Cheap chipsets for Google Android smartphones due out in Q3

MediaTek holds the biggest share of China's market for handset chips

Taiwanese chipset developer MediaTek will start rolling out low-cost chipsets designed for handsets that use Google's Android mobile software in the third quarter of this year, promising to drive down the cost of such handsets in China.

MediaTek holds the lion's share of the market for mobile phone chips in China through its focus on low-cost chips and partnerships with dozens of small mobile phone makers throughout the nation. The development of a chipset specifically for Android could unleash hundreds of new smartphone designs in China.

MediaTek has worked with Chinese handset makers for years, providing the chips and other hardware, while the handset makers focus on the external design of the phones and handset sales.

A MediaTek representative confirmed the new time frame on Tuesday. Previously, the company had simply said "in the second half of this year."

The deal with Google is similar to one with Microsoft announced early this year, though the Microsoft pact combines MediaTek chips and hardware with Microsoft's Windows Mobile software.

The goal for both initiatives is the same, to put thousands of new, low-cost smartphones on the market in places such as China and India. Chipsets are usually the most expensive part of a mobile phone.

Google could not immediately be reached for comment.

MediaTek needs the deals to counter a crackdown on counterfeit handsets, called gray-market handsets, in China.

Some of the small electronics companies MediaTek deals with put out low-cost smartphones that are cheap imitations of the most popular brands, including iPhone look-a-likes. But years of pressure by major handset vendors as well as other issues, including tax evasion by some gray-market vendors, have led to the government investigation, according to market researcher iSuppli.

"Recent developments indicate that the Chinese government is beginning to take seriously the long-festering problem of smuggled handsets and counterfeit handsets, a thorny issue that not only undercuts the tax revenue but also tarnishes China’s image abroad," said Kevin Wang, director of China Research at iSuppli, in a report.

The researcher believes gray-market handsets will be greatly affected by the investigation and that MediaTek stands to lose out the most because its chipsets are the most popular among gray-market handset makers. The MediaTek representative declined to comment specifically on the issue.

The market for these counterfeit handsets in China will reach 172 million units this year, according to iSuppli, up nearly 19 percent from 145 million last year.

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