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June 24, 2017

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MediaTek anticipates slight declines in traditional first-quarter low season

TAIPEI, Taiwan -- MediaTek (MTK, 聯發科), one of Taiwan's leading fabless semiconductor companies, announced over an earnings conference call yesterday that performance in the first quarter of this year is expected to hold steady and see expected slight declines in the traditional low season.

Most notably, amid market concerns over the company's lagging progress in offering products catering to next-generation mobile broadband networks, MTK president Hsieh Ching-jiang (謝清江) stated that sales of chips with Long Term Evolution (LTE) connectivity are expected to represent 5 percent of overall revenues this year, with shipment volume reaching an excess of 15 million units.

In addition, shipments of the eight-cored system on a chip (SOC) will represent a 5- to 10-percent portion of the company's smartphone offerings in the first quarter, while shipments of dual- and quad-cored products are not expected to deviate dramatically from the respective ranges of 45 to 55 percent, and 30 to 35 percent of overall sales.

The company expects to ship over 300 million units of smartphone chipsets this year, improving by 36 percent over the previous year's 220 million units. The portion of the company's sales from exports are anticipated to reach 30 to 40 percent, with sales to the China market estimated to account for 60 to 70 percent of overall revenues.

Meanwhile, gross margins in the first quarter are expected to reach between 45.5 and 47.5 percent, with operating profit margins forecast to fall at the 23- and 27-percent range.

4G LTE Represents 5 Percent of Total Smartphone Chipset Shipment

Among the 300 million units of smart phone chipsets expected to be shipped this year, 5 percent will be capable of LTE connectivity, 25 to 30 percent are designed for time division (TD) networks, and about 20 percent are for the enhanced data rates for the GSM evolution (EDGE) network, with wideband code division multiple access (WCDMA) network-specific chipsets making the bulk of the company's sales this year at 45 to 50 percent.

Propelled by strong demand in the China market, shipments of smartphone and tablet computer chipsets across the strait last year reached 220 million and 20 million units respectively.

The company stated, however, that due to the conventional low season and fewer working days, performance in the first quarter is expected see a 2- to 10-percent quarter-on-quarter decline, with revenues reaching between the NT$35.8 billion and NT$39 billion range.

MTK stated that the acquisition of Mstar (晨星) will be completed on Feb. 1, following which the newly acquired company's operations will be fully included in its financial statements. The impacts of the merger are expected to be no more than 1 percent of the company's earnings results in the first quarter, said MTK.

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