Shanzhai - Mediatek

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Mediatek estimates that in 2009 they will top 350 million units shipped in a global market of 1.2 – 1.4 billion, roughly 30% of the handset industry’s market share. The company has experienced rapid growth and success since 1997 and has established themselves as a leader in their industry. However, in avoiding business with “tier-one” companies and not seeking market share in the now prevalent 3G industry, Mediatek is faced with strategic issues moving into the future. 3G has become a North American and European staple for quick data services and people are beginning to want versatility out of their handsets; cameras, GPS, web browsing, etc. While Mediatek provides an innovative product with its customizable features, their strategy works best within a 2G world. Looking to the future, the company will see the bulk of its success moving east to parts of Asia with weaker infrastructure and down to Africa. While there is promise in those two markets, their lack of 3G compatibility means a negative impact on Mediatek’s North American ventures. Mediatek does not deliberately supply illegal manufacturers, however 50% of the company’s market share is going to black market Shanzhai makers. This brand image has customers considering Mediatek a low-quality brand. Additionally, if policies are enforced to regulate knockoff handset sales, the company could lose 50% of its market. On the other hand, in China there is high demand for handsets with 3-5 month life cycles. This is a trend indicative of legitimate consumers who like to upgrade their technology often. Mediatek has been capitalizing on this tendency by regularly offering new features. This short life cycle has Shanzhai handset customers purchasing roughly 4 handsets per year, positively impacting Mediatek’s sales volume. The chipset industry has grown immensely in the last 10-12 years, as indicated in

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