Produced by | Frontier of Entrepreneurship

Art Editor | Xing Jing

Reviewed by | Song Wen

MediaTek, once dubbed the "King of Copycats" for its dominance in China's Huaqiangbei electronics hub, has evolved into a global smartphone chip giant backed by China's Android ecosystem. Over the past two decades, its ascent has mirrored the rapid expansion of China's consumer electronics sector.

This chipmaker, which initially built its reputation on mid-to-low-end mobile phone chips, now stands at a critical crossroads of transformation.

In the second quarter of 2026, MediaTek reported consolidated revenue of NT$152.183 billion, marking a slight 1.2% year-on-year increase. However, its gross margin contracted by 2.9 percentage points to 46.2% compared to the same period last year. Operating profit plunged 22.2% year-on-year to NT$22.868 billion, while net profit declined by 12.3%.

Over a longer six-month horizon, total revenue for the first half of 2026 reached NT$301.333 billion, experiencing a marginal 0.8% year-on-year decrease. Net profit attributable to the parent company stood at NT$48.489 billion, with the year-on-year decline widening to 15.19%.

More significantly, its mobile phone business relinquished its position as the top revenue contributor for the first time. Facing mounting pressure, the company is pinning its hopes on AI chips to compensate for the decline in its smartphone segment.

However, in this emerging field, former rival Qualcomm has also announced its entry, while international chip giants and domestic self-developed chip companies are all vying for market share, intensifying industry competition to unprecedented levels.

MediaTek's journey of transformation remains fraught with challenges.

MediaTek's growth trajectory has been closely intertwined with China's mobile phone market, even described as "interdependent."

In its financial report's customer geographical breakdown, MediaTek categorizes the market into three segments: Taiwan, Asia, and Others. In 2025, revenue from the Asian market accounted for a staggering 91.88%, with the Chinese mainland market contributing the lion's share.

(Figure/ MediaTek's 2025 Financial Report)

This deep integration began with a strategic pivot three decades ago.

Founded in 1997, MediaTek initially focused on optical drive chip design before officially entering the mobile phone market in 2003. At that time, Shenzhen's Huaqiangbei was inundated with multi-SIM, multi-standby phones. With its "one-stop mobile phone solution," MediaTek significantly lowered the technical and financial barriers to mobile phone manufacturing, rapidly capturing this burgeoning market.

Entering the smartphone era, MediaTek continued to focus on the mid-to-low-end market, first partnering with brands like OPPO, vivo, Gionee, and Coolpad to promote affordable 3G smartphone chips. It later solidified its position with the blockbuster success of the 799-yuan Redmi phone.

Buoyed by massive shipments of mid-to-low-end models in the Chinese market, MediaTek once became the world's largest mobile phone chip vendor by shipment volume.

According to data from YuanChuan Institute, based on 2021 revenue, it even surpassed NVIDIA and AMD, ranking as the world's seventh-largest chip design company.

(Figure/ YuanChuan Institute)

Additionally, according to China Fund News, in the fourth quarter of 2023, MediaTek's mobile phone business revenue surged 53% quarter-on-quarter, accounting for 64% of total revenue, undeniably its primary business.

However, what propelled it to industry leadership is now the primary cause of its performance decline.

MediaTek's financial reports reveal that in the second quarter of 2026, the company's overall revenue increased slightly by about 1% year-on-year, with the mobile phone business contributing only 41% of total revenue, marking a significant 20% year-on-year decline under immense pressure.

Notably, this marked the first time in MediaTek's history that the mobile phone business lost its position as the top revenue generator.

(Figure/ MediaTek Earnings Briefing Materials)

So, why did the company's mobile phone business suddenly lose momentum?

In fact, this is not just a MediaTek issue but a contraction faced by the entire industry.

According to Counterpoint's H1 2026 smartphone SoC market report, global smartphone main chip shipments declined 15% year-on-year in the first half, with core suppliers Qualcomm and MediaTek both seeing shipment declines exceeding 25%. The primary trigger for this industry contraction was the skyrocketing prices of memory chips.

