Fri, Sep 27, 2013 - Page 13 News List

Amendment opens markets for MediaTek

By Kevin Chen  /  Staff reporter

MediaTek Inc (聯發科) and Qualcomm Inc on Wednesday confirmed they have amended their patent agreements signed in 2009, two weeks after a newspaper said the two were considering the action.

Analysts said the revised agreements would allow MediaTek to expand its customer base in the 3G services sector, but expected no repercussions for either party due to the non-monetary nature of the agreements.

However, Qualcomm could benefit from MediaTek’s rising smartphone penetration in developing countries and therefore increase its royalty income, they added.

Shares of MediaTek, Taiwan’s top handset chip designer, rose 0.13 percent to NT$372 in Taipei yesterday, while those of Qualcomm, the world’s largest supplier of chips for mobile phones, were up 0.35 percent to US$68.75 in New York.

Under chairman Tsai Ming-kai’s (蔡明介) leadership, MediaTek has become a key driving force behind low to mid-end smartphone manufacturing for emerging markets and appeared aggressive in broadening its product portfolio and customer base to compete with rivals such as US-based Qualcomm and China’s Spreadtrum Communications (展訊通信).

In a joint statement issued on Wednesday, MediaTek said it has retained a good relationship with its US rival, adding that the two have not lodged any complaints against each other either with the US Federal Trade Commission, the US International Trade Commission or any other government agency in any country.

The statement said the two companies could sell their chipsets to any customer under the amended agreements, while neither Qualcomm nor MediaTek could receive any patent rights from the other that could be conveyed to a third party.

“MediaTek and Qualcomm have recently agreed to amend those agreements in certain ways, as well as to suspend certain portions of those agreements,” the joint statement said.

The companies have amended the contractual provisions relating to MediaTek reporting its sales information of Code Division Multiple Access (CDMA) and wideband CDMA (WCDMA) chipsets to Qualcomm, it said.

They did not specify the content of the particular amendments related to MediaTek’s reporting obligations or other terms of the amended agreements, citing confidentiality, according to the statement.

In 2009, the two firms agreed to exchange intellectual property on CDMA and WCDMA technology, with MediaTek agreeing to disclose key information — such as its customer portfolio, shipment details of chipset volume and average selling price — to Qualcomm in exchange for no royalties or license fees for the use of Qualcomm’s 3G technology.

Kim Eng Securities Ltd analyst Warren Lau (劉華仁) said such arrangements prevented the hugely successful “white-box 2G feature phones” business model pioneered by MediaTek from entering the 3G smartphone market.

However, as MediaTek gains importance in the smart device market, the company is eager to “fine-tune its earlier intellectual property agreements with Qualcomm — perhaps limiting the revealing of trade information and seeking the flexibility to engage with new customers,” Lau said in a note on Sept. 9.

HSBC Securities said the amended agreements would allow MediaTek to expand its customer base from Qualcomm’s authorized clients to previously unauthorized ones.

“There are more than 400 handset manufacturers in China and Qualcomm currently has less than 200 licensees in China. The changed agreements could help MediaTek reach out to those smaller customers,” HSBC Securities Taiwan Corp analyst Yolanda Wang (王郁雅) said in a separate note ahead of the companies’ announcement.

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