MediaTek Inc (聯發科), which supplies handset chips to China’s Xiaomi Corp (小米) and Huawei Technology Co (華為), yesterday said its gross margin this year would continue to be poor — remaining less than 40 percent — due to intensifying price competition, which last quarter drove the firm’s net profits to an almost three-year low.
MediaTek’s latest forecast came after gross margin plunged to an all-time low of 38.5 percent in the fourth quarter of last year as rivals Qualcomm Inc and China’s Spreadtrum Communications Inc (展訊) wage a price war to vie for bigger market shares.
“Price competition is to continue to weigh on the gross margin of our 3G and LTE chips this year... Gross margin is to be lower than 40 percent,” company vice chairman and president Hsieh Ching-jiang (謝清江) told investors.
Hsieh attributed the downbeat estimate to a rise in the LTE smartphone chip segment — which is expected to account for more than 50 percent of total handset chip shipments this year — as the firm’s margins on LTE chips are poor.
To cope with price erosion, MediaTek aims to boost revenue contribution from its high-end Helio-brand smartphone chips to 20 percent of its total handset chip shipments this year, from less than 8 percent last year, Hsieh said.
However, this year revenues are set to grow by more than 10 percent from last year’s NT$213.26 billion (US$6.33 billion), boosted by the contribution of newly acquired Richtek Technology Corp (立錡), Hsieh said.
Revenue growth will be primarily driven by a double-digit percentage rise in sales from the company’s mobile phone chips, he said.
In the fourth quarter of last year, net income plunged 60 percent year-on-year to NT$4.18 billion (US$124.15 million), the weakest showing since the first quarter of 2013.
Last quarter’s net profits, down 47.5 percent quarterly, fell short of CIMB analyst Peter Chan’s (詹逸群) estimate of NT$6.4 billion and the NT$7.75 billion projected by HSBC analyst Yolanda Wang (王郁雅).
Chan has a “reduce” rating for MediaTek, citing challenges ahead, while Wang rates the chipmaker “hold.”
Revenues this quarter are expected to contract by 7 to 15 percent quarterly to between NT$52.5 billion and NT$57.4 billion, due to fewer working days during the Lunar New Year holidays, the chipmaker forecast, adding that gross margin would be between 37 and 40 percent this quarter.
Shipments of smartphone and tablet chips would be between 100 million to 110 million units, little changed from last quarter’s 105 million units, the firm said.
Smartphone and tablet chips made up about 60 percent of MediaTek’s revenues last quarter.
For the whole of last year, MediaTek saw its net profits sink 44.5 percent to NT$25.77 billion, from NT$46.4 billion in 2014.
That translates into earnings per share of NT$16.6 for last year, down from NT$30.04 in 2014, the firm said.
MediaTek yesterday reiterated its “open” attitude toward cooperation with other firms or merger-and-acquisition deals, as long as such a partnership would benefit both sides.
The chipmaker said it would continue to seek merger-and-acquisition opportunities to expand its core mobile phone chip business, or to accelerate its expansion into the Internet of Things, or automobile chip segments.
“Merger-and-acquisition deals will remain an important factor in MediaTek’s growth. We are still looking for targets,” Hsieh said.
MediaTek shares yesterday fell 3.45 percent to NT$210, under-performing the TAIEX, which gained 0.14 percent.
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