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MediaTek expects profit boost by 24-32% from shipments

Posted: 03 May 2016 ?? ?Print Version ?Bookmark and Share

Keywords:smartphone shipments? smartphone chips?

MediaTek is optimistic in its shipment increase during the second quarter of the year from the first quarter inspite of the slow global growth in the segment.

MediaTek forecast that its second-quarter shipments of smartphone and tablet chips will fall in a range of 135 million to 145 million units compared with 110 million units during the first quarter, the company said during an April 29 conference call to announce its first-quarter results. Qualcomm on April 20 said it expects its chip shipments in the current quarter to be within in a range of 175C195 million units, about the same as in the previous quarter.

MediaTek will need to counter slowing demand after global smartphone shipments fell 3% to 335 million units in the first three months of this year from the same period a year ago, according to market research firm Strategy Analytics. MediaTek is counting on demand in China, which has been buoyed by handset subsidies from telecom operators.

Mediatek HQ

Figure 1: To boost its profit margin, MediaTek said it aims to lift its flagship line of Helio smartphone chips to as much as 20% of its total shipments this year.

"We see strong demand coming back from China," MediaTek Chief Financial Officer David Ku said on the conference call.

Chinese smartphone makers have gained market share at the expense of the world's largest brands, Apple and Samsung. China's Huawei strengthened its number-three position during the first quarter this year, garnering an 8% market share, up from 5% a year ago. The company saw smartphone shipments march ahead 64% annually to 28.3 million units worldwide.

While MediaTek is upbeat on the second quarter, all bets may be off during the second half of this year as normal seasonal patterns are cast to the wind. MediaTek's sales during the second half may be less than 50% of the full year total, Ku said. Ordinarily, the ratio of first half to second half revenue is 45:55, he said.

MediaTek also said that its profit margins may fall during the second quarter and later this year as company products are squeezed by more intense competition. In addition to Qualcomm, MediaTek faces growing rivals in China such as Hisilicon, Spreadtrum and ZTE chip-design unit ZXIC, which have Cat 6 or Cat 7 LTE modems. Hisilicon has started, and Spreadtrum will begin to use Taiwan Semiconductor Manufacturing Co.'s 16nm process just behind Apple and ahead of MediaTek.

The competition this year is what Ku calls a "wild card." It's "something that still worries us," he said.

Flagship strategy

To boost its profit margin, MediaTek said it aims to lift its flagship line of Helio smartphone chips to as much as 20% of its total shipments this year.

"We feel comfortable reaching that target," Ku said.

The Helio line accounted for between 10% to 15% of total shipments during the first quarter, and the company expects the number to exceed 15% during the second quarter.

The company made rapid gains in the Chinese smartphone market last year against Qualcomm to take an approximate 40% share of the long-term evolution (LTE) business. Now that market growth is slowing, the company aims to increase its share of revenue. Roughly half of MediaTek's sales come from China.

-Alan Patterson,
EE Times

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