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June 23, 2017

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MediaTek poised to increase China market share

TAIPEI, Taiwan -- Taiwan's MediaTek Inc. (聯發科), the leading chip supplier for Chinese smartphones, is likely to double its market share in China's homegrown 3G network this year amid fewer competitors, according to Morgan Stanley.

The U.S. brokerage said there are several chipmakers that are likely phase out from China's TD-SCDMA market because of structural changes, including MStar Semiconductor Inc.'s (晨星半導體) merger with MediaTek, the privatization of Spreadtrum Communications Inc. (展訊通信), and the potential privatization of RDA Microelectronics Inc. (銳迪科微電子).

"We believe the competitive landscape is different now: there are fewer players and some are perhaps not as focused on the near term," Bill Lu, a Morgan Stanley analyst in Hong Kong, wrote in a research note last week.

"We believe MediaTek's TD-SCDMA market share could double this year as prices stabilize," he said, but did not reveal MediaTek's current TD-SCDMA market share or future target.

The other significant change, Lu said, is that MediaTek was competing only in the mid-range to low-end market a year earlier, but has now added higher-end products to the mix to meet demand in all emerging markets and some developed markets.

Based on those reasons, the analyst raised his price target for MediaTek shares to NT$550 (US$18.26) from NT$500 and maintained his "overweight" rating on the stock.

Lu also raised his forecast for MediaTek's 2014 earnings per share by 14.7 percent to NT$31.56 and for 2015 by 7.5 percent to NT$33.92, citing strong smartphone growth and rising gross margins.

Shares in MediaTek had risen 1.58 percent to NT$513 as of yesterday in Taipei trading.

In the first quarter of the year, MediaTek shipped 75 million to 80 million smartphone chips, exceeding its estimate of 65 million units.

The company has forecast that its consolidated sales for the second quarter will range between NT$51.5 billion and NT$55.2 billion, up 12-20 percent from the first quarter, while its smartphone chip shipments will total 80 million to 90 million units.

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