MediaTek Inc (聯發科), the nation’s largest handset chip supplier, yesterday reported its lowest quarterly earnings in three years amid a slump in demand, rising operating expenses and asset impairment losses.
Net income plunged around 36 percent to NT$2.88 billion (US$85.4 million) after deducting employee profit sharing expense during the fourth quarter of last year, the company said in a statement. It was MediaTek’s weakest quarterly earnings since the first quarter of 2005.
As the economic turmoil may persist, MediaTek said it expected revenues to slide between 8 percent and 16 percent this quarter from NT$20.65 billion last quarter, as customers remain cautious about making new orders after the Christmas and Lunar New Year holidays.
“Customers have drawn down inventories to a very low level as demand recovers, but they are cautious about replenishing inventory given limited visibility,” MediaTek president Hsieh Ching-jiang (謝清江) told a teleconference yesterday.
“Revenue decline will be across all product lines,” Hsieh said. “The mobile phone business, however, will be a relatively brighter spot as we are seeing strong demand for Chinese handset brands in the remote areas of the mainland.”
MediaTek, the largest handset chip supplier in China, said handset chips may account for a bigger portion — up to about 70 percent — of its overall revenues this quarter, compared with roughly 65 percent last quarter.
Gross margin may hold steady, or rise slightly this quarter from 54.5 percent in the final quarter of last year, aided by sales of higher-priced chips and expectations of a stronger US dollar against the local currency, Hsieh said.
Hsieh vowed to strictly control the chipmaker’s operating expenses amid the downturn and cut expenses to around NT$4.7 billion in the first quarter of this year, after reporting a 21 percent increase in expenses to NT$5.7 billion in the fourth quarter.
The chipmaker attributed the rise to an increase in royalty payments and higher operating expenses at an overseas wireless chip unit it bought from Analog Devices Inc last year.
MediaTek also booked a one-off non-operating loss of NT$1.63 billion in the fourth quarter, mainly from an asset impairment loss of NT$1.26 billion. The company expects losses to narrow sharply this quarter.
“MediaTek’s guidance was better than I thought, especially its efforts to reduce its operating expenses and non-operating losses, which play a crucial role in a chipmaker’s bottom line,” said Eric Chen (陳慧明), a semiconductor analyst with BNP Paribas Securities Co’s Taipei branch.
Given the company’s stable gross margin, Chen said he believed “MediaTek already hit the bottom in the fourth quarter and will see earnings recover in the current quarter.”
MediaTek shares jumped 3.86 percent to NT$255.5 yesterday, outperforming the benchmark TAIEX, which gained 2.48 percent.