A few weeks ago, Ali and Baidu unveiled their smart speakers and DuerOS voice platforms, creating a buzz in the market. However, recently, numerous articles labeled as the "best" have surfaced online, primarily discussing the boom in the smart speaker market and MediaTek's resurgence. These articles seem to suggest that the smart speaker market is set to explode, potentially marking the second spring for MediaTek.
After reading these analyses, we noticed a subtle yet significant detail: each prediction about the smart speaker explosion and MediaTek's skyrocketing chip shipments came with the word "to be." Perhaps the smart speaker market's "to be" hot is merely wishful thinking.
In the smartphone market, MediaTek has struggled due to repeated failures in breaking into the high-end segment, leading to a gradual loss of its mid-to-low-end market share. This situation has placed the company in a precarious position. With declining revenue and unexpected layoffs, the pressing question remains: how can MediaTek find its second spring?
Currently, apart from smartphones, any other market appears to be a potential lifeline. The smart speaker, widely seen as a promising product, seems to fit the bill.
Recently, some media outlets reported that major smart speaker manufacturers like Google, Amazon, and Alibaba are considering purchasing MediaTek chips. According to Taiwan’s e-Times, MediaTek has already secured chip orders from Amazon’s next-gen Echo speakers and Google’s “Google Home†smart home device. Additionally, it was rumored that Tencent and Xiaomi, a smartphone maker, plan to release their own branded smart speakers later this year, also expected to utilize MediaTek chips.
These chip orders could boost MediaTek's third-quarter results. Optimistic forecasts suggest that MediaTek's chip (and solution) shipments for smart speakers could double this year and double again the following year.
But is the seemingly thriving smart speaker market truly a golden opportunity for MediaTek to reclaim its glory? It might not be that straightforward.
Virtual Boom in the Smart Speaker Market
Amazon Echo
Smart speakers, currently integrated with smart voice interaction technology, have become a focal point for AI entering households. The industry seems to agree that in the future of artificial intelligence, smart speakers will likely become the most critical entry point. Amazon’s Echo and Google’s Google Home have taken the lead, while Apple’s Homepod, Microsoft’s Invoke, Facebook, and even Samsung have remained quiet. Although the domestic market started later, JD.com, Himalaya Xiaoya, and Tmall Genie X1 have sparked a wave of new products.
According to Strategy Analytics, global smart speaker shipments are predicted to grow from 5.9 million units in 2016 to 59 million units in 2022, with a market value reaching $5.5 billion.
However, the emergence of smart speakers in China feels like a "hot" trend rather than a genuine demand. In the world's largest consumer electronics market, smart speakers are just another trendy industry, currently viewed by tech giants as the next battleground. This mirrors past trends like the "Hundred Regiments Offensive," "Internet Mobile Wars," and "Bicycle Wars," where many join in but few remain.
Will smart speakers definitely become the gateway to the AI era? No one can be certain, and predicting this within the next 5 to 10 years is challenging.
Xiaode co-founder Liu De noted: "For the next 10 to 15 years, the smartphone will continue to dominate the smart home sector. However, over the next decade, with technological advancements, it's highly possible that all smart devices will become gateways as they become interconnected and intelligent. When many household devices transform into smart entrances, these entrances will inevitably be decentralized."
Similarly, the Tmall Elves did not engage in direct competition. The person in charge at the press conference emphasized that Alibaba envisions the future evolution of Tmall Genie in the realm of smart hardware. Thus, regardless of whether smart speakers are the ultimate entrance, those who remain standing after the dust settles will determine the outcome.
Smart Speaker Chip Pioneer
Then returning to the chips inside smart speakers, internet and smart hardware companies are betting on the potential future market demand. It’s reasonable that MediaTek leads in this area.
At this year's MWC Shanghai show, MediaTek launched its first single-chip MT2625 NB-IoT system and, alongside China Mobile, unveiled the smallest NB-IoT universal module. At the subsequent Google I/O Developer Conference in May, it introduced the MT8516 SoC designed for intelligent voice assistant devices and smart speakers, stating that current products like Elves, Essential Home, and Lynx X1 all utilize this chip.
