ByteDance in Talks to Procure MediaTek Custom AI Chips for Data Centers, Bloomberg Reports

IT Home reported on October 15 that, according to Bloomberg, ByteDance is close to finalizing a deal to procure data center chips from MediaTek. This transaction would secure critical computing components for ByteDance while helping MediaTek compete with Qualcomm.

According to people familiar with the matter, ByteDance is in advanced talks with MediaTek regarding the supply of custom chips, which will be used to power ByteDance's data centers. MediaTek will provide an undetermined quantity of application-specific integrated circuits (ASICs)—chips tailored specifically for client platforms. If the deal goes through, ByteDance could become the second-largest customer of MediaTek's ASIC business, following Google (Alphabet).

ByteDance is aggressively ramping up hardware investments, betting on artificial intelligence as its next growth engine. However, like domestic peers Alibaba and Tencent, it is unable to purchase top-tier AI chips from vendors such as Nvidia, while local chipmakers like Huawei also struggle to fully meet all of its computing power demands.

Therefore, ByteDance is exploring alternative solutions, including partnerships with chip design firms. Under current U.S. export control regulations, such collaboration models are permissible as long as the AI computing power procured by Chinese companies does not exceed specific thresholds. Bloomberg previously reported that earlier this year, ByteDance reached a similar agreement with Qualcomm to purchase millions of AI chips.

For MediaTek, securing this major contract will help reduce its reliance on the smartphone business and enable it to compete with Qualcomm and Broadcom in the data center sector—an area where it previously had less presence. MediaTek expects its AI chip revenue to reach approximately $2 billion this year (IT Home note: currently around 13.413 billion yuan) and aims to capture a 15% share of the $80 billion (currently around 536.52 billion yuan) data center chip market next year. Nvidia's announcement in September of a $3.5 billion (currently around 23.473 billion yuan) investment in MediaTek will further support MediaTek in achieving these goals.

As major tech companies increasingly develop custom AI chips in-house, MediaTek is benefiting by leveraging its technical expertise accumulated in mobile processors to tap into the data center infrastructure boom. With a market value of approximately $210 billion (currently around 1.41 trillion yuan), it is the second-largest company in Taiwan, trailing only TSMC.

ByteDance represents a prime opportunity for MediaTek: a high-volume client that can propel the Taiwanese manufacturer into one of the semiconductor industry's fastest-growing segments. Like leading U.S. tech firms, ByteDance and its domestic counterparts plan to continue stepping up infrastructure investments required for AI model training and inference, anticipating that AI services will be widely adopted by mainstream users as the technology iterates.

ByteDance is considering raising its capital expenditure this year to as much as $70 billion (currently around 469.455 billion yuan)—more than double last year's total—to expand data centers and other AI infrastructure. If economic and operating conditions remain favorable, its capex could potentially reach $100 billion (currently around 670.649 billion yuan) in 2027. ByteDance secured a $30 billion (currently around 201.195 billion yuan) loan in September to fund these investments.

ByteDance's massive investments signal a more aggressive strategy aimed at consolidating its first-mover advantage in key areas such as conversational large models and video generation, as well as expanding its international influence. Centered around flagship models such as Seedance, the company's AI business faces stiff competition from formidable rivals like Alibaba's Happy Horse, Kuaishou's Kling AI, and Google.