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Chinese chip makers ride wave of low-cost tablets

Michael Kan | Dec. 19, 2013
Qualcomm and Nvidia get most of the headlines in the mobile chip business, but two Chinese vendors are cornering the market for processors used in low-cost tablets, and in 2014 they might find their way into a product near you.

"We've made a huge reduction in the performance gap," he claimed. Other big name tablet vendors are in talks to use Allwinner's chips, according to El-Baz, though he said he couldn't name any because the deals are pending.

The company also plans to release an eight-core chip in the first quarter next year, and is considering a run at the laptop processor market, too.

Rockchip, based in the port city of Fuzhou, has made even better progress selling to the major brands, said Canalys analyst James Wang. Its processors are used in 7-inch tablets from Toshiba and Huawei that are sold in Latin America and Europe. And China's Lenovo introduced an Android notebook this year that uses a Rockchip processor.

The Chinese vendors are attracting big vendors in part with lower prices. "They are making these chipsets so cheap, which reduces the tablet costs," Wang said. One of their single-core chipsets might go for less than $5, compared to between $15 and $30 for competing products from Qualcomm and Nvidia, he said. 

The big brands want a piece of the burgeoning worldwide market for low-cost tablets too, according to Wang. The profit margins may be small, but economies of scale might allow them to ship enough cheap tablets to make it worth their while, he said.

The rise of Allwinner and Rockchip are part of an overall trend in which Chinese firms, long seen as the manufacturing engine for the rest of the world, are developing leading products of their own. Lenovo is now the world's largest PC maker, and China is currently home to the world's fastest supercomputers, the Tianhe-2 -- although it runs on processors from Intel.

Some quality concerns remain, not just with Chinese processors but with other components and product assembly too. "[For] most of the key components, like the panel and the touch screen, the quality is not as good," said IDC analyst Helen Chiang.

But Chinese firms are learning fast, thanks partly to the experience they have gained building products for the rest of the world. U.S. companies such as HP are bringing their R&D expertise to Chinese factories, which the Chinese firms can in turn use to win business with new customers, and eventually apply to their own products.

"I think there is still a learning curve, but this of course can be short," Chiang said.

China can also turn out new products quickly, and it's not saddled with the legacy PC business of manufacturers in Taiwan, whose fortunes rose and fell with that market.

Roger Sheng, an analyst with research firm Gartner, believes Chinese chip makers have more work to do. They still need two or three years before their processors are more widely accepted by mainstream tablet makers.


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