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Taiwan baseband chip design firm MediaTek, which is acquiring smaller companies for their intellectual properties, has bought Beijing start-up Pollex for US$13 million.

The acquisition  targeted Pollex's intellectual properties and engineering resources, said MediaTek in a statement.

'MediaTek has no presence in smart phones and Pollex is a key software supplier' for the gadgets, JP Morgan analyst Alvin Kwock said. 'The acquisition will allow MediaTek to branch  out to a new market.'

Mobile phones are considered 'smart'  if they include functions  such as web browsing,  email  and remote control of computers.

MediaTek is the leading supplier in China of baseband chips, a key component of mobile phones responsible for communication and control.

The company supplied 34.5 per cent of the baseband chips used by  Chinese original equipment manufacturers of mobile phones last year,  says market research firm iSuppli, which estimates the country will produce 35 per cent of the one billion mobile phones shipped this year.

Growth by acquisition is an important strategy for chip design firms once  their revenue base  grows to US$1 billion, Mr Kwock wrote in a recent report.

MediaTek's revenue, which  was NT$46.3 billion (HK$10.98 billion)  last year, may grow to NT$53.5 billion this year,  JP Morgan said.

'MediaTek has quietly made a handful of shrewd acquisitions at very reasonable prices in recent years' and in the process has obtained a lot of important intellectual property, said Mr Kwock.

This  allows MediaTek to penetrate  new product segments  faster.

The company bought from US-based Tvia its video-related MPEG software technology in 2003 for US$10 million and acquired Inprocomm of Taiwan in 2004 for US$3 million for its wireless  local network patents.

Last year, MediaTek took over Taiwan-based Ubec for its short-range wireless, or Bluetooth, related technology for less than US$10 million. This approach has also been used by other US chip design firms such as Broadcom and Marvel.

Marvel acquired Intel's subsidiary for its application processors in June for US$60 million and Broadcom bought Silicon Valley start-up Zeevo for US$32 million to obtain its Bluetooth-related technology.

MediaTek  focuses on small acquisitions.  It has spent  US$100 million to US$110 million  on nine deals including Pollex, Mr Kwock estimates.

Besides developments for smart-phones, Pollex is an important supplier for many  Chinese makers of mobile-phone  middleware, or software that mediates  with other programs. The Pollex purchase will help MediaTek to develop closer  ties with the mainland manufacturers, Mr Kwock said.

The 100  workers  at  Pollex's Beijing development centre can also strengthen customer services in the China wireless market, he said. MediaTek has about 500  mainland and about 1,000  Taiwan employees.

The purchase will not be welcomed by MediaTek's competitors such as Shanghai-based Spreadtrum. Many Chinese chip design companies rely on Pollex for their supply of  middleware, said Mr Kwock. Now they have to find a new supplier or try to develop the middleware themselves. 'This would take time.'

In one transaction, not only has MediaTek obtained important  intellectual properties to further develop its product lines, it also pre-empts  competitors, specially the Chinese start-ups, from getting bigger. 'It is a very smart move,' said Mr Kwock.



MediaTek targets intellectual properties in US$13m Pollex deal