Samsung Electronics had talks with MediaTek over cooperation in the second half of 2014 and MediaTek is expected to become an application processor (AP) supplier of Samsung's smartphones in the second half of 2015 at the soonest to help fill up the gap in the Korea-based vendor's product lineup.
After Broadcom quit the smartphone AP business, Samsung has turned to Marvell for replacement and partnered with China-based Spreadtrum to acquire AP solutions for its lower-end smartphone product lines.
However, the two firms' ability on product supply and support was rather weak, while their solutions also lack diversity and are not upgraded frequently enough, making it difficult for Samsung to develop divers products using their solutions.
Although the two firms' AP supply to Samsung has been improving and turning stable recently with Spreadtrum shipping almost 20 million APs to Samsung in 2014, their efforts are still unable to satisfy Samsung and therefore, the Korea-based vendor has turned to MediaTek, looking to improve its product mix.
Samsung has strong demand for the supply of all levels of APs and despite its high-end smartphones having encountered tough challenges from competitor devices in 2014, its entry-level products still enjoyed rising demand in emerging markets as well as Europe and North America.
Since Marvell and Spreadtrum's product lineups are rather simple, Samsung is unable to make products that stand out from competitor devices using their solutions. Although their supply is growing stable, Samsung, which has strong ambitions to grow strong in the Tizen ecosystem and wearable device market, the two firms' product quality and ability to support different ecosystem products were both unsatisfactory.
MediaTek and Samsung never cooperated over smart mobile devices in the past and the two were competitors in India. However, MediaTek's diverse product lineup for the mobile device market, complete support from the supply chain for wearable, telecom solution and components, and strong technical support services are expected to complement Samsung's gaps.
Although Samsung has the most advanced manufacturing process and experience designing APs in house, the company is still aggressively seeking assistance from outside in order to achieve a breakthrough in its product lineup since supplying large clients is the priority for its capacity, and its management over different levels of telecom ecosystems is still not yet mature.
With the partnership, Samsung will be able to achieve more obvious differentiation from competitors in the mid-range and entry-level smartphone market. Combining its products with MediaTek's smart family, telecom and wearable technologies, Samsung is also expected to benefit for an increase in its products' added value.
Therefore, Digitimes Research believes in addition to mid-range and entry-level products, Samsung is likely to adopt MediaTek's solutions and technologies in its high-end products also.
However, Samsung is said to have acquired its supply chain partners' confidential information via partnerships in the past, whether Samsung's partnership with MediaTek is meant to acquire information will remain to be seen.