MediaTek Inc (聯發科), the nation’s biggest handset chip designer, yesterday posted a decline in second-quarter profits as demand weakened in emerging markets. A sales slump is expected in the current quarter amid lower selling prices, the company said.
Net income edged down 1.4 percent from a year ago to NT$9.03 billion (US$282 million), or NT$8.34 per share, in the second quarter. This was an 18.9 percent decrease from NT$11.1 billion, or NT$10.28 a share, in the first quarter.
Revenue increased 6.4 percent year-on-year to NT$29.95 billion, but fell 8.4 percent from NT$32.7 billion in the first three months.
“The sequential decline in revenue came as demand faded after the Labor Day holidays in China, coupled with the impact of the European debt crisis as well as excess inventory in India and the Middle East,” MediaTek president Hsieh Ching-jiang (謝清江) told investors yesterday.
Despite that, flat-panel TVs and Blu-ray DVD chipsets saw double-digit revenue growth as the company gained market share, he said.
MediaTek said third-quarter sales should be down 8 percent to 15 percent from second-quarter levels to between NT$25.4 billion and NT$27.5 billion as the company cuts prices for chipsets amid tough competition.
“Price cuts will offset some of our volume growth,” MediaTek financial executive Yu Mingto (喻銘鐸) said.
Inventories in India and the Middle East will continue to be digested into the current quarter, which will impact shipments, while shipments for PC products would slow as demand peaked in the first half — traditionally a quieter period for PC sales, Yu said.
Cheaper selling prices put second-quarter gross margin at 55 percent, short of its earlier forecast of 57 percent. That also compared with 59.1 percent gross margin during the same period last year and 56.7 percent in the first three months.
Margins will further drop to between 51.5 percent to 53.5 percent in the period from this month through September, but Hsieh said the level should rise back to 55 percent next year as it ramps up the production of higher-priced System-on-chip (SoC) solutions.
Analysts yesterday raised concerns on the longer inventory turnaround in the third quarter, which rises to 90 days from 60 days.
As shipments of SoC solutions — expected to account for as much as half of its handset chipset shipments by the end of the year — ramp up, this would slowly alleviate the issue, Hsieh said.
Handset chips currently account for 70 to 75 percent of all Mediatek’s revenues and SoC solutions are mostly applied to the 2.5-generation and 2.75-generation chips.
The company said it expects more clients will switch to SoC for more advanced 3G and 4G chips in the future.
To secure its leadership in the industry, MediaTek inked a licensing agreement with Japan’s biggest telecom operator, NTT DoCoMo Inc, earlier this week to develop chips supporting 4G technology.
“We aim to maintain our current share, if not increase it ... A price cut is in line with the market situation,” Hsieh said.
MediaTek yesterday adjusted upward its whole-year handset chip shipments to 500 million from an earlier target of 450 million, representing a 40 percent increase from last year’s 350 million.
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