(Figure/ Counterpoint)

According to TMTPost, compared to the same period last year, memory chip costs have surged nearly 300%, with their share of mobile phone material costs jumping from 10-15% to over 30%.

Facing soaring upstream costs, Qualcomm and MediaTek announced price hikes in June and July, attempting to pass supply chain pressures downstream to mobile phone manufacturers. However, mobile phone brands found it difficult to fully transfer these costs to end consumers.

This "price hike wave" hit MediaTek particularly hard, given its focus on the entry-level 5G chip segment.

According to PConline reports, mid-to-low-end mobile phone manufacturers, already operating on thin margins, were unable to absorb chip price increases, leading them to cut 5G chip orders, delay new product launches, and even revert some low-end product lines to 4G, eliminating significant demand for entry-level chips and directly dragging down MediaTek's overall shipment performance.

Mobile phone manufacturers' actions also reflect this dilemma. Starting in mid-March this year, leading brands like OPPO, vivo, and Honor began raising prices on mid-to-low-end phones. However, subsequent sales data showed that Android vendors generally fell into a vicious cycle of "losing volume upon price hikes."

IDC data reveals that in the second quarter of 2026, smartphone shipments in the Chinese market reached approximately 66.01 million units, down 4.3% year-on-year, marking the fifth consecutive quarter of year-on-year decline.

The chill in the end market rippled up the supply chain, ultimately impacting chip suppliers' financials.

While MediaTek stated it is offsetting declining mobile phone chip sales with emerging businesses like smart edge computing, current growth is insufficient to fully offset profit pressures. In the first half of 2026, net profit attributable to the parent was NT$48.489 billion, down 15.19% year-on-year.

(Figure/ MediaTek Q2 Report)

In the second quarter of 2026, revenue increased 1.2% year-on-year, while operating profit plummeted 22.2% year-on-year, with a gross margin of 46.2%, down 2.9 percentage points year-on-year. Revenue grew, but profit margins continued to narrow.

(Figure/ MediaTek Announcement)

More alarming than profit declines is inventory risk.

Financial reports show that as of June 30, 2026, MediaTek's inventory reached NT$98.421 billion, up 77.4% year-on-year, with inventory growth far outpacing revenue growth.

(Figure/ MediaTek Q2 Report)

Given the semiconductor industry's characteristics of short chip technology iteration cycles, rapid inventory depreciation, and steep price declines, the value of older inventory models will quickly erode over time.

If consumer electronics demand fails to recover as expected in the second half of the year or if new product market acceptance falls short, the company may face significant inventory write-downs, further eroding current profits.

Amid ongoing pressure in its mobile phone business, MediaTek is seeking new growth avenues.

In the second quarter of 2026, revenue from MediaTek's Smart Devices Platform business accounted for 53% of total revenue, up 26% year-on-year, officially surpassing the mobile phone business as the company's largest revenue source.

(Figure/ MediaTek Q2 Report)

"Frontier of Entrepreneurship" notes that this business has an extremely broad coverage, spanning home broadband and networking chips, smart TV and audio-visual processing chips, tablet and Chromebook computing platforms, wearable and smart home IoT chips, automotive electronics and in-vehicle communication chips, and customized AI accelerator ASICs for data centers and cloud service providers.

In essence, this business provides full-scenario edge computing and connectivity solutions for clients in consumer electronics, industrial, automotive, and cloud computing sectors.

MediaTek appears more confident in this business's growth. In its earnings outlook, the company mentioned that growth in the Smart Devices Platform business in the third quarter of 2026 is expected to offset the negative impact of the declining mobile phone business.

The core source of this confidence may be the company's AI chips, which are about to enter mass production.

As disclosed during MediaTek's Q2 2026 earnings call, the company's first AI accelerator ASIC, developed in collaboration with a major U.S. cloud service provider, is scheduled to begin production in the fourth quarter of this year.

