China white-box tablet players' shipments increased sequentially in the fourth quarter of 2013 thanks to strong demand from mature markets worldwide. Demand from emerging markets has also started picking up after mid-December 2013.
In the first quarter of 2014, as the fierce pricing competition continued in the tablet market and Wi-Fi-based white-box tablet models contributed almost no profits, more and more white-box vendors started pushing tablets with phone functions. The move is expected to turn such devices into a mainstream from a niche segment of the tablet market, and help the tablet penetrate deeper into emerging markets.
The numbers of tablet models with phone functions using MediaTek's integrated solutions, as well as their total shipments, have been increasing rapidly since early first-quarter, which has helped the Taiwan-based chip supplier catch up with its China-based competitors such as Allwinners and Rockchip. Digitimes Research expects tablets with phone functions to account for over half of all white-box tablet shipments in the second half.
As the manufacturing process and technology evolve, the price gap between white-box tablets' single-core and dual-core chip solutions is now only less than US$1. Digitimes Research expects that dual-core solutions to completely replace single-core solutions by the end of the first half 2014 and become the mainstream specification for entry-level white-box tablets.
Allwinners lost its advantages in the tablet chip market in the fourth quarter due to issues with its transition from single-core to dual-core solutions. Although it managed to resolve these issues in January 2014, Allwinners has yet to regain its momentum and was already surpassed by Rockchip in Wi-Fi-based tablet chip shipments in the first quarter.
Meanwhile, MediaTek has already started to focus on pushing solutions for tablets with phone functions.
Because their experience in smartphone development can be readily applied to tablet designs, many white-box players already started designing their tablets with phone functions using MediaTek's smartphone chip solutions to create new business opportunities as early as the first half of 2012. However, after releasing its tablet chip solutions, MediaTek has started monitoring how its clients use its smartphone chips.
Because of their cheaper prices and sufficient supply compared to solutions for tablets with phone functions, MediaTek's entry-level smartphone solutions such as MT6572, MT6575 and MT6577 are still popular among white-box players doing tablets with phone functions. Most of China's independent design houses (IDHs) have purchased the smartphone solutions through non-official channels to avoid paying MediaTek the licensing fees for its solutions.
With the dual-core processors becoming the mainstream specifications in the white-box tablet market, MediaTek's highly integrated processors (combining the application processor and baseband chip), with prices lower competitions from Allwinners, are expected to reach over eight million in shipments (both smartphone and tablet APs) to the China white-box tablet market in the first quarter and will challenge the quarterly 12 million mark in the second half.
Digitimes Research believes MediaTek smartphone and tablet APs' high integration and related solutions' maturity, which can significantly reduce white-box players' development time for tablets with phone functions, will attract white-box players who have not yet tried MediaTek's solutions. With tablets with phone functions' proportion in total tablet shipments expected to continue growing, MediaTek's APs are expected to acquire 25% share in the white-box tablet market in 2014, up 10pp on year.