ARM’s open-license model has allowed it to become ubiquitous in the mobile market, simultaneously giving lesser-known or brand-new semiconductor companies the opportunity to use its IP to build SoCs of their own. Those chip makers can then use their hardware to compete against the well-known semiconductor giants.
Many of these companies, which don’t yet have pervasive brands, have to compete against the entry-level offerings from larger, more established competitors. This is exactly the kind of strategy Chinese companies use to excel, thanks to the low costs of manufacturing. Now, as some of those vendors cultivate more notable brands, many device manufacturers are starting to choose their wares, and not just because of low prices.
The Chinese semiconductor companies started out at the lower end of the performance spectrum, and have successively raised the bar to hit higher levels. More powerful SoCs command greater premiums and earn higher margins. Naturally, they all want to increase their profits.
At the same time, since they've been offering aggressive pricing from the beginning, even their quicker processors are still considered affordable compared to the competition. This should allow them to steal market share from the better-known chip companies, even at the high end of the mobile chip market, earning positions in more popular flagship devices, which, in turn, will strengthen their brand.
The Chinese chip makers that seem to be doing the best right now are MediaTek, Rockchip, and Allwinner. Together, they have 75.7 percent of the tablet processor market in China, with Rockchip and Allwinner taking the lead.
MediaTek is doing much better in the phone market in China, with over 50 percent market share, thanks to the integration of its processors with baseband modems. Its main Chinese competition there is Spreadtrum, though that company’s market share is five times smaller.
Qualcomm is the only real challenge to MediaTek in the Chinese smartphone market. But even that juggernaut had to adopt stock Cortex-A5 and -A7 designs in order to become price-competitive. It had a brief advantage in the LTE market by integrating the cellular standard into its SoCs. However, Qualcomm’s market share is declining as more companies integrate baseband modems.
With the Chinese government and manufacturing customers tending to favor Chinese chip makers as well, it's going to become increasingly difficult for an outsider like Qualcomm to compete against these fast-growing Chinese chip makers, especially when they can't even beat them on price.