Fri, Nov 02, 2007 - Page 12 News List

MediaTek warns of revenue fall in 4Q

SLOWDOWN New products, such as bluetooth and GPS chips, may lift handset sales, but lackluster demand for consumer electronics would affect sales, the company said

By Lisa Wang  /  STAFF REPORTER

MediaTek Inc (聯發科), the nation's top handset chip designer, warned yesterday that revenues may fall 10 percent to 12 percent in the current quarter from last quarter's record- high figure as weakening demand for consumer electronics, including digital TVs, offsets growth in handset sales.

Mobile phone chips, which made up half of MediaTek's overall revenues of NT$26.69 billion (US$824 million) last quarter, may grow by a single digit percentage this quarter from last quarter mainly on sustained demand in China, company president Hsieh Ching-chiang (謝清江) told investors at a teleconference.

Chinese demand

"Growth in the third quarter was higher than our original estimate as China's strong economic growth fueled handset demand. The fourth quarter will still be a high season in China [as customers order ahead of the Lunar New Year shopping season]," Hsieh said.

MediaTek is the biggest handset chip supplier in China, competing with the world's biggest phone chipmaker Texas Instruments Inc and German's Infineon Technologies AG in supplying most Chinese mobile phone brands.

The launch of new products, including bluetooth and GPS chips for handsets, this quarter may also give sales a boost, Hsieh said.

In addition, the company is set to start designing third-generation, or 3G, phone chips for customers in the second quarter of next year, he said.

But growth in the handset area will not be enough to offset a more than 20 percent decline in chips for consumer electronics as demand slackens in the seasonally slow fourth quarter, Hsieh said.

disappointing

Eric Chen (陳慧明), a semiconductor analyst with BNP Paribas Securities' Taipei branch, said that even the single-digit growth forecast for handset chips by the company was below his expectations, adding that the market was expecting flat fourth-quarter revenues.

A shortage in key components like power amplifiers could be the reason behind the slower handset chip shipment forecast, Chen said.

Meanwhile, Kenneth Lee (李克 揚), who tracks the semiconductor industry for Primasia Securities, said: "MediaTek's guidance still looks okay to me, as long as the company can maintain revenues above NT$20 billion and sustain long-term growth. Plus, it is good to see continued growth in the high-margin phone business."

Lee has a "buy" rating on MediaTek, with a price target of NT$715, implying a 13 percent upside from the stock's closing price of NT$637 yesterday.

On Tuesday night, MediaTek reported record-high third-quarter net income of NT$11.85 billion, or NT$11.5 a share, which represents growth of 82 percent year-on-year or 56 percent quarter-on-quarter owing to better-than-expected handset chip demand in China.

MediaTek's guidance of a sharp drop in consumer chip sales may reflect rising competition from new players such as local chip designer MStar Semiconductor Inc (晨星半導體) and probably slowing consumer spending in the US, Lee said.

Partly because of pricing competition, gross margin may shrink 1 percentage to 2 percentage points from 57.1 percent in the third quarter, MediaTek said.

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