MediaTek Q2 profit sinks 67%

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MARGIN IMPROVEMENT:While earnings fell to a 16-year low, the IC designer saw its gross margin pick up for the first time in three years as it focuses on mid-range chips

MediaTek Inc (聯發科) yesterday posted its weakest quarterly profit in 16 years as demand for its smartphone chips faltered due to customer inventory correction and market share loss.

Second-quarter net earnings plunged 66.5 percent to NT$2.2 billion (US$72.78 million) from NT$6.59 billion a year ago and 66.7 percent from NT$6.64 billion in the first quarter, the company said.

However, the smartphone chip designer saw its gross margin rebound for the first time in three years, with the figure rising to 35 percent from 33.5 percent in the first quarter.

MediaTek has shifted its focus and resources to mid-range smartphone chips after suffering a setback in its foray into the high-end chip segment, dominated by the US-based Qualcomm Inc.

“Our priority is to improve our gross margin and recoup our market share loss,” co-chief executive officer Rick Tsai (蔡力行) told an earnings conference in Taipei.

Tsai, who took over the post on June 1, said the company plans to roll out two mid-end chips from its Helio P family and one entry-level 4G chip in the second half of this year, with another two mid-range chips set to hit the market next year.

“We have a full range of chips from the Helio P family, which can fully meet the demand of our major smartphone customers in China,” Tsai said.

Gross margin for this quarter is expected to rise slightly to the 34 percent to 37 percent range, thanks to better demand for higher-margin chips used in Internet-of-Things devices and power management chips for set-top boxes, Tsai said.

The company’s goal is to see its gross margin climb to the high 30s in the second half of next year, he said.

Revenue for this quarter is expected to grow between 2 percent and 10 percent from last quarter to between NT$59.2 billion and NT$63.9 billion, Tsai said.

Combined shipments of smartphone and tablet chips are expected to be flat at between 110 million and 120 million units this quarter from last quarter, MediaTek said.

Smartphone and tablet chips are the company’s major revenue sources, accounting for about 45 percent of its total sales last quarter.

“There will be no marked seasonal growth in demand for smartphone chips in the third quarter, as our smartphone products are still in the transitional period,” Tsai said.

“Besides, demand from China is less robust than other emerging markets,” he said.

The company said its board has approved the resignation of co-chief operating officer Jeffrey Ju (朱尚祖), who will stay on as a senior consultant for the company.