Following MediaTek's 2017 shareholder meeting, Chairman Cai Mingjie told the media in an interview: "MediaTek is one of the leading chipmakers for Amazon’s smart speaker Echo, accounting for more than half of the shipments." Additionally, according to MediaTek's Deputy General Manager and Head of the Home Entertainment Products Group, nearly 80% of the chips in the smart speaker market in 2016 were supplied by MediaTek.
For the future smart speaker market, visitors expressed optimism, stating that MediaTek's Family Entertainment Business Group accounted for approximately 20% of the company's total revenue last year. With the market improving, this year's revenue is expected to rise to 25%.
While this appears to be good news for MediaTek, competitors won't let MediaTek monopolize the entire pie.
Competitors
Facing the rapid expansion of the smart speaker market, Qualcomm, Ziguang Zengrui, and Intel are also actively preparing, hoping to carve out a piece of the pie.
Last month, at a developer event in Shenzhen, Qualcomm officially launched its "Smart Audio Platform." Besides the chip itself, Qualcomm offers developers additional development tools on this new platform. The intent is clear: developers are encouraged to use these tools to create hardware products similar to Amazon Echo more quickly.
Both new models released by Qualcomm support Google Assistant and Amazon Alexa. They also support voice recognition, Voice over Internet Protocol (VoIP), and other features. Clearly, their goal in this market is evident.
Moreover, Intel, which has been overlooked in the mobile chip space, is also making waves. At Amazon's Developers Conference last December, Intel launched a high-profile "Smart Home Hub" smart speaker based on Amazon Alexa. Intel aims to use this as a reference design, allowing more third-party hardware vendors to learn from it.
Meanwhile, Ziguang Zengrui’s smart speaker products featuring the company’s chips have been shipped in large quantities, beginning to vigorously capture the low-end smart speaker market under 300 yuan. A spokesperson for Ziguang Zengrui stated: “Currently, we have around dozens of speaker customers, mainly smart and Bluetooth speakers priced under 300 yuan. Our chip prices are very competitive.â€
Faced with competitors, how can MediaTek avoid repeating its smartphone market mistakes in the smart speaker market?
The Smartphone Market Remains Safe
Lynx Elf X1
From drones, robots, VR, AR, to today’s smart speakers, the tech industry has never lacked opportunities, but these opportunities often fade quickly, leaving only a few to succeed.
With the fervent anticipation surrounding smart speakers, large and small players, along with capital, will flood in. Under the influence of capital, the industry may follow the path of the VR industry—quickly heating up before rapidly cooling down and settling into a lukewarm phase. It's possible that the smart speaker market will eventually shrink to a niche like VR and AR.
If the market remains niche, even if the vast majority of chips are MediaTek products, the limited market size won’t compensate for MediaTek’s decline in the smartphone chip market. Furthermore, the bright IoT market outlook can’t solve the urgent needs of the current smartphone market.
After attempting to explore the high-end with the Helio X series and experiencing gradual decline with the P series after occupying the low-end market for six months, MediaTek’s upward trajectory is unfavorable. MediaTek still needs to address the pressing issue in the smartphone market.
According to MediaTek’s May 2017 operational announcement, monthly revenue was only NT$18.437 billion (approximately RMB 4.16 billion), a 3.9% increase from the previous quarter but a 25.2% drop year-over-year. More concerning than the revenue decline is that MediaTek’s processors have been branded as low-end in the smartphone space. This predicament is difficult to reverse in the short term.
It’s not a wise move to chase the hype surrounding smart speakers. For MediaTek, whose gross profit margin has fallen below 40%, compared to the still uncertain prospects of smart speakers, the priority is to reclaim more market share in the smartphone market, despite the “low-end†label.
Perhaps, the upcoming annual flagship chip Helio X30 will be MediaTek’s only counterattack. The Meizu Pro 7 equipped with the MediaTek Helio X30 will soon be released. If this strategy is executed well, the "true high-end chip" could significantly improve its development.
This year, it’s either the high-end smartphone market or the entrance to smart homes in 5 to 10 years. For MediaTek, it’s likely a single-choice question.
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