MediaTek Inc (聯發科技), the world's largest supplier of DVD player chips, reported that fourth-quarter net profits nearly doubled on the back of rising demand for semiconductors used in cellphones.
Net income rose to NT$5.3 billion (US$164 million) in the three months ended Dec. 31 from NT$2.7 billion a year earlier, the company said in a statement yesterday. Sales, reported earlier, gained 53 percent to NT$14.7 billion.
The company, which supplies semiconductors for about half of the world's DVD players, started providing cellphone chips in the third quarter of 2004 because of an oversupply in its main business.
MediaTek's earnings were good "as its gross margin was quite high," said Mike Shiao (蕭光一), a fund manager at Invesco Taiwan Ltd (景順投信) in Taipei, which oversees US$1.3 billion in assets.
"The DVD chip was already a mature market for MediaTek, but the company was smart and versatile enough to expand into the cellphone chip market," he said.
The company expects its gross profit margin to be around 58 percent in the first quarter, chief financial officer Yu Ming-to (
MediaTek's gross margin rose to 58.6 percent in the fourth quarter, from 55.7 percent in the third quarter and 44.3 percent a year earlier.
MediaTek expects sales contribution from cellphone chips to rise to one-third this year from more than 20 percent last year, Yu said.
The contribution from chips used in DVD players is projected to fall to about a third this year from about 40 percent last year, he said.
Demand for MediaTek's cellphone chips is coming mainly from emerging markets such as India, Russia and China, Yu said.
MediaTek supplies almost all the "top-tier" Chinese cellphone makers such as TCL Corp and Lenovo Group Ltd (
Global cellphone shipments gained 14 percent to 813 million units last year, and are forecast to rise 4.6 percent to 850 million this year, according to California-based researcher iSuppli Corp.
Yu said first-quarter sales likely will decline by about 25 percent from the fourth quarter after the year-end shopping season and because of fewer working days owing to the Chinese New Year holiday break.
Shares of MediaTek rose 1.4 percent to close at NT$332.5 in Taipei yesterday. The stock has dropped 14 percent to date this year, compared with a 1 percent gain in the TAIEX.
The company's profit rose 28 percent to NT$18.3 billion last year. Sales increased 16 percent to NT$46.5 billion.
MediaTek, which reported its results after the market closed, was expected to post fourth-quarter net income of NT$6.7 billion, based on the median estimate of four analysts surveyed by Bloomberg.
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