Saturday, December 14, 2013

Earlier this year, I wrote about the importance of MediaTek’s SoCs in the emerging market. Back then, devices running their quad core Cortex A7 chips were still a couple of months away from entering the market. In that piece, I wrote that although Mediatek’s cheap MT 6589 chipset was not going to blow the minds of high end consumers, it was very important due to its potential to democratize high performance mobile devices. 

By Bobby Situkangpoles

To my surprise, in the months following the article, MediaTek’s cheap quad core had surpassed my expectations. It is now the dominant chipset powering Chinese built phones and tablets, allowing MediaTek to grab more than 50% of the world’s largest smartphone market. In India, the chip has allowed local manufacturers like Micromax and Karbonn to establish themselves as the second and third largest phone manufacturer in the world’s third largest smartphone market.

Since it is December, I think the time is right to review the role that MediaTek chips has played in the emerging markets. We will use Lenovo’s rapid rise in Indonesia to better understand the role that Mediatek chips has played throughout the year and what the future may have in store for us.

In an interview with Bloomberg, Yang Yuanqing, Lenovo’s CEO announced that that in the coming quarters, Lenovo is going to expand their international reach to 20  new markets. According to the publication, “Lenovo’s  global push comes after success in Indonesia, where Lenovo grabbed 13 percent market share in 12 months while achieving profit margins higher than in the home market of China”. With its population approaching the 300 million mark, Indonesia is the largest market in South East Asia.

How did Lenovo manage to go from zero to controlling more 13% of Southeast Asia’s largest smartphone market in a little over 12 months?

The answer lies in leveraging MediaTek’s affordable chips and the application of some cunning strategies to exploit trends in the market.

It’s early 2012, Samsung’s original Galaxy Note just entered the market and it wow’d Indonesian consumers. The 5.3 inch screen finally made it possible to watch Korean TV shows or Japanese Animes with subtitles on the go. It also looked big enough to comfortably browse the web while out and about without having to carry laptops. The fact that the phone and its colorful flip cases were used by most Korean Idols and featured in almost all of most the popular Korean shows had also helped. It was the phone to be seen with.

There is only one problem. The original Note cost around 750 USD, way beyond what the average population can afford.

This is where Lenovo came in.

In September 2012 they began their Indonesian push by aping Samsung’s strategy of saturating the market with multiple models covering different price segments. Basically they offered cheaper, well put together alternatives to Samsung phones. Their initial lineup consisted of the low end A series models, two mid-range models in the form of the business oriented P700 and the media oriented S880, while their high end was represented by the quad core Exynos powered K 860.

The star of Lenovo’s first wave was the $200 S880. On paper, the phone did not look that impressive. It had a WVGA TN panel screen powered by MediaTek’s MT 6575, a 1 GHz single core Cortex A7 SoC that supported dual Sim cards, 512 MB of RAM, Android 4.0, a 5MP front camera and a VGA front camera.

However, the Lenovo S880 was the first phone available for $200 that came with a spacious 5 inch screen. While Lenovo was  not the first to tease the Indonesian market with cheaper alternatives to Samsung’s popular Galaxy Note, they were the first to accompany their offerings with widely available accessories.

Suddenly, for less than a third of the price of Samsung’s Galaxy Note, Indonesian consumers can walk around with a phablet in their hands, and just like those cool Galaxy Note people they can also customize the looks of their phones with colorful faux leather flip covers. The phone was so popular that even from September to November 2012, many retailers carrying the phone had waiting lists for people who wanted to get one.The Indonesian equivalent of Craigslist, Kaskus, was full of entrepreneurial users offering the phone at marked up price tags. It was an unprecedented feat for a Chinese made device, especially one that had only been on the market for a few weeks..

The S880 was not the only star though. For those looking for a smaller screen, Lenovo had the 4 inch screened P700. Specs were pretty much the same, however Lenovo marketed the P series as their business oriented model. To make sure the phone kept up with its business credentials, Lenovo not only built the phone with a more restrained design but also equipped it with a beefy 2500 mAh battery (the S880 had a 2250 mAh pack) to ensure that the phone can last all day.

The significance of Lenovo’s first wave is further demonstrated by what the market leader, Samsung, did in response.

When Samsung launched the 5 inch Galaxy Grand, many in the mainstream media were quick to dismiss it. Some went as far as calling out how silly it is, in this PPI obsessed modern world, to release a 5 inch phone with a 480 x 800 TFT display and 512 MB of RAM. WVGA on a 4 inch screen was barely acceptable, how could Samsung had released a 5 incher with that resolution? Some cried “rip off!”, others claimed it as an example of how Samsung had little concern of user experience and they only care about making as many profit as possible by leveraging their position as market leader.

These concerns were not entirely unfounded but they miss one crucial point. The Galaxy Grand was launched to cover a glaring gap in Samsung’s line up. That gap is the lack of a cheaper alternative to their popular Galaxy Note line. A gap that was painfully pointed out by the attention that Lenovo was getting for their $200 Lenovo S880.

The Galaxy Grand hit the store shelves in January 2013 some 4 months after the S880. It was priced at $320, some 120 bucks more than Lenovo’s affordable 5 incher. It came  with twice the number of cores, an 8 MP camera as opposed to 5, 8 GB of internal storage  and the usual TouchWiz extras to make  better use of the large screen.

Lenovo’s second wave came six months later.