To ensure smooth mass production, MediaTek's board has approved a flexible financing budget of up to $5 billion to secure supply chain capacity in advance if necessary.

(Figure/ MediaTek Earnings Briefing)

Such a substantial investment underscores MediaTek's determination to bet on the AI computing sector. So, what exactly is AI ASIC, and why has it become the core focus of MediaTek's transformation?

Simply put, AI ASIC, or Artificial Intelligence Application-Specific Integrated Circuit, is a specialized chip optimized at the hardware level for deep learning training and inference tasks.

To draw an analogy, if a well-known general-purpose GPU (like NVIDIA's H series) is an "all-rounder" in computing, retaining all control units needed for general-purpose computing and graphics rendering, making it adaptable to nearly all AI algorithms and applications but at the cost of significant hardware resources lying idle during specialized AI computations, resulting in suboptimal energy efficiency.

Then AI ASIC is like a "specialist craftsman" deeply focused on a single domain, retaining only hardware units essential for core AI tasks like matrix and tensor computations, eliminating all redundant modules, and even hardwiring mainstream AI operators like Transformer attention mechanisms directly into the circuitry, allowing nearly all hardware resources to serve target AI tasks.

For cloud service providers, custom AI ASICs enable tailored chips with superior power efficiency and lower costs based on their model characteristics, traffic structures, and deployment scenarios, representing a crucial path for cost reduction and efficiency improvement in large-scale AI computing deployment.

From an industry trend perspective, the growth potential for AI ASICs is immense. According to CIC estimates, China's chip customization service industry was valued at approximately RMB 68 billion in 2025 and is expected to reach nearly RMB 300 billion by 2030.

With the first AI accelerator set for mass production in the fourth quarter of 2026, MediaTek has successfully cleared front-end design and tape-out verification stages for its chips, positioning itself among the core computing power suppliers for global top-tier cloud service providers.

More pragmatically, once large-scale shipments are achieved, it will not only fill the revenue gap left by the declining mobile phone business but also directly drive a rebound in the company's overall profitability. MediaTek also stated during its earnings call that the AI ASIC business will significantly boost its overall operating profit margins.

Notably, MediaTek is not the only player eyeing the AI ASIC market.

On June 25, 2026 (local time June 24), Qualcomm announced at its 2026 Investor Day its major push into the AI data center market, revealing Meta as its first AI ASIC business customer.

The news sent MediaTek's stock price plunging the following day (June 26), touching limit-down at one point and ultimately closing below the NT$4,000 per share threshold. This occurred less than a month after its all-time high of NT$4,970 per share on June 2, with its market value evaporating by over NT$100 billion in a single day, reflecting significant market panic.

The market's violent reaction was not an overreaction. Qualcomm's aggressive entry means MediaTek faces a formidable rival in the AI chip sector, with AI ASICs far from being an exclusive growth market for MediaTek.

In fact, this is far from the first head-to-head clash between MediaTek and Qualcomm. As the two core players with the longest competitive span and broadest coverage in the global smartphone chip race, their rivalry spans three major industrial cycles—feature

In the early stages, the two companies initially operated in distinct market segments. MediaTek concentrated on the mid-to-low-end and white-label markets, dominating the knockoff and entry-level smartphone sectors with its 'high cost-performance ratio' offerings. Meanwhile, Qualcomm formed partnerships with global leading brands such as Nokia and Samsung, targeting high-end smartphones and operator-customized markets, resulting in minimal overlap between the two companies.

The real head-to-head competition began in the 4G era. According to Semiconductor Industry Observations, in 2016, Qualcomm introduced mid-to-low-end powerhouse chips like the Snapdragon 625. By leveraging mature manufacturing processes and stable power consumption, Qualcomm successfully penetrated the sub-$150 smartphone market—directly encroaching on MediaTek's core territory. Subsequently, leading domestic smartphone manufacturers shifted to Qualcomm's solutions, causing MediaTek's market share to decline rapidly.

