MediaTek Shipments to Fall in 2016

29 Dec

MediaTek said Monday it expects its mobile chip shipments to grow by a low double-digit-percentage at best in 2016.

Intensifying competition from Qualcomm Inc and Spreadtrum Communications Co will undermine MediaTek’s profitability next year and drive its profit growth to the slowest in three years, company executives said.

“As [price] competition will continue to be stiff in 2016, gross margins will be under even more pressure compared with this year,” MediaTek vice chairman and president Hsieh Ching-jiang told reporters.

“Our mobile phone [chip] business will continue to make a profit” this year, but it will be softer than this year and last year, he added.

MediaTek expects 4G long-term evolution (LTE) chips to account for 60 to 70 percent of the company’s overall handset chip shipments next year, up from an estimated 40 percent in 2015.

MediaTek could see gross margins fall to about 44 percent this year and to 42 percent next year, Daiwa Capital Markets analyst Rick Hsu told The Taipei Times.

Mobile phone chips make up about 55 percent of MediaTek’s revenue.

Overall, MediaTek is on track to reach its shipment target of 400 million smartphone chips this year, accounting for 26 percent of 1.5 billion mobile phones worldwide.

Next year, global mobile phone chip shipment growth will decelerate to about 10 percent annually, MediaTek co-chief operating officer Jeffrey Ju said. The growth will primarily come from LTE chip demand in India, Southeast Asia, Eastern Europe and Latin America.

In regards to Tsinghua Unigroup Inc’s interest in pursuing an M&A deal with MediaTek, Hsieh said that “industry consolidation is a trend.”

“We are open-minded about any M&A and joint venture [deals],” Hsieh said, adding that the two companies’ leaders had not met to discuss a deal.