Earlier, we have talked about Lenovo aped Samsung’s strategy of releasing large screened phones and the accessory line-up to go with them. Lenovo’s tactics however, did not stop there. While Samsung updates its phones on a roughly annual cycle, Lenovo refreshes its whole line of phones in less than 6 months.  

Lenovo’s second wave of phones hit the Indonesian market in February, only a month after Samsung’s Galaxy Grand started showing up in stores. This time, it came with a number of significant updates. The chipsets powering most of these phones (bar their highest end model, the K series) got updated to MediaTek’s MT 6577. It is a dual core Cortex A9 chip with integrated WCDMA radios, PowerVR series 5 GPU and 1 GB of RAM. The screens got updated to IPS. They also come with Android 4.1 Jelly Bean which Google launched only 6 months earlier. Indonesian consumers can now get large screened devices for $200-300 that have comparable performance to the previous year’s $600+ phones, with brilliant screens that allow for wide viewing angles and the same Android version that Samsung was shipping their flagship devices with.

Among the most popular phones in this generation Lenovo devices were the 5 inch S890 and the 4.5 inch  P770. The S890 was the update for the best selling S880 while the P770 was the successor to the P700. The S890 kept the same battery of its predecessor while the business oriented P770 had an even beefier 3500 mAh battery. For comparison, Samsung’s Galaxy Note 2, which came to the Indonesian market at around the same time, with its much larger screen and quad core CPU, had only 3100 miliamps. Thus, the P770 easily had one of the longest lasting battery life available on the Indonesian market at the time. There was also a smaller screened version sibling of the S890, the 4.7 inch S820. At launch, the S890 was sold for about $270 while the P770 and S820 was offered at around $240. An increase from the previous models but still cheaper than the Galaxy Grand. Lenovo had an edge over the Grand though, these phones had qHD resolution while Samsung’s was still stuck with WVGA. Thus, in terms of specs, Samsung’s entry was outclassed by Lenovo’s cheaper alternatives.

What happened in less than six months after that?

In March, MediaTek introduced their 1.2 GHz quad core Cortex A7 MT 6589 SoC. Apart from having two extra cores from the previous generation, this SoC also came with more graphic processing power courtesy of PowerVR’s SGX 544 GPU. Furthermore, this chip brought support for HD and full HD displays, as well as 13 MP camera.

Just like before, Lenovo leveraged MediaTek’s solution for their third wave of devices that started to in Indonesian stores in September. This time, Lenovo’s 200-300 USD models were equipped with Android 4.2, MediaTek’s quad core chip, 1 GB of RAM and 720p IPS displays. Hitherto, HD IPS screens were luxuries reserved only for $600+ phones. Lenovo’s third generation phones  made the feature available for less than $300. Their popular S series was again split into two models, the S820 had a 4.7 inch screen and 13 MP camera while the S920 came with a 5.3 inch screen and 8 MP camera. Both were priced at about 270 dollars. The P780 was the update for Lenovo’s business mid range. It has a brushed metal body, 5 inch HD IPS screen, and a 4000 miliamps battery. Specs and price were the same as the previous two.That battery capacity rating was not a typo. This $270 aluminium-bodied phone actually has a battery that is as big as those found on Samsung’s 7 inch Galaxy Tabs. It is even bigger than the one inside the 2013 Nexus 7!

Lenovo’s success in Indonesia represented the importance of MediaTek’s affordable chips in the emerging markets. With their affordable chipsets, MediaTek not only enabled manufacturers like Lenovo to raise the bar on what consumers can expect from a limited budget, their rapid development cycle also allows manufacturers to repeatedly raise the bar every six months or so.

The wonder, if you will, does not stop there. As newer iterations of MediaTek chips come to the market, manufacturers can shift older generation SoC into devices in lower price brackets.

Remember the 1 GHz dual core MT 6577 chip on Lenovo’s early 2013 devices? It can now be found inside the Lenovo A390, a 4 inch WVGA phone that Lenovo sells for $95. That is close to Galaxy S2 specs for the price of a Nokia Asha!

What does this mean for the future?

Considering it took only 6 months to bring the specs of Lenovo’s past $300 phones to their current $100 line-up, it is not hard to imagine seeing 720p quad core phones available for 100-200 dollars in the very near future.

Motorola’s $179 Moto G and Xiaomi’s $130 Hongmi may look impressive at the moment, but in less than a year, such level of performance could be a common sight for sub $200 phones. Give it another 6 months, 720p quad cores can be expected to start entering the sub $100 bracket.

When that happens, it will be judgement day for platforms aiming to compete with Android in the low end segment, like Nokia’s Asha or Mozilla’s Firefox OS phones. As I have mentioned in an earlier piece, when 720p Androids running the optimized for low end Kit Kat is available for less than $100, Nokia’s Asha and Firefox OS phones can only have a fighting chance if they are available for half the price.

Using the same assumptions, we can expect phones with 1080p IPS displays powered by Mediatek’s octa core ARM Cortex A7 MT 6592 to flood the $200-300 bracket in the coming quarters. In China, such phones are already available with prices starting from around $300. In 18 months’ time or less, such phones could be available for under $200.  

Pundits may argue about the merits of having eight Cortex A7 cores as much as they want, but no matter how we put it, the potential to have full HD phones available for under 200 dollars in less than 18 months’ time is a huge win for the democratization of technology.