ABI Research believes that more than one-third of smartphones shipped in 2013 were attached to reference designs supplied by key chipset vendors, of which 69% were targeted at below US$200 price points. The emergence of reference design programmes by chipset suppliers such as MediaTek, Qualcomm, and Spreadtrum have greatly helped small vendors, notably in China and India to compete in the lowest tier of the smartphone market.
Tier-one OEMs have long resisted delegating the device reference design to chipset suppliers as they see it as an integral part of their brand and differentiation. However, fierce competition from small vendors is now forcing tier-one OEMs to change their strategy and consider using third party reference designs, essentially in the cost-sensitive segments of the market (sub-$200). Nokia, Samsung, HTC, LG, Huawei, and ZTE have already started to use this approach, mainly for products targeted at emerging markets.
“These trends will take the competition to another level, forcing OEMs to make more compromises on reference design ownership. As a result, reference designs owned by chipset suppliers will gradually entrench to higher price points, making the smartphone market increasingly commoditized,” commented Malik Saadi practice director at ABI Research.
By 2019, more than two-thirds of smartphone shipments will be based on chipset suppliers’ reference designs, totaling more than 1.18 billion units, of which 23% are targeted at wholesale prices higher than $200. This development will greatly help chipset suppliers gain more influence within the mobile value chain and lead the overall smartphone technology innovation.
However, it will be hard for chipset makers to bring their reference designs to the high-end part of the market, notably smartphones at wholesale price higher than US$400. This is largely because this market segment is increasingly governed by vertical OEMs, notably Samsung and Apple who will continue to have control over high-end device reference designs and the overall components supply chain.
“As tier-one OEMs will increase their reliance on third party reference designs, a number of small vendors who have initially benefited from using turnkey designs will no longer have the privilege of price and time-to-market differentiation,”added Saadi. “This will translate into the elimination of a number of small brands but some established OEMs will not be immune against the forces of market consolidation either.”
These findings are part of ABI Research’s Mobile Device Semiconductors Market Research.
ABI Research provides in-depth analysis and quantitative forecasting of trends in global connectivity and other emerging technologies. From offices in North America, Europe and Asia, ABI Research’s worldwide team of experts advises thousands of decision makers through 70+ research and advisory services. Est. 1990. For more information visit www.abiresearch.com, or call +1.516.624.2500.
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