MediaTek to buy MStar, plans to show Qualcomm who’s boss

Ever heard of MediTek? What about MStar? Not ringing any bells? Here’s what you need to know: MediaTek designs chips, just like NVIDIA does, and just like Qualcomm does. Neither of those three companies actually make chips, that’s done by someone else. MediaTek is currently China’s largest chip designer. They are to China what Qualcomm is to the United States. Speaking about Qualcomm, their claim to fame is the Snapdragon system on chip. That chip combines a CPU, GPU, and various wireless radios, on an easy to integrate hardware platform that lets handset vendors produce phones at a rapid clip.

MediaTek does exactly what Qualcomm does, but in China. China has 1.3 billion people. Combine the population of the USA with the population of the EU and it only totals about 810 million. In other words, big-freaking-market. MStar does what MediaTek does, but at a smaller scale. MStar’s talents are actually in the digital TV space. Their chips are in half (yes, 50%) of all digital televisions. If MediaTek’s acquisition of MStar gets approved, then that one company will make 60% of the chips that go into Chinese phones, and 75% of the digital TVs that get sold around the globe.

When will this deal close? By the end of the first quarter of 2013. MediaTek says they have no plans to fire either their folks of MStar’s people, which is fantastic news.

So what does all this mean for you? Right now, nothing. In a decade though, it could mean a lot. Chinese electronics companies are starting to flex their muscles. Their designs are starting to look unique, their software is starting to look unique, and pretty soon their flagship devices are going to have Chinese chips inside too. It wasn’t that long ago when Samsung products were considered garbage. Today they make some of the most desirable consumer goods on the market.

Within your lifetime you’ll see the same story play out with a Chinese company.