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MediaTek expects Q2 revenue rise

MediaTek Inc (聯發科), the world's biggest supplier of chips for DVD players, expects revenues to expand 16 percent this quarter, boosted primarily by robust demand for its handset chips in China and new chips for digital TVs, the company's chairman said yesterday.

The growth would be an extension from last quarter as MediaTek said it gained market share in China more rapidly than it expected, matching the progress made by its Chinese customers after global phone brands such as Motorola Inc slowed expansion in the world's largest cellphone market.

"Demand in China has been strong since late last year. We felt slightly tight in supply," MediaTek chairman Tsai Ming-kai (蔡明介) told investors.

"We believe the purchase power will be supported by China's strong GDP [growth]," he said.

Handset chips are MediaTek's biggest asset, accounting for half of its total revenues of NT$14.93 billion (US$448.3 million) last quarter.

More than 80 percent of the company's mobile phone chips are shipped to China.

Vigorous demand for new chips for digital TVs, largely from North America, and DVD players in the usually slack second half, would help boost revenues by more than 16 percent this quarter from last quarter, Tsai said.

Tsai expected the new digital TV chips to account for 10 percent of the company's revenues this year.

"The growth is much bigger than most analysts thought, mainly because of its market share expansion in China," said Kenneth Lee (李克揚), a semiconductor analyst with Primasia Securities in Taipei.

Lee said MediaTek will benefit from the expansion of the market, mostly from Chinese mobile phone vendors, after the world's top five handset brands lose steam.

Gross margin, however, is expected to slide further by 55 to 55.5 percent this quarter, from 57.3 percent last quarter and 57.8 percent a year ago due to declining prices for chips used in consumer products such as DVD players and digital TVs, Tsai said.

The decline will come a quarter later than expected, he said.

Earlier this week, MediaTek posted record high first-quarter net income at NT$7.83 billion, or NT$8.15 per share, up 46.4 percent from NT$5.15 billion, or NT$5.36 a share, a year ago.

Sales were up 34.4 percent during the same period.

Since the beginning of the year, shares of MediaTek have advanced 19.7 percent to yesterday's closing price of NT$431.5 -- better than the 5.86 percent gain of the benchmark TAIEX index.

"The uptrend should continue for another short period of time, supported by strong growth this quarter," Lee said.

Early last month, Merrill Lynch, which gave a "buy" rating on MediaTek, raised the target price for the chip designer to NT$430 from its previous estimate of NT$420, on strong handset chip sales in China and better-than-expected progress in the digital TV chip market.
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