MediaTek Inc (聯發科) yesterday said it expects its mobile chip shipments to grow by a low double-digit-percentage at best next year, backed by rising demand for 4G chips in emerging markets such as India.
However, MediaTek, which mainly supplies chips to Chinese phone brands, including Huawei Technologies Co (華為), said that intensifying competition from Qualcomm Inc and Spreadtrum Communications Co (展訊通信) would undermine its profitability next year and drive its profit growth to the slowest in three years.
“As [price] competition will continue to be stiff in 2016, gross margins will be under even more pressure compared with this year,” MediaTek vice chairman and president Hsieh Ching-jiang (謝清江) told a media briefing.
“Our mobile phone [chip] business will continue to make a profit” this year, but it will be softer than this year and last year, he added.
MediaTek could see gross margins dip to about 44 percent this year and to 42 percent next year, from last year’s 49 percent, Daiwa Capital Markets analyst Rick Hsu (徐稦成) said.
Hsu is one of a few analysts who have a “buy” rating on MediaTek.
Hsieh also expects to see an expansion in revenue, market share and shipments of the company’s high-end mobile phone chip business next year, backed by rising demand for 4G chips.
Hsieh expects 4G long-term evolution (LTE) chips to account for 60 to 70 percent of the company’s overall handset chip shipments next year, up from an estimated 40 percent this year.
Mobile phone chips make up about 55 percent of MediaTek’s revenue, he said.
Overall, MediaTek said it is on track to hit its shipment target of 400 million smartphone chips this year, accounting for 26 percent of 1.5 billion mobile phones worldwide.
In China, the chipmaker expects to grab a 40 percent share of its LTE chip market this year.
Next year, global mobile phone chip shipment growth is expected to decelerate to about 10 percent annually, MediaTek co-chief operating officer Jeffrey Ju (朱尚祖) said.
The growth will primarily come from LTE chip demand in emerging markets, including India, Southeast Asia, Eastern Europe and Latin America, with shipments of LTE chips surging to almost 85 percent of its overall sales this year from about 20 percent last year, Ju said.
The global economy will be a key factor affecting mobile phone sales next year, Ju said.
A strong US dollar in the first half dealt a blow to handset sales in emerging markets, he said.
Commenting on Tsinghua Unigroup Inc’s (清華紫光) interest in pursuing a merger-and-acquisition (M&A) deal with MediaTek, Hsieh said that “industry consolidation is a trend.”
“We are open-minded about any M&A and joint venture [deals],” he added.
Hsieh said that the two companies’ leaders had not met to discuss a deal.
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