London – More than one-third of smartphones shipped in 2013 were attached to reference designs supplied by key chipset vendors, according to ABI Research. Sixty-nine percent of those designs were targeted at price points at less than $200. The emergence of the reference design program by chipset suppliers such as MediaTek, Qualcomm, and Spreadtrum have helped small vendors, particularly in China and India to compete in the lowest tier of the smartphone market, said the market researcher.
Reference designs are often used by designers to help them solve some of the biggest challenges they have in a design, and.or to evaluate design tradeoffs, together with bringing their products to market faster. By having a significant part of the design complete, designers can then better evaluate what they need to complete the design. The biggest advantage: They don’t have to start a design from scratch.
Although tier-one OEMs have resisted delegating the device reference design to chipset suppliers because they see it as an integral part of their brand and differentiation, growing competition from small vendors is now forcing tier-one OEMs to change their strategy and consider using third-party reference designs for cost-sensitive segments of the market, said ABI Research. Nokia, Samsung, HTC, LG, Huawei, and ZTE have already started using this strategy for products targeted at emerging markets.
“These trends will take the competition to another level, forcing OEMs to make more compromises on reference design ownership. As a result, reference designs owned by chipset suppliers will gradually entrench to higher price points, making the smartphone market increasingly commoditized,” said Malik Saadi practice director at ABI Research, in a statement.
The trend will only grow. ABI Research’s Mobile Device Semiconductors Market Research projects more than two-thirds of smartphone shipments will be based on chipset suppliers’ reference designs by 2019, totaling more than 1.18 billion units. Twenty-three percent will be targeted at wholesale prices higher than $200. The increase is expected to help chipset suppliers gain more clout in the mobile value chain and take the lead in smartphone technology innovation.
Still, it will be difficult for chipset makers to bring their reference designs to the high-end part of the market, particularly for those devices with wholesale prices of higher than $400, said ABI Research. The primary reason: Samsung and Apple continue to control high-end reference designs and the overall components supply chain.
“As tier-one OEMs will increase their reliance on third-party reference designs, a number of small vendors who have initially benefited from using turnkey designs will no longer have the privilege of price and time-to-market differentiation,” added Saadi. “This will translate into the elimination of a number of small brands but some established OEMs will not be immune against the forces of market consolidation either.”