Handset IC Suppliers Tend to Lower Prices in China

Handset IC suppliers including Qualcomm, MediaTek and Spreadtrum tend to lower prices to win orders from their major clients, which may negatively affect their gross margin performance in 2015, according to industry sources.

With China's consumers demanding higher end smartphones, companies are looking to enhance the price/performance ratio of their offerings by using more advanced chips, the sources said. For their part, chip suppliers attempt to obtain major orders from their clients by offering attractive quotes, the sources indicated.

In addition, the China smartphone market landscape will likely undergo changes in 2015, which could have a significant impact on the related IC supply chain, the sources suggested.

China's smartphone market is expected to become more concentrated, with first-tier brand vendors expanding their already-strong presence, the sources noted. Huge investments required to cope with the local carriers' transition to 4G will discourage more small-scale and specialized manufacturers from staying in China's smartphone market, the sources said.

Growth in China's smartphone market is also expected to slow in 2015, despite the upcoming rollouts of new 4G models, the sources said.