MediaTek Inc (聯發科技), the world's largest supplier of chips for DVD players, said yesterday that its first-quarter net income declined 14 percent from the previous quarter due to seasonal factors.
Earnings dropped to NT$4.19 billion (US$127 million), or NT$6.58 a share, in the slack January-March period, down from NT$4.9 billion in the fourth quarter of last year, the company said in a statement.
The fourth quarter is traditionally a peak season for the information technology industry.
However, the Hsinchu-based chipset maker was able to sustain a high gross margin of 51.4 percent during the first quarter as increasing shipments of high-margin chipsets and improved cost controls offset dropping prices for low-end products and price pressure from contract chipmakers, MediaTek said.
In the fourth quarter of last year, the company's gross margin was 52.3 percent.
"The quarterly decline in profits is largely in line with industry analysts' expectations, considering seasonal factors," said Chiu Yi-tong (朱益東), an analyst with Hua Nan Securities Investment Management Co (華南永昌投顧).
"We're more concerned as to whether MediaTek is able to rapidly expand into a new growth area -- the lucrative consumer electronics area -- by boosting shipments of chipsets used for household DVD recorders and for mobile phones," Chiu said.
According to a Central News Agency report, MediaTek chairman Tsai Ming-chieh (蔡明介) told investors that about 10 mobile phone vendors from Taiwan and China are using the company's chipsets in the development of new products.
According to the report, Tsai said he expects gross margins to fall below 50 percent in the current quarter due to lower average selling prices and higher prices charged by contract chipmakers.
According to the agency, Tsai said that rising shipments will drive sales up by 5 percent for the quarter, compared to the first quarter.
MediaTek said this month that sales in the first quarter declined about 12 percent, to NT$9.57 billion from NT$10.9 billion for last year's fourth quarter, but had registered an 11 percent increase compared to last year.
MediaTek shares were unchanged at NT$341 yesterday on the TAIEX, which lost 0.55 percent and ended the day at 6710.7 points.
MediaTek's small rivals Sunplus Technology Co (凌陽科技) and Novatek Microelectronics Corp (聯詠科技) rose 1.37 percent and 0.73 percent, respectively.
"Investors are looking for stocks with a promising outlook," said Chien Po-yi (
Sunplus and Novatek are two such stocks, according to Chen, as they have a much greater presence in the market for the chipsets used in mobile phones and liquid crystal display panels, which are expected to experience booming growth this year, Chien said.
"Also, investors are hesitant to buy pricey shares like MediaTek when the stock market seems to be losing momentum," Chien said.
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