Microsoft, Google Team with MediaTek in Smartphone Push

IDG News Service — Microsoft (MSFT) and Google (GOOG) have turned to Taiwanese chipset vendor MediaTek to boost their traction in smartphones aimed at China and other emerging markets.

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MediaTek has already developed a chipset and other hardware for Microsoft's Windows Mobile 6 operating system and has sent the package, MediaTek hardware plus Windows Mobile software, to handset makers in China so they can start designing new Windows Mobile smartphones, a MediaTek representative said.

"There is a huge thirst for smartphones in emerging markets," Microsoft said in a statement. "For many people, the phone rather than the PC is the main entry point to the Internet, resulting in a high demand for rich communication devices. In order to meet this demand, we have teamed up with MediaTek to facilitate the provision of affordable smartphones," the company added.

MediaTek will release a similar hardware and software package with Google's Android mobile phone OS in the second half of this year, the MediaTek representative said.

Google did not return calls requesting comment.

The deals will give Microsoft and Google access to hundreds of small mobile phone makers in China that sell inexpensive smartphones at home as well as abroad in India and other emerging markets, said Flora Wu, analyst at research firm BDA (China) Limited. MediaTek has worked with these 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. Partnering with MediaTek keeps R&D costs low for the phone makers in their struggle against bigger, established companies such as Nokia and Samsung Electronics.

Microsoft in particular has lost market share in the smartphone wars, mainly to Apple's iPhone and to BlackBerry phones from Research In Motion (RIM) (RIM).

The Windows Mobile OS ended 2009 with an 8.8 percent share of the global smartphone market, by number of units, down from 13.9 percent in 2008, according to market research firm Canalys. Google's Android OS was just behind Microsoft in fifth place in global share at 4.7 percent, up from 0.5 percent in 2008, while third-place Apple leaped to 15.1 percent from 9.6 percent and second-place RIM rose to 20.8 percent from 16.5 percent.

Symbian, the leading smartphone OS, also lost share, dropping to 47.2 percent in 2009 from 52.4 percent a year earlier.

One key for Microsoft in the partnership with MediaTek will be providing software support for Chinese mobile phone makers, said Daryl Chiam, a senior analyst at Canalys in Singapore. The Chinese companies are small and don't have as many research and development resources as bigger rivals, yet they need to differentiate their smartphones with unique user interfaces and more, he said.

Microsoft has talked about driving down the cost of smartphones for emerging markets for years. The company's Unlimited Potential Group has developed a concept called Fone+ for developing nations as a way to expand computing around the world, and primarily in poor countries. The idea is to connect a low-to-mid-end smartphone based on the Windows Mobile OS to a TV via a docking station so data on the handset can be displayed on the TV screen. That way, people can use the computing power in the smartphone on a big screen.

Microsoft did not return requests for comment on this story and it is unclear if Fone+ is part of the pact with MediaTek announced Tuesday.