IT之家 (IT Home) News on October 15: According to Bloomberg, ByteDance is close to reaching an agreement to purchase MediaTek's data center chips. This deal would both secure key computing components for ByteDance and help MediaTek compete with Qualcomm.
People familiar with the matter revealed that ByteDance is in in-depth talks with MediaTek about the supply of custom chips, which will be used to support the operation of ByteDance's data centers. MediaTek will provide an as-yet-undetermined number of application-specific integrated circuits (ASICs), that is, chips tailored to customer platforms. If the deal materializes, ByteDance may become MediaTek's second-largest ASIC customer after Google (Alphabet).
ByteDance is significantly increasing hardware investment, betting on artificial intelligence as its next growth engine. But like its domestic peers Alibaba and Tencent, it cannot purchase the most top-tier AI chips from vendors such as Nvidia; meanwhile, local chip makers such as Huawei also struggle to fully meet all of its computing needs.
Therefore, ByteDance is looking for alternatives, including partnering with chip design companies. Under current US export control rules, this kind of cooperation model is allowed as long as the AI computing power purchased by Chinese companies does not exceed a specific threshold. Bloomberg previously reported that ByteDance reached a similar agreement with Qualcomm earlier this year to purchase millions of AI chips.
For MediaTek, winning this large contract would help it reduce its dependence on its mobile phone business and compete with Qualcomm and Broadcom in the data center arena, a field MediaTek has previously not excelled in. MediaTek expects its AI chip revenue to reach about US$2 billion this year (IT之家 note: approximately RMB 13.413 billion at current exchange rates), and targets capturing a 15% share of the US$80 billion (approximately RMB 536.52 billion at current exchange rates) data center chip market next year. Nvidia announced in September an investment of US$3.5 billion in MediaTek (approximately RMB 23.473 billion at current exchange rates), further helping MediaTek achieve these goals.
MediaTek is benefiting as major tech companies develop their own dedicated AI chips, leveraging its accumulated expertise in mobile processors to enter the data center infrastructure boom. With a market cap of about US$210 billion (approximately RMB 1.41 trillion at current exchange rates), it is Taiwan's second-largest company after TSMC.
ByteDance is a quality opportunity for MediaTek: it is a customer with enormous purchasing volume, capable of helping this Taiwanese company break into one of the fastest-growing segments of the semiconductor industry. Like leading US tech companies, ByteDance and its domestic peers plan to keep increasing infrastructure investment for AI model training and inference, anticipating that as the technology iterates, AI services will be widely adopted by ordinary users.
ByteDance is considering raising its capital expenditure this year to as much as US$70 billion (approximately RMB 469.455 billion at current exchange rates), more than double last year's total, to expand data centers and other AI infrastructure. If the economic and business environment improves, capital expenditure in 2027 could further reach US$100 billion (approximately RMB 670.649 billion at current exchange rates). ByteDance obtained a US$30 billion loan in September (approximately RMB 201.195 billion at current exchange rates) to fund these investments.
ByteDance's massive spending signals that it is adopting a more aggressive strategy, hoping to consolidate its first-mover advantage in key arenas such as large language models and video generation, and expand its overseas influence. The company's AI business centers on flagship models such as Seedance, facing strong competition from Alibaba's Happy Horse, Kuaishou's Kling AI, Google and others.