MediaTek Inc (聯發科) yesterday said that its first-quarter profit almost halved year-on-year, citing softer-than-expected mobile phone demand and supply chain inventory corrections that curbed customers’ orders for its chips.
MediaTek, one of the world’s biggest mobile phone chip suppliers, said net profit for the first three months of the year plummeted 49.3 percent to NT$16.87 billion (US$548.8 million), the lowest level in about nine quarters. Net profit was down from NT$33.26 billion in the first quarter of last year. On a quarterly basis, net profit contracted 8.7 percent from NT$18.49 billion.
Gross margin last quarter dropped to 48 percent from 48.3 percent in the previous quarter and 50.3 percent in the first quarter of last year, largely because of weaker pricing for certain models, the company said.
Photo: Vanessa Cho, Taipei Times
MediaTek said some of its major customers have reduced excessive inventory to a normal level, but they hold a prudent view about mobile phone demand in the near term.
As a result, MediaTek expects revenue from its mobile phone chips business to be flat this quarter on a sequential basis after plunging 20 percent quarter-on-quarter last quarter.
The company expects a pickup in the second half of this year, although it said that the overall business visibility remained vague.
Mobile phone chips accounted for 46 percent of the company’s total revenue of NT$95.65 billion last quarter.
Revenue this quarter is expected to dip 4 percent sequentially to NT$91.8 billion in the chip designer’s worst-case scenario, while its best-case scenario involves quarterly growth of 4 percent to NT$99.5 billion.
The company told investors three months ago that the first quarter was “likely a low point” of this year.
“We believe customer and channel inventory is coming down. We just had discussions with major OEM [original equipment manufacturing] customers. Their inventories have come down to levels they deem normal. Some others are still a bit higher. Overall, inventory has been coming down from the end of the fourth quarter,” MediaTek CEO Rick Tsai (蔡力行) told investors in an online investors’ conference yesterday.
“The market sentiment remains weak. Customers are drawing shipments cautiously even when their inventory has normalized,” he said.
The company said its second-quarter guidance reflected customers’ cautious outlook about market demand and its strategies in a competitive environment.
With economic uncertainty increasing worldwide, consumers became more willing to buy refurbished smartphones, or second-hand handsets, rather than a new one, the chip designer said.
A longer smartphone replacement cycle is also affecting handset demand, it said.
Global mobile phone shipments would drop to 1.1 billion units this year from 1.4 billion units last year, MediaTek said, adding that the overall share of 5G smartphones would reach 55 percent.
MediaTek said that in the expected weak demand environment, it would remain consistent with its strategy that it seeks to balance its market share, revenue and profitability, rather than focusing only on price competition.
The “race to the bottom” type of pricing does not lead to higher end-market demand, nor can it change the overall market share distribution, Tsai said.
Demand for chips used in TVs and broadband devices, especially from North American telecoms, is showing robust momentum this quarter, the company said.
Chips used in smart-edge devices made up 47 percent of MediaTek’s total revenue last quarter.
Demand for power management chips, which contributed 7 percent to its revenue last quarter, would be stable this quarter, the company said.
Semiconductor shares in China surged yesterday after Reuters reported the US had ordered chipmaking giant Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) to halt shipments of advanced chips to Chinese customers, which investors believe could accelerate Beijing’s self-reliance efforts. TSMC yesterday started to suspend shipments of certain sophisticated chips to some Chinese clients after receiving a letter from the US Department of Commerce imposing export restrictions on those products, Reuters reported on Sunday, citing an unnamed source. The US imposed export restrictions on TSMC’s 7-nanometer or more advanced designs, Reuters reported. Investors figured that would encourage authorities to support China’s industry and bought shares
FLEXIBLE: Taiwan can develop its own ground station equipment, and has highly competitive manufacturers and suppliers with diversified production, the MOEA said The Ministry of Economic Affairs (MOEA) yesterday disputed reports that suppliers to US-based Space Exploration Technologies Corp (SpaceX) had been asked to move production out of Taiwan. Reuters had reported on Tuesday last week that Elon Musk-owned SpaceX had asked their manufacturers to produce outside of Taiwan given geopolitical risks and that at least one Taiwanese supplier had been pushed to relocate production to Vietnam. SpaceX’s requests place a renewed focus on the contentious relationship Musk has had with Taiwan, especially after he said last year that Taiwan is an “integral part” of China, sparking sharp criticism from Taiwanese authorities. The ministry said
US President Joe Biden’s administration is racing to complete CHIPS and Science Act agreements with companies such as Intel Corp and Samsung Electronics Co, aiming to shore up one of its signature initiatives before US president-elect Donald Trump enters the White House. The US Department of Commerce has allocated more than 90 percent of the US$39 billion in grants under the act, a landmark law enacted in 2022 designed to rebuild the domestic chip industry. However, the agency has only announced one binding agreement so far. The next two months would prove critical for more than 20 companies still in the process
CHANGING JAPAN: Nvidia-powered AI services over cellular networks ‘will result in an artificial intelligence grid that runs across Japan,’ Nvidia’s Jensen Huang said Softbank Group Corp would be the first to build a supercomputer with chips using Nvidia Corp’s new Blackwell design, a demonstration of the Japanese company’s ambitions to catch up on artificial intelligence (AI). The group’s telecom unit, Softbank Corp, plans to build Japan’s most powerful AI supercomputer to support local services, it said. That computer would be based on Nvidia’s DGX B200 product, which combines computer processors with so-called AI accelerator chips. A follow-up effort will feature Grace Blackwell, a more advanced version, the company said. The announcement indicates that Softbank Group, which until early 2019 owned 4.9 percent of Nvidia, has secured a
RSS