Mediatek to Take a Hit from Growing 4G Popularity in China

21 May

Mediatek may need to speed up its current 4G/LTE chip development a bit more. According to a recent report from Want China Times, China’s top mobile carriers such as China Mobile, China Telecom, and China Unicom are all planning to shift their focus towards the faster, more capable 4G/LTE networks, and will allegedly begin cutting the subsidies for their 2G and 3G smartphones in the process.

The potentially decreased 3G handset demand resulting from the subsidy cut will not be good news for the Taiwanese chip maker. According to a recent report released from Goldman Sachs, Mediatek’s market share in the 3G smartphone chip market is currently at its highest in China, and is expected to approach 60% by the end of 1H 2014 as its System-on-Chip (SoC) shipments grows to 59 million units.

Should the subsidy cuts take effect sooner than expected and deter potential consumers from seeking out 3G phones, Mediatek’s numbers will arguably take a hit during the second half of the year.

“Even with 3G inventory at normal levels now, MediaTek may still suffer from a potential inventory drawdown assuming there is declining demand in the third quarter of 2014, in our view,” said Donald Lu, the main technology analyst at Goldman Sachs.