Thu, Jan 06, 2011 - Page 11 News List

MediaTek set to appeal trade secret leak ruling

IC DESIGN WARS:Citigroup has cut its earnings forecasts for MediaTek by 15% for this year and 24% for next year on increased price competition and lower market growth

Staff writer, with CNA

Taiwan-based IC designer -MediaTek Inc (聯發科) said yesterday it would appeal against the sentence a former employee received for leaking trade secrets to a competitor.

In a verdict issued on Monday, the Taipei District Court sentenced a former MediaTek employee surnamed Yang to nine months in prison for leaking information to a MediaTek competitor. The sentence can be commuted to a fine of NT$270,000.

MediaTek said it would file an appeal because the ruling was too lenient and would encourage further violations of laws protecting trade secrets in the future, -potentially -setting off a cycle of vicious -competition within the sector.

In the case MediaTek had brought against Yang, the former employee was accused of illegally leaking the company’s trade secrets to rival MStar Semiconductor Inc (晨星半導體) in 2007, when he left MediaTek to work for MStar.

According to MediaTek, Yang, who was on MediaTek’s payroll between November 2005 and April 2007 before starting work at MStar in May 2007, collected confidential business information from MediaTek just before he left the company.

After Yang was employed by MStar, he used the secrets contained in his notebook computer on the job and also presented it in a briefing for MStar executives, MediaTek alleged.

Upset by the ruling, the company said confidential business information is an IC designer’s most important intangible asset, and if the law could not adequately protect companies’ trade secrets and other intellectual property, the sector’s survival would be threatened.

It also argued that the impact of the court decision would be felt not only by high-tech businesses, but also by the domestic economy across the board.

In a recent report released by IC Insights, MStar was expected to rank as the 13th-largest fabless IC provider in the world last year in terms of sales, while MediaTek was likely to rank fourth.

Meanwhile, Citigroup said in a client note on Tuesday that it had lowered its earnings forecasts for MediaTek this year and next year by 15 percent and 24 percent respectively, to reflect slower whitebox market growth and fiercer price competition.

“The market is now excited about MediaTek launching an Android phone chipset with a reference price of about US$100. Without a subsidy, US$100 is too expensive for the vast majority of whitebox handset customers, who normally pay below US$40 for whitebox handsets,” Kevin Chang (張凱偉) wrote in the note.

With severe price pressure from China’s Spreadtrum Communications Inc (展訊), Citigroup expects MediaTek’s baseband average selling price to decline another 25 percent this year from last year, the note said.

The brokerage also cut its target price for MediaTek to NT$243, from the NT$284 it set previously. Shares of MediaTek edged up 0.48 percent to NT$420 yesterday in Taipei trading.

ADDITIONAL REPORTING BY KEVIN CHEN

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