Tuesday, September 24, 2013

I have an old friend who uses parables in conversations so often that I nicknamed “the prophet”. This person once said, “Too good to be true, is too good to be true”. I have tried to prove this statement wrong for years, but unfortunately so far, it still holds true for Mediatek.

Read on to find out why.

Lenovo S820 with 4.7 inch 720p display and 13 MP camera

I have an old friend who uses parables in conversations so often that I nicknamed “the prophet”. This person once said, “Too good to be true, is too good to be true”. I have tried to prove this statement wrong for years, but unfortunately so far, it still holds true for Mediatek.

Read on to find out why.

Earlier this year, I wrote about the (then) potential significance of Mediatek’s quad core ARM A7 line up the MTK 6589 series. In that piece, I predicted that the chip should enable manufacturers to produce relatively high performance, high resolution devices for around $250 or less.

The chip itself comes in three guises. The standard 1.2 GHz model offers support for up to 1920 x 1080 displays, 1080p video capture, and 13 Megapixel cameras. There’s a lower cost “M” model with same core speeds but lower clocked GPU that supports “only” up to 8 Megapixel camera, 720p video capture and qHD resolution displays. The last one is the “T” which is the performance model that comes with higher CPU and GPU clocks (1.5 GHz and 357 MHz, respectively).

Another important thing is that all three models come with built in HSPA+ and TD-CDMA modems while at the same time offering support for dual SIM cards. This provides manufacturers with a simple and cost effective System on Chip with integrated baseband solution, just like Qualcomm’s Snapdragons. While the combination of the Arm Cortex A7 cores and SGX 54X GPU might not excite high end phone fiends, the 28 nm quad core SoC is enough to provide performances close to last year’s flagships at a fraction of the price.

In the following months, Mediatek’s MTK 8689 series has basically taken over the budget smartphone world by storm. If we take a look at budget smartphones flooding the market in China and India, almost all of them use Mediatek’s chips. As I predicted, the little affordable chip has allowed companies to offer 720p (in some cases, even 1080p) phablets for less than $300 off contract. Many manufacturers have come up with respectable alternatives for people with sub $300 budget in the emerging markets powered by these chips. As has been mentioned here and here, In India this SoC has allowed local manufacturers such as Micromax and Karbonn to rise to the 2nd and 3rd spot in terms of local market share, closely trailing the leader Samsung, leaving the likes of Nokia, Sony, HTC and Apple eating their dusts.

In my opinion, the most exciting phone that the MTK 6589 has allowed to come to the market is Xiaomi’s Red Rice. This is a 720p IPS phone that Xiaomi is selling for $130 off contract in China. In late August, Trendforce released the results of their Bill of Materials analysis of Xiaomi’s Red Rice. They reported that Mediatek’s quad core chip has allowed Xiaomi to build the Red Rice for only $85. Of course, not everyone would be able to operate on such a tight profit margin as Xiaomi with their unique service oriented business model, but in a year’s time, declining cost of components should allow other manufacturers to produce phones comparable to the Red Rice at close for less than $150, give another 6 to 8 months, similar spec’d phones could be sold for less than $100. As I've mentioned before, this will spell a challenge for companies looking to capitalize on the exponentially growing lower-low-end segment like Mozilla with their Firefox OS and more recently, Nokia-Microsoft with their entry level Lumia line.

Jeff Orr, an analyst at ABI Research noted in August:

“When you look at operating systems in the emerging markets, you tend to find that Android has been busy fulfilling its mission to bring the Internet to consumers who can’t afford a traditional PC or Laptop”.

It goes without saying that  Mediatek’s affordable quad cores have played a significant role in this.

However, things are not all rosy with Mediatek. A quick look at international forums as well as these piece from Gizchina shows that there’s a growing demand from users of Mediatek powered devices for the company to be more accommodative to the custom ROM developer community. Apparently, Mediatek has yet to embrace the Android GPL guidelines. The enthusiast community is clamoring for Mediatek to provide source codes and resources to help them develop alternative firmwares for their devices.

Mediatek’s closed nature is obviously at odds with Android’s open source approach. At the surface it paints a rather evil picture of Mediatek, at least from the enthusiasts’ perspective. However, I believe there’s reason to believe that Mediatek is not solely to blame for this closed door policy.

Looking at it from another perspective, Mediatek’s partner manufacturers are operating at thin margins to bring these relatively high performance devices to the budget market (with Xiaomi’s example above being an extreme example), it is not in their best interest for Mediatek to open up its resources to the enthusiasts communities. On one side, providing devs with resources needed to make fully functional ROMs would increase their product’s appeal to the enthusiasts crowd, as exemplified by Oppo. On the other hand, doing so would allow users to extend the service life of their devices and delay upgrading to newer models. That could really hurt Mediatek’s clients who are selling devices at such minimum margins. Unlike the likes of Sony or HTC, these manufacturers don’t make multi-hundred dollar profit for each device sold; they had to rely on customers continuing to upgrade to their newer models to have sustainable business.

As it stands, while Mediatek powered phones are doing a good job at democratizing tech by delivering (relatively) high performance devices to people whose budgets would not have allowed them to expect such specs in the past, modding enthusiasts would be better off steering away from Mediatek powered devices.

That does not mean that performance enthusiasts on a budget should not get Mediatek powered phones though, they just need to be prepared to commit to a self-imposed yearly upgrade cycle to make sure that they can stay close to the top of the game.

That’s not too bad though, because if you choose wisely, some of these devices have held their prices well in the second hand market. In my local market, Indonesia, Mediatek powered Lenovo phones tend to lose less than 35% of their market value in a year’s time. Used in a timely manner, that residual value can really help users to stay up to date without having to rely on third party ROMs.
Let’s see if Mediatek could prove my friend wrong in the future.

Bobby Situkangpoles