Counterpoint attended Spreadtrum’s Global Partner Conference on August 15th. We’ve been tracking Spreadtrum for several years and this event helped to crystalize our views on how Spreadtrum’s recent developments are shaping its business strategy and potential.
We can summarize the perspective by looking at: four market changes + two types of customers + two products + two key functions.
Four Market Changes:
1. Spreadtrum is undertaking a vertical strategy – moving from its initial focus on the entry-level to also encompass the mid-range with the launch of the SC9853 series products.
2. Spreadtrum began to actively enter the 4G and 4G+ semiconductor markets based on its good performance in the 2G and 3G markets. Counterpoint forecasts that Spreadtrum will reduce the shipment proportion of 3G products and increase 4G shipment to around 150 million chipsets, accounting for 26% of total shipments, in 2017.
3. Spreadtrum drew market share away from Mediatek in the 3G market. In 2015, Spreadtrum was able to gain share in the WCDMA market, primarily from Mediatek, thanks to its SC7731 chip platform. Spreadtrum entered the 4G market with cooperation from Samsung using the SC9830 platform in 2016. Spreadtrum is well positioned to win further share from incumbents, Qualcomm and Mediatek, during 2017 with the release of its cost-effective SC9850 series LTE chipset – assuming the product exhibits good stability and performance relative to competitor products.
4. In addition to selling well in traditional emerging markets, such as India, Southeast Asia, Africa and South America, we believe Spreadtrum can extend into the Chinese and European markets by taking advantage of OEM development, telecom operators’ support and the popularization of 4G. Many European operators now allow OEM self-certification rather than undertaking lengthy, expensive and cumbersome testing by themselves.
Two Types of Customers:
1. Operators: two cases to illustrate Spreadtrum’s approach to the operator customer market:
– China Mobile has been promoting 4G+, with products like its own-branded A3 model. The A3 uses Spreadtrum’s chipset solution and Counterpoint data shows that sales volume of the model had already reached 3 million units by the end of July 2017.
– Spreadtrum launched mobile phones supporting the VoLTE function for the first time in India at a price of only $45 together with handset OEM Lava and the operator Reliance Jio. So-called 4G feature phones that allow consumers to benefit from low calling costs are likely to grow strongly in the near term.
2. OEMs: Spreadtrum is cooperating with a number of key OEMs to help them expand into the low-end segment across a diverse array of international markets.
For example, Spreadtrum helped Samsung open up low-end markets with several models of Samsung Galaxy J1 and J2 series utilizing the SC 9830 platform. According to our model sales data, Samsung contributed more than 80 million shipments to Spreadtrum’s SC9830 entry-level chips.
Two Products
Two significant products were released by Spreadtrum:
1. SC9853I: a 14-nanometer, 8-core, 64-bit LTE chip based on Intel architecture. The SC9853I uses Intel’s advanced 14-nanometer process technology and utilizes the Intel Airmont processor architecture. It’s designed for the global mid-range 4G market. It is equipped with an efficient mobile computing performance and ultra-low power management with master frequency reaching 1.8GHz. In terms of communications, it supports five-mode (TDD-LTE/ FDD-LTE/ TD-SCDMA/ WCDMA/ GSM) downlink Cat 7, uplink Cat 13 bidirectional carrier aggregation with a downlink/uplink rates up to 300Mbps and 150Mbps respectively. In addition it supports 1080P HD video playback, 18:9 full HD+ (1080 * 2160) screen resolution display and 16-megapixel dual cameras. In addition, both Intel and Spreadtrum can provide complete turnkey service and technical support to OEMs.
2. SC9850: Five-mode high-integration low-power LTE chipset. The Spreadtrum SC9850 series is designed for the upgrade to low-end LTE market globally. Based on the 28nm process node, it is equipped with a 1.3GHz quad-core ARM Cortex-A7 application processor and ARM Mali 820 MP1 GPU for 3D graphics acceleration. It can support five modes (TD-LTE/ FDD-LTE /TD-SCDMA /WCDMA /GSM), with Cat 7 downlink and Cat 13 bidirectional carrier aggregation with the downlink/uplink rates reaching up to 300Mbps and 150Mbps respectively. Furthermore, it supports 1080P HD video playback, 18:9 HD+ (720*1440) screen resolution and dual 13-megapixel cameras. It’s the first time Spreadtrum is supporting downlink at Cat 7 in the low-end products; an urgent requirement for China Mobile . If Cat 7 is not required by the operator or OEM, a lower cost version of the platform, SC9850KL can be selected. The product series can meet the demands of 18:9 resolution screens shifting towards the low end.
Two Key Functions.
Spreadtrum is focusing R&D efforts to emphasize two functions, one that’s of primary interest to consumers now, and one that may take longer to reach consumer consciousness:
1. Camera: Spreadtrum placed the camera function at the corporate level for the first time. The Camera brings the implementation of depth of field, built-in 3DNR enhancing the shooting experience at night, real-time beauty and other features with dual cameras.
2. Spreadtrum is enabling advanced functions such as 3D modeling and augmented reality (AR) with the SC9853I opening the potential for these functions to be offered in lower cost products.
Perspective: Spreadtrum is graduating from a primarily low cost player to one with a more comprehensive product portfolio that will enable its OEM partners to bring strong features to the mid-range.
It is not alone is this and will face head on competition from Qualcomm as it extends from the high end toward the mid-range and even low end. Likewise Mediatek will not give up its strong mid-range position without a fight. Nevertheless, these are positive developments for Spreadtrum that will provide OEMs with a broader range of alternative solutions to choose from when developing their product portfolios.
Appendix
Spreadtrum: responsible for delivering state semiconductor strategy
Spreadtrum Communications, Inc. is privately owned by Tsinghua Unigroup Ltd. Tsinghua Holdings Co., Ltd. is the absolute controlling shareholder of Tsinghua Unigroup. Tsinghua Holdings Co., Ltd. is established and invested in by Tsinghua University, which itself is a wholly state-owned limited liability company. Spreadtrum was acquired by Tsinghua Unigroup on Dec 23, 2013. The implication of this complex ownership structure is that Spreadtrum is not only responsible for the operational objectives of the enterprise, but also carries the strategic objectives of national semiconductor development. China’s national semiconductor development strategy 2020 aims to build a technologically advanced and safe integrated circuit industrial system.
