MediaTek expands mobile phone business

Taiwanese chip designer MediaTek Inc. said it paid US$13 million for a number of mobile phone software applications in a bid to expand the acceptance of its communications chips.

The deal with Beijing software developer Pollex Mobile Software Co Ltd. comes at a time other companies are shying away from the mobile phone market due to intense competition. BenQ Corp., for example, withdrew from its German-subsidiary BenQ Mobile GmbH & Co. OHG late last month because handset market share losses were causing it to hemorrhage money.

The purchase shows that MediaTek is intent to delve further into the ultra low-cost handset market despite stiff competition from other chip developers, such as Texas Instruments Inc. and Infineon Technologies AG. Users in areas where ultra-low cost handsets are popular, such as China and India, should benefit from the battle because chips are the most expensive part inside a mobile phone, and the rivalry should help reduce prices.

MediaTek is a latecomer to the handset chip market, so buying the software from Pollex will help it expand its offering of features. Most major companies offer a complete handset design, with printed circuit board and other components along with their chips to prospective mobile phone makers in the ultra-low cost segment. These designs require some embedded software and applications to run basic functions.

Investment banking firm Merrill Lynch recently upgraded its view on MediaTek because of its momentum in China’s ultra-low handset market. The investment firm expects MediaTek to sell 88 million communications chips in 2007, up 30 percent compared to this year. One drawback Merrill had noted for the chip designer was a lack of handset technology, a weakness MediaTek appears to be working on with the help of the software purchase.

Pollex develops mobile phone software for several operating systems. Intel Capital invested in the company two years ago.