Qualcomm and MediaTek plan to cut another 30% in 5G chip orders in the second half of 2022 due to a decline in orders from Chinese phone makers, according to Ming-Chi Kuo, an analyst at TF International Securities and a frequent Apple supply chain news commentator, wrote in a May 22 report.
Why it matters: Weak demand in the Chinese smartphone market has resulted in domestic phone makers cutting orders, causing a ripple effect in the industry. Additionally, android phones are using processors one or two generations behind Apple, making them face a long uphill battle in China.
Details: Qualcomm and MediaTek, two of the world’s largest system-on-a-chip (SoC) makers, have reportedly been forced to cut orders after Chinese phone brands had to cut smartphone orders as a result of Covid-19 lockdowns across China and weak demand for smartphones.
- Kuo surveyed major Chinese Android phone brands, including Xiaomi, Oppo, Vivo, Transsion, and Honor, finding that they had cut another 100 million orders since his last survey on March 31.
- Kuo’s survey also showed that Taiwan-based MediaTek has cut orders for the fourth quarter of this year by 30%-35%, with those mainly focused on mid-to-low-end chips. Additionally, Qualcomm cut orders of its high-end Snapdragon 8 series by about 10%-15% for the second half of 2022.
- Kuo explained that the performance of 5G chips can be seen as a long-term indicator of the strength of the smartphone industry. Due to the longer lead-time needed for 5G chips, declining orders indicate that the Chinese smartphone market will remain muted during the peak season of the third and fourth quarters and won’t see a comeback till the first quarter of 2023.
- Louis Liu, an analyst from CINNO Research, told TechNode a similarly pessimistic prediction and believes that smartphone sales in China would drop by 7%-8% this year.
Context: China shipped 17.6 million smartphone units in April, a yearly decline of 21.6% and 12.2% less from March. The decline can be attributed to a drop in market demand and less promising processors for Android phones compared to Apple’s, according to a report from CINNO Research.
- Apple, on the contrary, remains relatively strong in the Chinese market due to the US company’s processors being two generations ahead of those supplied by Qualcomm and MediaTek.