In the second quarter of 2017, MediaTek's revenue plummeted nearly 20% year-on-year, with net profit hitting its lowest point in five years. At that time, the company's then-CFO openly acknowledged during an official earnings call: 'Our market share will continue to decline, with no improvement expected before the fourth quarter of 2017.'

The 5G era further escalated their rivalry. In 2020, MediaTek launched its first 5G flagship chip, the Dimensity 1000, just one week prior to Qualcomm's Snapdragon 865 release.

As one of the industry's first integrated 5G SoC solutions, it offered significant advantages over Qualcomm's contemporaneous discrete modem approach in terms of power efficiency and integration. This marked the official launch of MediaTek's 'premiumization' counteroffensive in the 5G era.

By late 2021, the Dimensity 9000 made its debut, featuring TSMC's cutting-edge 4nm process and directly competing with Qualcomm's Snapdragon 8-series flagships. Subsequent iterations—the Dimensity 9200, 9300, and 9400—gradually narrowed the performance gap or even locally surpassed Qualcomm's contemporaries in CPU multi-core performance, energy efficiency, and process technology.

However, closing the hardware parameter gap did not translate into a breakthrough in the premium market.

From the Dimensity 9000 to 9500, MediaTek's flagship chips have matched Qualcomm's specifications on paper but have failed to shake off their 'cost-effective' brand image. As a result, their adoption rates in mainstream flagship models remain low, with Qualcomm's Snapdragon still dominating the high-end segment.

(Figure / MediaTek Official Website)

Counterpoint Research data reveals that in the first quarter of 2025, MediaTek led globally with a 36% market share, followed by Qualcomm at 28%. However, in the high-end segment (typically referring to chips used in smartphones priced above $500), Qualcomm still held about 55-60% of the market, compared to MediaTek's 27-30%.

Leading overall but losing the high ground—this remains MediaTek's persistent regret in the smartphone market and serves as a potential cautionary tale for its AI ambitions.

Moreover, Qualcomm is not MediaTek's only competitor. Globally, the AI ASIC sector already boasts numerous industry giants.

Internationally, Broadcom has emerged as a true stealth giant, long supplying custom chips to cloud vendors like Google and Meta while dominating most of the cloud-custom AI chip market. Marvell Technology (MRVL.US) similarly specializes in custom chips and recently strengthened its optical interconnect and AI chip synergy through the acquisition of Celestial AI. AMD has expanded its AI computing matrix via acquisitions of ZT Systems, Taalas, and others; Intel continues to promote its Gaudi series AI accelerators; even OpenAI unveiled its first custom AI inference chip, Jalapeño, jointly developed with Broadcom on June 24.

The domestic market is equally competitive. Alibaba's T-Head Semiconductor launched HanGuang 800, one of China's earliest large-scale commercialized cloud AI inference ASICs, tailored for internal scenarios like e-commerce recommendations and visual recognition. Baidu's Kunlun Xin K-series AI chips are custom-built for internal businesses, including ERNIE large models, search, and autonomous driving. VeriSilicon follows a Broadcom-like design service model, offering custom chip design services to communication, consumer electronics, and internet clients while boasting mature experience in AI ASIC tape-outs and backend implementations.

Additionally, domestic internet giants like ByteDance, Tencent, and Meituan have all advanced self-developed AI inference and training chips in recent years, primarily serving internal data center scenarios like recommendations, advertising, and large models—typical ASIC approaches that remain unavailable for external sale.

(Figure / MediaTek Official Website)

For MediaTek at this critical transformational juncture, AI ASIC represents a new frontier full of potential. However, with established players like Broadcom controlling the market, old rival Qualcomm hot on its heels, and domestic firms accelerating their pursuit,

the true challenge lies in securing a clear differentiated positioning in data center AI ASICs while rapidly delivering compelling products and customer cases. For MediaTek, this 'transformation' trial has only just begun.

*Note: Featured images and unsigned pictures in the text are sourced from SheTu.com under the VRF agreement.