The Taiwanese press has in the past dubbed him the “bandit phone king”, because Tsai Ming-kai’s company MediaTek traditionally manufactured the chips that powered lower-end mobile phones, mostly made in mainland China. His firm has had a challenging 2020, courtesy of Donald Trump’s efforts to curtail Chinese telecoms giant Huawei.
High noon for MediaTek?
In May the US Department of Commerce restricted Huawei’s access to US technology, banning its use in the manufacture of chips designed to Huawei’s specifications. This impeded the Shenzhen giant’s chip design arm HiSilicon, as well as the company which manufactures its most advanced chips, TSMC.
That sounded like good news for companies such as MediaTek, which could ship their off-the-shelf chips to Huawei instead. MediaTek’s share price shot up 75% between May and August.
However, it was a false dawn. As some had always suspected, it was only a matter of time before the US government closed the loopholes in the Huawei supply chain ban.
Last month the US authorities announced new restrictions preventing all third-party vendors from supplying Huawei with any chips made with US software or hardware. In practice, this means all the suppliers as there are no real alternatives to US technology at the more advanced end of the semiconductor manufacturing and supply chain.
For example, MediaTek uses American electronic design automation (EDA) tools to design its semiconductors.
MediaTek’s stock has lost a fifth of its value since the beginning of August. But financial analysts believe it’s still well placed to do well out of the industry’s 5G upgrade. Earlier this year, MediaTek launched its Dimensity range of system-on-a-chip (SoC) for the new standard. And by the second quarter of this year it was also outselling Qualcomm as a supplier to other Chinese smartphone vendors, according to Digitimes. MediaTek finished the quarter with 38.3% market share, compared to the US chip giant’s 37.8% and 21.8% for HiSilicon, which was servicing its parent Huawei.
Does Tsai need a few dollars more?
The company’s chairman is worth $1.8 billion, according to Forbes. His life story parallels the “Taiwan miracle” – how a largely agricultural island transformed into a technology powerhouse, fifty years after the arrival of Nationalist forces defeated by the Communists in China’s civil war.
Taiwan prospered with US financial assistance and technology transfers. Like many of his contemporaries, 70 year-old Tsai was partly educated in the US, where he completed a master’s degree in engineering. When he returned to Taiwan in the early 1970s, he joined a research institute set up to nurture a semiconductor industry with American assistance. Its technology was licenced from Radio Corp of America (RCA), which also helped to establish Taiwan’s first chip manufacturing facility.
Tsai joined the plant, which was spun off into a separate company called United Microelectronics Corp (UMC) in 1980. Seven years later UMC spun off its chip design arm – MediaTek – as well. Tsai became its founding chairman and CEO.
Since then, Tsai has proved adept at moving with the times. The company initially serviced manufacturers of cheap handsets from China’s southern provinces – the shanzhai (copycats) or bandits, as they were known. But as some of these companies developed into more recognised brands, MediaTek moved upmarket too.
It now faces a dilemma. MediaTek’s technological base – and indeed Taiwan’s strong position in the semiconductor industry – owes much to its longstanding relationship with the US. However, MediaTek’s biggest clients increasingly come from mainland China, including brands such as OPPO and Xiaomi.
Can MediaTek survive if the US and China split into two separate supply chains (and markets) in tech terms? Over the short-term, its prospects seem solid. In addition to smartphone chips, MediaTek has also been diversifying into semiconductors that support new applications in the internet-of-things (IoT). But over the longer-term it may face tough choices, if Sino-US tensions persist.
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