Sat, Oct 29, 2011 - Page 12 News List

Upbeat MediaTek posts strong profits

CHIPPER EXECUTIVE:The firm aims to ship 6 million smartphone chips this quarter after shipping more than 4 million units in the first nine months, its president said

By Lisa Wang  /  Staff Reporter

MediaTek Inc (聯發科), the nation’s biggest handset chipmaker, yesterday reported its strongest quarterly net profits in a year after business was boosted by resilient demand for its smartphone chips from primarily Chinese clients, such as Lenovo Group (聯想) and ZTE Corp (中興).

The Hsinchu-based chipmaker said the fourth quarter would be better than expected as it plans to ship more new mobile phone chips to customers, which would help lessen the impact of a decline in the supply of chips used in optical storage devices and televisions.

“Excluding contributions from subsidiary Ralink Technology Corp (雷凌), [MediaTek’s] revenues are expected to drop 5 percent in the fourth quarter from the previous quarter, compared with fourth-quarter declines of 10 percent or 20 percent over the past years, thanks to shipments of new products,” MediaTek president Hsieh Ching-jiang (謝清江) told an investor conference yesterday.

MediaTek aims to ship 6 million smartphone chips this quarter after shipping more than 4 million units in the first nine months, Hsieh said. The company is on track to hit its target of shipping 10 million units this year, he said.

Including Ralink, a local Wi-Fi chipmaker acquired by MediaTek last month, revenues are expected to slide 2 percent to NT$22.9 billion (US$767 million) from the NT$23.38 billion posted in the third quarter in the worst-case scenario, Hsieh said.

The best case scenario was that MediaTek would grow its revenues by 5 percent quarter-on-quarter during the slow season, to NT$24.5 billion, he added.

MediaTek’s revenue forecast beat the expectations of Daiwa Capital Market analyst Eric Chen (陳慧明), who predicted that the chipmaker’s revenues would decrease 3 percent quarter-on-quarter in the worst case scenario or increase by 3 percent in the best case.

In the July-to-September period, MediaTek’s net income expanded 22.4 percent to NT$4.07 billion, from NT$3.33 billion in the second quarter, the chipmaker said, marking its best quarterly earnings since the fourth quarter of last year, when earnings hit NT$3.83 billion.

Third-quarter net profits plunged 41.6 percent on an annual basis from NT$6.97 billion.

Because of persistent and intense price competition, MediaTek expects gross margins to contract to between 42 percent and 44 percent, compared with 45.1 percent in the third quarter.

Weakness in Ralink’s gross margin also cut into the company’s margin, MediaTek said.

The forecast beat Chen’s projection of a 44.5 percent gross margin in the fourth quarter.

That is likely to pave the way for a rebound in gross margins for the the first quarter of next year because of higher sales of smartphones in China, according to a research note issued by Chen yesterday.

Chen reiterated his “out-perform” rating on MediaTek.

MediaTek said it also plans to ship its next-generation smartphone chip dubbed the MT6575 to customers in the first quarter of next year.

Chinese companies, including Lenovo, Huawei Technologies Inc (華為) and Huaqin Technology Co (華勤), are among MediaTek’s MT6575 chip customers, Hsieh said.

Hsieh said the goal of shipping 550 million chips for feature phones this year would be reachable and the company hopes to ship more next year, primarily to emerging markets such as Africa.

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