open about the fact that MediaTek is very interested in the U.S. market and the company’s goal is to triple or even quadruple sales to the U.S. However, he didn’t give a time frame for MediaTek’s implementation of these plans.

Apparently, the management of the company has been planning to reduce the dependency on Taiwan in terms of production for a long time. Mr. Tsai reported that in 2022, GlobalFoundries, a U.S.-based company, was commissioned to manufacture some of the older processors.

With a share in the global market amounting to 6 % in the second quarter of 2022, GlobalFoundries is the world’s fourth largest contract chip vendor after TSMC (56 %, according to statistics published by Counterpoint Research), Samsung (13 %) and UMC (8 %). MediaTek probably delegated the outdated chips’ manufacturing process to GlobalFoundries in order to load TSMC down with the production of its most advanced CPUs. As reported by CNews, in November 2022, MediaTek launched the Dimensity 9200, which is currently the world’s most advanced smartphone processor.

Intel still there

GlobalFoundries’ fabrication plants are located in the U.S. and Singapore. Mr. Tsai did not specify which one of the countries is manufacturing chips for MediaTek. However, he pointed out that the company does not intend to limit itself to working with GlobalFoundries only.

MediaTek has shown a strong interest in cooperating with Intel, a U.S.-based company. CNews reported that the companies became partners back in the summer of 2022. However, by November 2022 Intel had not yet started manufacturing processors for its new Taiwanese client.

Intel is not able to manufacture the most advanced MediaTek processors, since, unlike TSMC, which has almost achieved the 1 nm process, it has been stuck with the 10 nm process. MediaTek is not bothered by this, though. What it is going to delegate to Intel is building processors for smart TVs and routers.

Mr. Tsai stated that MediaTek decided to use the “Intel 16” chip manufacturing technology for producing chips. Intel’s fabrication facility located in Ireland will start the production in the second half of 2024.

Remembering its roots

Apparently, MediaTek is not going to terminate its contracts with TSMC, at least in the foreseeable future. Head of MediaTek pointed out that Taiwan is the world’s most important region for chip making but stressed that it is not enough.

Mr. Tsai expects to partially book the TSMC’s new 5 nm wafer fab, which, according to CNews, TSMC is building in Arizona (U.S.). It is most likely that the facility will be launched gradually, since the company is planning to start the production no later than 2024.

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