MediaTek Inc (聯發科), the nation’s largest handset chipmaker, yesterday said it had reached a broad patent agreement on third-generation (3G) chips with US rival Qualcomm Inc without paying royalties.
The favorable terms have eased investor concerns that huge royalty payments might erode MediaTek’s profits at a time when growing competition is adding to pressure on the firm to lower chip prices.
The patent agreement helped boost MediaTek’s share price, which rose 1.73 percent to NT$529, versus the broader market’s nearly 1 percent decline yesterday. The joint announcement came before the stock market opened.
“MediaTek will be able to sustain gross margin, as the companies will not claim any royalties based on the cross-licensing agreement,” said Kenneth Lee (李克揚), a semiconductor analyst with Fubon Securities Investment Services Co (富邦投顧).
“We believe MediaTek’s leading position in TD-SCDMA chips may give it the upper hand in the patent negotiations with Qualcomm,” Lee said.
TD-SCDMA — which stands for time division-synchronous code division multiple access — is one of the 3G technologies adopted only in China.
Lee reiterated his “buy” rating on MediaTek with a target price at NT$617.
MediaTek told investors that gross margin may fall slightly to around 59 percent in the current quarter from a record high of 60.2 percent last quarter on lower chip prices.
Under the agreement, each company’s patent portfolios will be shared.
MediaTek’s customers will need to obtain licenses from Qualcomm and pay for the patents, the firm said.
That may help increase shipments of Mediatek’s 3G handset chips later this year after adding more popular CDMA and WCDMA chips to the existing 3G lineup. MediaTek is selling TD-WCDMA chips.
MediaTek retained its revenues forecast for this quarter made on Oct. 30. The company said revenues may decrease by between 13 percent and 19 percent from last quarter’s NT$34.36 billion (US$1.06 billion) on faltering mobile phone demand from China and bigger price cuts.
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