Fri, Nov 07, 2014 - Page 13 News List

MediaTek expects Q4 revenue to fall

CHIPPING AWAY:While company president Hsieh Ching-jiang expects competition in the 4G chip market to increase, he said new solutions would help to cut costs

By Lisa Wang  /  Staff reporter

MediaTek Inc (聯發科), which includes Amazon.com Inc and Google Inc among its new customers, yesterday said revenue for this quarter would fall amid seasonal weakness after reporting record profit last quarter.

Revenue is expected to be between NT$54 billion and NT$58.6 billion (US$1.77 billion and US$1.92 billion) this quarter, which means a forecast of between a 6 percent decline and a 2 percent increase compared with the previous quarter’s revenue of NT$57.47 billion, MediaTek president Hsieh Ching-jiang (謝清江) told investors.

“We are seeing signs of slackening demand for our products across the board this season,” Hsieh said.

In the previous quarter, the company’s net profit reached NT$13.1 billion due to robust demand from China for its 4G handset chips, up 58 percent from NT$8.42 billion a year earlier and 5.98 percent higher than NT$12.55 billion in the second quarter.

Shipments of smartphone chips would hold steady this quarter, compared with last quarter’s shipments of between 90 million and 100 million units, Hsieh said.

That would bring the company’s overall smartphone chip shipments this year to surpass its original estimate of 350 million units this year, he said.

Gross margin might shrink for the second consecutive quarter to about 47.5 percent, or rise to 49.5 percent in the current quarter, from 49.1 percent during the three-month period ending September, he said.

Hsieh expects downward pressure on gross margin to increase in the first half of next year, though it might stabilize in the second half of next year, due to escalating price competition from rivals.

“The competition will be more evident in the 4G chip market,” he said.

MediaTek’s quarterly results came after rival Qualcomm Inc released its latest results overnight in the US, showing its earnings rose to US$1.89 billion, or US$1.11 a share, in the past quarter, up 26 percent from the year-earlier profit of US$1.5 billion, or US$0.86 a share.

Revenues increased by 3 percent sequentially to US$6.69 billion in the third quarter, Qualcomm said in a statement.

To challenge competition, MediaTek plans to roll out new versions of single-chip 4G solutions to cut costs, Hsieh said.

The positive news is that more expensive 4G, or long-term evolution (LTE), chips are set to make up about a 20 percent share of the company’s total smartphone chip shipments, an increase from 10 percent last quarter, the company said.

LTE chips have about a 10 percent price premium compared with 3G chips, according to MediaTek.

Yuanta Securities Co (元大證券) yesterday said MediaTek’s guidance for this quarter is positive, but its margin outlook for the first half of next year appears to be under more pressure.

MediaTek is “still lacking comfort on margin,” Yuanta analyst George Chang (張家麒) said in a client note.

He forecast that the firm’s gross margin would drop to 46.6 percent next quarter and to 46.9 percent in the second quarter of next year.

The brokerage yesterday retained its “hold” recommendation on MediaTek shares, with its price target unchanged at NT$460 over the next 12 months, implying an 11.38 percent upside from the stock’s closing price of NT$413 yesterday in Taipei trading.

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