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Revenue to grow by 8% to 10% in Q3: MediaTek

MediaTek Inc (聯發科), the nation’s top fabless chip company and design house, said yesterday it was optimistic about this quarter’s performance, driven by strong demand of TV integrated circuits (ICs) and handset ICs.

“Looking ahead, third-quarter revenue is expected to grow by around 8 percent to 10 percent quarter-on-quarter,” the company’s president Hsieh Ching-chiang (謝清江) told investors yesterday.

Hsieh said pricing pressure would continue in the third quarter after the average selling price (ASP) fell in the second quarter, but the drop would be within a 5 percent range.

Hsieh said the company would increase exports to emerging markets, going into global OEM/ ODM, and possibly entertaining price cuts.

In the second quarter, the Hsinchu-based company’s revenue came in at NT$22.32 billion (US$732.5 million), which reflected an increase of 15.2 percent from the previous quarter’s NT$19.38 billion and a rise of 21.2 percent from NT$18.42 billion a year earlier.

Net income was NT$5.1 billion for the second quarter based on generally accepted accounting principles, which translates into an earnings per share of NT$4.93 in the second quarter, up 26.4 percent from last quarter, the company’s latest financial data showed.

The second-quarter profit of NT$5.1 billion indicated a 26.64 percent increase from the previous quarter but a 32.98 percent decline from the same period last year, the company said.

“Despite the worldwide economic slowdown and weaker consumer sentiment, shipments of major product lines still grew from the previous quarter and the same period of last year,” MediaTek chief financial officer Mingto Yu (喻銘鐸) said.

The company’s shift towards higher margin products has paid off in a generally stable blended average selling price. In addition, its effort to cut costs on all product lines has contributed to a higher gross margin than the previous quarter.

With high margin products and cost-down efforts, Yu said the company would continue gross margin momentum this quarter, although he didn’t offer an exact gross margin forecast for the quarter.

The company’s second-quarter gross margin was 53.8 percent, up from 52.1 percent in the first quarter but lower than 55.9 percent a year earlier.

Eric Chen (陳慧明), a semiconductor analyst with BNP Paribas Securities’ Taipei branch questioned MediaTek’s company strategy since MediaTek’s handset IC market share in China is already high.

But Andrew Lu (陸行之), an analyst with Citigroup Global Markets in Taipei, believed the company’s continuous market-share gains in China’s handset IC production and in the export market would help boost the company’s long term competitiveness.

Citigroup reiterated its MediaTek rating as a top semiconductor share “buy,” Lu said in a client note yesterday.

“We believe MediaTek’s long-term competitiveness is sustainable and year-on-year sales recovery should start in September 2008,” he wrote.

Lu maintained a “buy” rating for MediaTek with a revised target price of NT$525.
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