MediaTek's sales make it top gun

MediaTek Inc (聯發科技) became the largest chip-design house in Taiwan in March, as its monthly sales surpassed former market leader VIA Technologies Inc (威盛電子) for the first time.

MediaTek reported monthly sales of NT$2.5 billion, over 173 percent higher than the same period last year, on strong sales of chips for use in CD-ROM, CD-recordable and rewritable and assorted DVD players.

As the company's sales have risen, so has its stock. The firm listed on the TAIEX last July at NT$198 per share and has leaped as high as NT$772 per share recently. Yesterday, the stock fell NT$32 to end the day at NT$713 as investors had expected better sales than were reported.

The company overtook VIA Technologies, which specializes in computer chipsets and central processors, for the first time last month. VIA's monthly sales dropped 48 percent from the same time last year to NT$2.3 billion.

VIA still retains the local chip-design crown in terms of quarterly sales. Sales from January through March at the company hit NT$7.3 billion, down 29 percent from the same time last year but higher than MediaTek, which reported January-through-March sales of NT$6.96 billion, a 208 percent increase over the same time last year.

Analysts credit MediaTek's shooting star with the worldwide increase in sales of CD and DVD related products. MediaTek entered these markets long ago with lower-priced chip products than competitors in the US and Japan. Lower labor costs and a smaller chip keep MediaTek's prices lower than competitors.

Since the chips are smaller, more can be cut from a single silicon wafer, and the price-per-chip falls as a result.

MediaTek will soon face more competition from other local companies, such as VIA, which has already launched chips for CD-ROMs and DVD-ROMs.

MediaTek has responded to VIA's moves by reducing the price of its CD-ROM chipsets, which account for around 20 percent of the company's revenue.

"I think [MediaTek's price cut] will put VIA in a very difficult position," said Belle Chang, a chip analyst at Merrill Lynch in Taipei. She expects MediaTek to maintain its profit margins at over 50 percent for the first quarter.

Chips made for use in CD-rewritable drives have already become the hottest seller in the market for optical-drive chips, Chang said.

VIA has yet to produce a CD-rewritable drive chip, but has already developed a chip for DVD drives. Analysts believe it will take the company at least six months to make a dent in the DVD market.

VIA's sales results have been falling this year because of its inability to gain a license from Intel to produce Pentium4 compatible products, analysts say.

Without such a license, the company is unable to sell its mainstay computer chipsets to Taiwan's four largest motherboard makers, which account for around half the global supply of motherboards.

Motherboard manufacturers fear that using any unlicensed VIA chipsets will result in raising Intel's ire, and have chosen instead to use chipsets made by US-based Intel or Silicon Integrated Systems (矽統), a local computer chipset maker.