MediaTek Anticipates Slow Q1, But Still Confident About Its Fattening Chunk of China’s Smartphone Market

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MediaTek reported lower-than-expected revenue in its fourth quarter, but the Taiwanese handset chip maker says its still poised to stand strong against rivals like Qualcomm. The company, which was founded in 1997 and entered the mobile phone business in 2004, has grown rapidly on the back of its reference designs, which are purchased and re-branded by manufacturers. MediaTek’s roster of clients include Coolpad, Huawei, Lenovo, Samsung and ZTE.

MediaTek said at its investor conference this week that compared with the third quarter of 2012, fourth-quarter net profit decreased around 9 percent to $4.88 billion NTD (about $165.39 million USD), while revenue in the fourth quarter finished at $26.73 billion NTD. The company had anticipated a decrease of about two to five percent. MediaTek’s consolidated revenue for 2012 was $99.26 billion NTD, while year-on-year consolidated revenue grew 14.33 percent. The net profit for all four quarters of 2012 was $15.68 billion NTD.

MediaTek blamed inventory issues, as well as pricing competition from manufacturers in China and Latin America, for the slowdown in revenue growth. In response, the company will decrease its product inventory and reduce the price of some chipsets by 10 percent, a move it anticipates will decrease its overall growth in the first quarter of 2013 to the range of $21.9 billion NTD to $24 billion NTD, down from $26.73 billion NTD in the fourth quarter. MediaTek says that it plans to return to positive growth in the second quarter of 2013.

Despite its current growing pains, MediaTek’s chip shipments continue to enjoy strong momentum, especially in the smartphone segment. This year, it plans to ship 200 million chips, mostly to smartphone makers in China. MediaTek says it hit its target of selling 110 million smartphone chips in 2012, an impressive jump from the 10 million chips it sold in 2011. Though global smartphone sales are expected to exceed featurephone sales for the first time in 2013, MediaTek continues to cater to the latter segment, a market that it dominated by focusing on emerging markets like Indonesia, India, Brazil and Russia. Overall in 2012, Media Tek sold chipsets for about 500 million phones, eclipsing Samsung, HTC and Apple in total volume, notes Wired.

In 2013, MediaTek expects its marketshare in China to be an impressive 30 percent to 40 percent in TD-SCDMA chipsets, 50 percent to 60 percent in WCDMA/HSPA and 70 percent to 80 percent for EDGE chips. The company says it anticipates TD-SCDMA chipsets to make up 20 percent to 25 percent of its projected sales volume in 2013. This is important for MediaTek because TD-SCDMA is China’s 3G standard. At last month’s Qualcomm QRD summit, China Mobile’s deputy manager of products Wang Hengjiang said that in 2012, there were over 60 million TD-SCDMA devices sold, which means that, as of the end of November, there were over 220 million 3G users in China. China Mobile’s goal is to sell twice as many TD-SCDMA devices this year, with smartphones taking up over 80 percent of that segment. Furthermore, MediaTek’s first quad-core processor, the MT6589, just launched, and the company also released a dedicated processor for tablets, which is expected to launch in the third quarter.

Feeling the heat of competition, Qualcomm has responded with it Qualcomm Reference Design (QRD) program to help Chinese manufacturers quickly penetrate overseas markets such as North America. The San Diego-based company is also focusing on creating products that will take advantage of the upcoming arrival of 4G LTE in China. Its dual-core CPU MSM8930 Snapdragon S4 Plus will also start shipping in devices over the next few months.