Thu, May 01, 2014 - Page 13 News List

MediaTek Inc Q1 results beat market expectations

By Lisa Wang  /  Staff reporter

MediaTek Inc (聯發科), the nation’s top handset chipmaker, yesterday posted 17.7 percent sequential growth in net income in the first quarter boosted by higher-than-expected shipments of better-margin advanced smartphone chips.

During the quarter ending March 31, net income expanded to NT$10.81 billion (US$357 million), compared with NT$8.4 billion in the final quarter of last year, hitting a historic high.

The figure exceeded the NT$9.95 billion forecast by Credit Suisse analyst Randy Abrams and NT$9.48 billion forecast by Daiwa Capital Markets analyst Eric Chen (陳慧明).

“Demand for smartphones was quite strong in the first quarter. Smartphone are thriving in emerging markets,” MediaTek president Hsieh Ching-jiang (謝清江) told a conference call.

Chinese brands have expanded their presence in emerging markets such as India, Southeast Asia, Latin America, Africa, Russia and the Middle East, which has helped boost demand for dual-core and quad-core chips, Hsieh said.

Last quarter, shipments of smartphone chips increased to between 75 million and 80 million units, greatly surpassing the company’s forecast three months ago of 65 million units.

Advanced octa-core smartphone chips accounted for more than 10 percent of the total shipments last quarter, higher than the 5 percent to 10 percent share forecast by MediaTek, paving the way for the company to hit its target of a 10 percent to 15 percent share for the whole year.

MediaTek counts Xiaomi Corp (小米), Lenovo Group (聯想) and TCL Communication Technology Holdings Ltd among its clients.

The company expects the growth momentum to extend into the current quarter.

“Demand in emerging markets for smartphones remains robust in the second quarter... Demand from overseas markets [emerging markets, the US and Europe] will outpace demand in China,” Hsieh said.

Hsieh said demand for octa-core smartphone chips is growing rapidly this quarter after tier-one customers started using the chips in their phones last quarter.

Shipments of smartphone chips will grow 12.5 percent to 90 million units from the first quarter, Hsieh forecast.

Revenue is set to grow by between 12 percent and 20 percent sequentially to between NT$51.5 billion and NT$55.2 billion, compared with NT$46 billion in the first quarter, Hsieh said.

The growth rate is much faster than Abrams’ expectation of a 3.3 percent quarterly increase. Abrams maintained his “outperform” rating on MediaTek shares with a target price of NT$540, implying a 14.4 percent upside from the closing price of NT$472 yesterday.

“MediaTek offered a strong surprise at the gross-margin level, in addition to strong revenue guidance, which may trigger upward earnings revisions from analysts,” Chen said in a report yesterday.

MediaTek said its gross margin will climb to about 48.5 percent this quarter, from 48.3 percent in the first quarter.

“MediaTek may surprise investors again when it releases its second-quarter results. We are positive for its revenue and gross margin trend,” Chen said.

Daiwa maintained its “buy” rating on MediaTek shares.

To sustain growth, MediaTek plans to ship its first octa-core long-term evolution (LTE) chip in the third quarter ahead of its original schedule of the fourth quarter and it plans to ship its first 64-bit chip and wearable chips in the second half of the year.

Separately, United Microelectronics Corp (UMC, 聯電), the world’s No. 3 contract chipmaker, yesterday posted stronger-than-expected net profit of NT$1.18 billion for the first quarter.

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