MediaTek Posts Weakest Quarterly Results Of 2016

Taiwanese fabless semiconductor business, MediaTek, has just posted its weakest quarterly results this year and is in part blaming "seasonal factors" for the relatively poor performance. The company announced consolidated revenue of $756 million (NT$23.8 billion) for October 2016, which is down over 14% since September 2016 but up over 7% from October 2015. MediaTek is forecasting fourth quarter revenue to be in the region of $2.1 billion to $2.3 billion at current exchange rates (NT$66.6 billion to NT$72.9 billion). In terms of unit sales, the business has revised it fourth quarterly chip shipment numbers down to 135 to 145 million, from the 145 to 155 million units in the third quarter. It still expects to maintain a gross margin between 33.5% to 36.5%, which is lower than the company has seen in recent years thanks to intense competition in the semiconductor market. For example, the company's margin was over 40% for the third quarter 2015.

MediaTek is blaming a combination of factors for the revenue slowdown: foundries are experiencing continued tight supplies of 28nm chips, the size of many of MediaTek's successful supermid-range chips. Furthermore, MediaTek's customers are buying fewer chips. This is because MediaTek's business typically tends to lead the smartphone and tablet sales market: the majority of businesses have already built up inventories in readiness for the fourth quarter. As for the competition, MediaTek has become something of a victim of its own success. For years the company offered inexpensive but relatively unsophisticated chipsets firstly for tablet devices and later for smartphones. However, as MediaTek matured its product portfolio and started to incorporate more and more features, so it has increased the price of its chipsets and this has pushed it into direct competition with businesses such as Qualcomm, considered to be something of a premium name in smartphones. Unfortunately, for MediaTek it does not (yet) have the brand presence in some developed markets in order to effectively compete with Qualcomm in the premium smartphone ranges, but the business is developing a sub-brand in the shape of the Helio chipsets, where it has successfully carved a niche for itself in the mid-range and supermid-range market.

Looking forward, both the market and MediaTek had been expecting this revenue slowdown. The company continues to evolve new products for the smartphone and tablet markets, but growth here is set to decelerate with some industry experts predicting annualized growth of 2.5% between now and 2019. The business has diversified into other arenas such as the Internet of Things, as well as building other components for smartphone manufacturers such as wireless charger assemblies.

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David Steele

Senior Staff Writer
I grew up with 8-bit computers and moved into PDAs in my professional life, using a number of devices from early Windows CE clamshells and later. Today, my main devices are a Nexus 5X, a Sony Xperia Z Tablet and a coffee cup.